A Budget for stability must mean less is more

As it prepares for its first Budget, it’s critical the government considers something important but quite dull: practicality

If you’d attended the government’s International Investment Summit last week and your bingo card had the words ‘regulation’, ‘stability’ and ‘growth’ on it, you’d have been over the moon.

Yes, both the Prime Minister and Chancellor were firmly focused on pro-business language. Needless regulation that holds back investment is destined for the chop and the new details on the National Wealth Fund’s amalgamation with the UK Infrastructure Bank was billed as the beginning of the end of economic instability.

Growth and competitiveness are clearly top of our new government’s mission list. Since last year, the financial regulators also have this as a secondary objective, although the jury’s still out on exactly what this means. So, how do you take this principle into a Budget and make change that will really help companies to deliver the growth the country needs?

I think the answer could be best summarised as ‘less is more’. It’s critically important that the government considers something quite dull, but very important: practicality. Indeed, operational considerations around any changes made will be crucial to avoid landing companies with layers of additional compliance, which costs both time and money.

This won’t just be for the good of the companies, but their customers too. The abolition of the lifetime allowance is a prime example of a change made in the spirit of deregulation and simplicity, that in practice delivered three new caps and was so complex it couldn’t be delivered in time. The people who suffered are those still waiting for the legislation implementing the changes to be enacted so they could retire or if they were continuing to work, to restart contributions to their retirement nest egg without a punitive tax cliff edge applied.

Consulting is key

Consulting with industry is key here. Announcements won’t scare the horses if people know that the practicalities are being considered, and that government and the regulators are happy to genuinely consult with business about the best ways to achieve our shared goals. Labour’s history of talking to business prior to getting into power was good. The formation of the National Wealth Fund was a collaborative effort from Labour, industry and climate experts and was in planning well before we heard the starter whistle for the election.

We’ve welcomed the early engagement, and it will be important that this commitment to partnership and collaboration with business continues. Recently, Labour has suggested a collaborative approach in forming a taskforce between industry, consumer groups and regulators to tackle the motor insurance affordability challenges we face. This recognises that working together will lead to better outcomes. Yet at the same time the FCA continues to take more heavy-handed action such as the universally disliked enforcement proposals to ‘name and shame’ companies before they’ve even been found at fault (when most are not). It’s yet to be seen whether this is a purposeful approach of good-cop, bad-cop or the government really will push regulators to think carefully about actions that impact commercial competitiveness.

Another consideration for this Budget is recognising that there are already many irons in the fire that need addressing before adding additional tasks to financial services industry compliance teams. Implementing the FCA’s consumer duty has been a significant task for everyone within financial services, and this needs time to fully embed new expectations, as the regulator has recognised. With pensions, the extension of Automatic Enrolment, implementation of dashboards, the value-for-money framework and the advice/guidance boundary review are all TBCs that need resolving. The Pensions Review taking place right now does suggest that Rachel Reeves, Tulip Siddiq and Jonathan Reynolds all understand this.

Finally (and I’m now back to the Investment Summit), something made clear by both domestic and international investors is that contract certainty should be considered paramount for investor confidence. Again, I am hopeful that this message has landed with Labour. Stability in this regard would be warmly welcomed.

Charlotte Wightwick is head of conduct regulation at the Association of British insurers