It’s a step in the direction it was not a repeat of the 1980s Big Bang that transformed the City. Margaret Thatcher’s sweeping financial reforms unleashed growth and competitiveness. There was no mention of an end to the EU’s loathed Solvency 2 regime, which the Government has been threatening to do away with for at least two years and which would unleash the full financial firepower of pension pots.
It’s the big prize. The EU’s crazy rules allow Canadian pension funds to plough money into big UK projects, but largely restrict domestic asset managers and insurers to a risk-averse existence of buying government bonds and highly-rated corporate debt.
The distorting effect of such capital requirements is that it skews investment towards the old economy by making it much harder to invest in renewable energy, infrastructure and companies that will be vital in the path to net zero.
As a study by KPMG for the Association of British Insurers pointed out rather neatly, the regulations are so illogical tha “it is easier to invest in a mining company than a wind farm”.
More importantly, the same study found that a proper revamp would release £95bn to be reinvested in other vital parts of the economy.
Equally important, given the Bank of England’s nervousness about capital rules being loosened too much, the ABI concluded that “the UK market will still be one of the most highly regulated sectors in the world” and have “enough capital to withstand a 1-in-200-year shock”.
So why the wait? There is a wall of money tied up in financial giants such as Legal & General and Aviva waiting to be poured into science and technology, thousands of fledgling but promising start-ups, and scores of home-grown green energy projects that would bolster energy security at the same time as bringing down our carbon emissions.
If the Government is serious about wanting to make sure more long-term investment comes from Britain directly as well as from overseas, then sweeping away the nonsensical red tape that ties the hands of swathes of this country’s financial sector is by far the best way to do it.
Kwarteng raised hopes with assurances that further City reforms are on their way this autumn. More than six years after the Brexit referendum and two years until the next General Election he has little time to waste.