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Rachel Reeves will use her Mansion House speech to call for a big dialling- up of risk in financial services, with looser regulation and what City of London figures are dubbing a new “Tell Sid” campaign to persuade the British public to buy shares.
The UK chancellor will on Tuesday set out plans for what she claims will be the biggest set of reforms to financial regulation in a decade, as she attempts to increase risk across the sector to boost growth and deliver better returns for the public.
The chancellor’s speech to City grandees will include plans to give what one Treasury official called “the information and support they need to start investing in stocks and shares”, moving away from cash savings.
Reeves has retreated from her original intention to announce at Mansion House plans to scale back tax breaks for cash ISAs, a controversial move intended to divert savings into equities, following a backlash from building societies and consumer champions.
Her allies say these changes are “still on the cards” but she feels she needs more time to work on the proposal and to win the public argument for reform.
In the meantime, Reeves will launch a campaign to support what former prime minister Margaret Thatcher used to call “popular capitalism” with information and advice on the advantages of investing in stocks and shares.
The City has drawn parallels with the 1986 “Tell Sid” television adverts from the Thatcher era designed to encourage the public to buy shares in the privatised British Gas.
Among the relaxation of regulations will be a significant reform that allows companies to raise more money from secondary share issues without needing to publish a prospectus under plans to revive the UK’s flagging equity markets.
The Financial Conduct Authority, the UK financial regulator, said the change was part of a package of measures to increase the risk investors can take in response to government pressure to bolster economic competitiveness and growth.
“Investment is not and should not be risk-free,” the FCA said, adding that its proposals would allow “a greater risk appetite for investors”.
UK-listed companies are allowed to do follow-on share issues worth up to 20 per cent of their existing equity without having to go through the costly process of publishing a prospectus. The FCA said it would increase this to 75 per cent from the start of next year — a change it estimated would save companies £40mn a year.
However, some banks worry the FCA has gone too far, leaving investors exposed. “We had argued for a smaller increase to the current prospectus threshold, but we recognise the FCA has opted for 75 per cent,” said Julie Shacklady, a director at bank lobby group UK Finance.
The regulator also said it would help companies go public faster by shortening the minimum time between a prospectus publication and an initial public offering from six to three days.
Unlisted companies would be able to sell more than £5mn of shares or bonds outside of public markets without issuing a prospectus using a new platform for public offers framework, the FCA said. It said companies would find it easier to sell debt to retail investors under plans to cut the disclosure requirements on smaller bond issues worth less than £100,000.
“These bold shifts promote innovation, lower costs, and enable a broader investor base for growing businesses,” said Simon Walls, FCA executive director of markets, adding the reforms were part of a wider shift “from pre-emptive checks to market disclosures”.
Mortgage lenders are being encouraged to take more risk under recent proposals made by the Bank of England and FCA, which Reeves will present along with the launch of a new loan guarantee scheme as supporting 10,000 more first-time home buyers.
The chancellor will say the changes have allowed building society Nationwide to expand access to its Helping Hand mortgages for thousands more people on incomes as low as £30,000.
Reeves will set out some of her regulatory reforms in Leeds ahead of her speech to the City elite in London on Tuesday evening, in a sign of her desire to see the financial services industry drive growth across the UK.
“I have placed financial services at the heart of the government’s growth mission,” Reeves will tell the City. She will say that this will “drive investment in all sectors of our economy and put pounds in the pockets of working people”.