Rachel Reeves has told senior economists and business leaders that she wants to rip up regulations on the financial services sector brought in after the 2008 financial crash.
The chancellor has been desperately looking for ways to kickstart economic growth in the UK, which has flatlined since Labour came to power last July with the country teetering on the edge of going into recession.
Speaking on a panel during a debate on the global economy in Washington DC on Thursday, Ms Reeves revealed that she believes now is the time to at least partly go back to pre-banking crisis regulations, in the hope it will inject much-needed growth into the City of London and financial markets.
She said: “Excessive regulation makes it hard for new entrants to come into market, puts up prices for consumers.
“So I do think that we’ve gone too far in one direction. And of course, after the financial crisis, we had to put in place a good, greater set of regulations than we had before, sure, but we are now what you know, getting on for 20 years since the financial crisis. And I do think we’ve got to think about that balance.”
When major banks and financial institutions collapsed around the world in 2008 because they were overleveraged on the property markets, the then-Labour government in the UK was forced to bail out Lloyds, Halifax Bank of Scotland and the Royal Bank of Scotland.
Gordon Brown’s government had to nationalise Northern Rock and the collapse saw new red tape and regulations brought in to prevent a similar crisis from happening again.
Internationally, the crisis saw whole countries’ economies, including Greece and Ireland, having to be bailed out.
But Ms Reeves, who until the debate had not indicated any major policy change on her trip to the International Monetary Fund conference of finance ministers in Washington DC, was clear that she considered financial regulation to be similar to environmental.
She repeated Labour’s plans to strip away protection for nature to allow new infrastructure and housing to be built.
Pouring contempt on HS2’s “bat shed”, a £100 million tunnel project designed to protect wildlife along the train route in Buckinghamshire, she also turned her ire on interventions to protect spiders and sea bream.
She said: “Environmental regulations are now the biggest barrier to investing in renewable energy in the UK. That is not the purpose of environmental regulations, but they’re the things that are holding up pylons being built.
“They’re stopping wind farms from being built. And the number of submissions, and we all get this as ministers, that we get in our boxes every day, that you know, I’m afraid that the minister had to block this wind farm development because of sea bream swimming in that part of the North Sea.
“Or there are some spiders which are unique to this area, which means you can’t build the thousands and thousands of homes that we need. Or we’ve spent 100 million pounds in the UK in building a bat tunnel to go alongside the high-speed rail link between London and the north of England, because otherwise the bats would not be able to cross the road.
“I mean, it is absolutely insane the costs that are added to essential infrastructure investments.”
