Shadow Chancellor Sir Mel Stride has delivered a sharp verdict on Rachel Reeves’ record at the Treasury, dismissing it as “managerial incrementalism” that falls well short of what the City needs.
Speaking to City AM, Stride argued the financial sector requires far bolder action, saying “we need a big bang two for the City, not just some kind of tinkering and incremental movement… when you talk to banks privately, that is what they will tell you.”
Reeves is expected to deliver a Mansion House address next Tuesday in what many anticipate will be one of her final acts as Chancellor before a leadership transition takes hold.
During her time in the Treasury, Reeves introduced the Leeds Reforms, which she claimed would “rewire” the financial services system and remove what she described as a “boot on the neck of businesses.”
The reforms included a crackdown on the Financial Ombudsman Service, a review of the ring-fencing regime, and measures aimed at boosting retail investment across the UK.
While industry figures publicly welcomed the moves, critics were quick to dismiss the package as “untransformative,” arguing it did not go nearly far enough to restore London’s global competitiveness.
The Conservative Party has pledged a more radical overhaul, including the full abolition of ring-fencing rules that force major banks to separate their retail and investment banking operations.
Stride was direct in his criticism of the government’s partial approach, saying “don’t just try and open up a chink in ring-fencing,” describing that half-measure as how he would “characterise the Reeves reforms.”
The Tories estimate that scrapping the seven-year-old ring-fencing rules would free up around £1.5bn in capital, a move backed by Natwest, Lloyds, HSBC and Santander, though Barclays’ CS Venkatakrishnan has been the only major City banking chief to defend the regime.
On capital requirements, Stride acknowledged the UK is falling behind, saying “we are not competitive, certainly with America, and it’s not entirely competitive with Europe either,” and vowed to legislate if necessary.
He was unequivocal about how far the Conservatives would go, stating any requirement for the Bank of England’s Financial Policy Committee to consider competitor jurisdictions “won’t just be a request — it would be a clear requirement.”
The Bank of England has itself faced friction with Reeves, most notably when Governor Andrew Bailey blocked a meeting she convened between Revolut and regulators during the $75bn fintech’s four-year pursuit of a banking licence, which Revolut eventually secured this year.
Stride warned that regulation had become an obstacle to new market entrants, saying the system had gone “into this kind of cul-de-sac of trying to squeeze out every single wrinkle of risk.”
With Reeves expected to be replaced when Prime Minister-in-waiting Andy Burnham takes the reins, Stride raised fresh alarm about the City’s prospects under new leadership.
He said he was hearing that “Camp Burnham” favoured “more tax, and more spending,” and detected “anti-banking rhetoric in and around the Burnham camp,” warning Labour viewed banks as “the most politically and easy hit.”
Jamie Dimon, the boss of JP Morgan, has already threatened to reconsider the bank’s £3bn Canary Wharf tower if government policy turns hostile toward the banking sector.
City banks are also reported to be anxious about Burnham’s choice of Chancellor, with many fearing energy secretary Ed Miliband could take the post.
Stride said he would be prepared for whoever stepped into the role, but admitted “I’m quite fearful about where all of that will lead.”