13th January 2025

Regulators to rescue the economy

Yes, you did read that correctly. Prime Minister Keir Starmer recently sent a letter to over ten key regulatory bodies, including the Financial Conduct Authority (FCA), asking them to come up with pro-growth measures by mid-January.

That is this week!

His aim behind this is to encourage these regulators to find ways to help stimulate economic growth while maintaining oversight and ensuring consumer protection. Starmer's government should supposedly be focused on creating an environment that fosters business investment, job creation, and overall economic stability.

The late Ronald Reagan, 40^th President of the USA reckoned that a government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it. 

Starmer has gone through all of these stages in just a few months failing spectacularly to see any growth at all.

He has also failed to understand that a regulators role is to ensure compliance with the rules they set. Most of those rules, especially those of the FCA, are purposely designed to thwart growth, innovation, business investment, job creation, and overall economic stability within the world of financial advice.

This government is not really seeking a regulators solution to our problem, it just does not, will not see that the government is the problem. 

There are no end of financial services professionals who can and actually have come up with 10 simple ways to promote economic growth. Justin Urquhart Stewart is just one high profile expert that immediately springs to mind. They have of course been ignored.

The regulators will likely have been tasked with identifying areas where they can reduce red tape or adjust their approaches in a way that balances consumer interests with the need for growth, especially as the UK continues to fail to recover from the economic impact of the pandemic, inflation, getting the workshy back to work and other challenges.

This kind of initiative often suggests a more proactive role for regulators in shaping economic policy, with a focus on removing barriers that may hinder businesses, while still ensuring that public interests are safeguarded. It also reflects a broader approach where Starmer's government seems keen to focus on growth through structural reforms, while working with independent regulatory bodies.

Keir Starmer is not really a seasoned politician, more a lawyer with a long career in public service and human rights who has, along with most of his front bench, never had a proper job outside politics or the law. The exception of course being Ms Reeves, and we can see how that is going!

He and his Cabinet have no experience of what it takes to create growth but are learning fast to hinder. Their very short term in office can be seen as a growth prevention strategy.

That said, political figures often attract differing opinions depending on their policies and the perspectives of those judging them. Some may view his initiatives, like asking regulators for pro-growth proposals, as a way of dodging responsibilities to easily blame others if their plans do not work.

Here are some common criticisms of regulators, Starmer should digest the following:

1. Overly Bureaucratic and Slow to Adapt

2. Lack of Flexibility

3. Over-Regulation and Stifling Innovation

4. Regulatory Capture

5. Limited Resources

6. Short-Term Focus

7. Political Influence

This criticism is one to be really worried about. This request will compromise their independence and make them more susceptible to the influence of government priorities or corporate lobbying, potentially undermining their credibility and effectiveness. 

In this case Starmer’s Labour government may pressure financial regulators to loosen regulations to stimulate economic growth, even if doing so might increase systemic risks, like what was seen in the lead-up to the 2008 financial crisis.

8. Inconsistent Enforcement

9. Difficulty Balancing Growth and Consumer Protection

10. Lack of Market Understanding

While regulators do vital work in ensuring market stability and protecting the public, their effectiveness often depends on their ability to stay agile, informed, and independent of political influence. 

Ronald Reagan was right, “The most terrifying words in the English language are: I'm from the government and I'm here to help.”

Whether you agree with Starmer’s approach or not, it's important to recognise that political decisions are complex, often driven by competing interests and long-term goals, even if they may not always appear ideal or popular in the short term. So, it really depends on your perspective and priorities when evaluating his decisions. 

Never has that old adage of ‘if you try to please everybody all of the time somebody is not going to like it’ been true.

Regulation