Andy Haldane: Government’s bid to cut red tape ‘has little chance of success’
The government’s call for regulators to slash red tape “has little chance of success” unless watchdogs’ mandates are changed in law, according to the Bank of England’s former Chief Economist Andy Haldane.
Speaking at the CityAM Awards in London’s Guildhall, Haldane criticised the government’s policy of seeking regulatory reform “via exhortation and press release” and urged ministers to “provide air cover for regulators to accept more risk” by formally rewriting their regulatory mandates. He warned that Labour’s deregulatory agenda risks being a “missed opportunity” unless the mandates of bodies like the Financial Conduct Authority and the Competition and Markets Authority “are changed in statute.”
Haldane, who served as the Bank’s top economist from 2014 to 2021 also called for “a radical slimming of both the number of regulators and their rulebooks,” adding “I think a halving would be easy to engineer without the loss of any real substance.”
Speaking to 500 guests from across the City and wider business community, Haldane described a world “riddled with both risk and risk-aversion” where businesses and investors have been “scarred, financially and psychologically” by a succession of shocks from the financial crisis and the Euro crisis to Brexit, Covid and US tariffs. He said the resulting risk-aversion has led to an environment of “no or low return, no or low investment, low or no growth.”
Haldane described this as “essentially the story of the past couple of decades” and called for greater-risk taking backed by radical regulatory reform if the UK is to break out of a “cycle of doom and gloom” powered by “uncertainty, risk-aversion and low growth.”
“Words are cheap”
The Prime Minister, Keir Starmer, has blamed “a morass of regulation” for preventing “billions of pounds more of investment from flowing into Britain” – and has vowed to “sweep away” red tape.
However, while Haldane described the government’s approach to deregulation as “directionally right” he cautioned that “words are cheap” and called for more robust efforts to encourage risk, saying “What was right in regulatory terms back at the time of the global financial crisis, when risk-taking was too high, is not right today when risk-taking is too low.
“I was a financial regulator back then and the macro-economic case now is as clear as it was then – only with the signs reversed. Having slammed on the brakes then, rightly, now is the time to switch to the accelerator.”
The FCA has pledged to go “harder and faster” in its review of financial regulation.
Haldane, who recently announced his decision to retire as Chief Executive of the RSA, said that any deregulatory agenda needs to be accompanied by “a full-throated, whole-hearted approach to industrial strategy, again backed by government with actions – and some money – rather than rhetoric.”
He said that the government’s industrial strategy, details of which are set to be announced this summer, “needs to play to the UK’s obvious strengths, including of course in financial services.”
“UK must champion innovation and risk”
Haldane closed on an optimistic note, declaring that Canada can turn global uncertainty to its advantage.
“Innovation, especially financial innovation, has in the past been spurred not blunted by uncertainty and adversity,” he said, adding:
“Here in this City, it was the adversity of the Great Fire of London that led to the creation of the global insurance market. It is at moments like then, and now, when opportunity knocks loudest.
“And at this time of great global disruption, the UK and the City can turn this to its competitive advantage, by becoming a champion of innovation to manage and mitigate risk.
“To serve, as in the past, as a magnet for money, talent and business. If, that is, we play our policy cards right and act with boldness, leaning into risk rather than away from it, revelling rather than wallowing in it.”