Prime Minister hopefuls clashed over the future of financial regulation in the City as “red tape” plays an increasingly prominent role in the race to become the next leader of the Conservative Party.
In a televised debate in the central city of Stoke-on-Trent, Foreign Secretary Liz Truss criticized former chancellor Rishi Sunak for not moving quickly enough to scrap EU directives governing the city following Brexit
“I would realize the opportunities post-Brexit,” Truss said. “I’d do things like change Solvency II and Mifid, and I’d get down to it, because I’m ready to take on the orthodoxy.”
“I think we can do things differently. I want to change our regulations. I want to get these EU regulations off the statute book.”
“There has been no plan for economic growth for the past two and a half years,” he added. “We haven’t done things like Solvency II, Mifid that would have unlocked investment in our country. I want to turbocharge that.”
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The Treasury unveiled its flagship Financial Markets and Services Bill on July 20, legislation that could lead to the repeal of hundreds of retained EU laws once it is on the statute books.
The government has also backed the reform of Solvency II – introduced to govern capital cushions and risk management at insurers to strengthen the sector in the event of another financial crash – claiming that the requirements are “excessive ” and prevent capital investment in projects such as green infrastructure and technology.
Sunak said his leadership would mark “the benefits of financial market reform.” He then asked the Stoke crowd if anyone knew what Solvency II meant.
Brexit Opportunities Minister Jacob Rees-Mogg, who is backing Truss as leader, tweeted that the Solvency II reform could free up £65bn of investment.
“It’s a shame Rishi thinks this is too complicated for the rest of us to understand,” she wrote.
Repeated references to specific financial services rules in the televised event surprised some experts.
“Solvency II is a really important policy area, but it has come up in these debates more times than social care or transport,” wrote former Lib Dem special adviser Sean Kemp.
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Christopher Croft, chief executive of the London & International Insurance Brokers’ Association, the trade body representing the interests of Lloyd’s insurance and reinsurance brokers, wrote: “If only one could trust. [Truss] I knew that [Solvency II was. The random mention of Mifid being a bit of a giveaway.”
Other commentators cautioned that the rhetoric of cutting red tape from the candidates needed to be balanced with ensuring consumers remained protected.
Marloes Nicholls, head of policy and advocacy at The Finance Innovation Lab wrote: “Sunak just said no one knows what Solvency II is. Does that explain why the government feels comfortable cutting protections so that millions of pensioners and insurance holders will see their money put at risk?”
Former Financial Conduct Authority director Mick McAteer wrote: “The insurance lobby wants to reduce consumer protection to give shareholders a windfall. Shows you how much influence finance lobby has that [a] candidate for prime minister mentions such an arcane subject”.
To contact the author of this story with comments or news, email Justin Cash
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