Tag Archives: Queen’s speech

GK Insight – Dr Iain Wilton on the future for financial services

GK’s Head of Research, Dr Iain Wilton, reflects on the future of Britain’s financial services in the wake of the Queen’s Speech. 

Many aspects of the Queen’s Speech have received a lot of attention, from the absence of the Queen herself to the inclusion of so many housing-related bills – less than a week, in fact, after housing issues contributed to the Conservatives’ poor local election results, especially in London.

Surprisingly, however, relatively little attention has been paid to legislation that will fundamentally affect one of the UK’s most significant, successful but sometimes controversial sectors – its world-renowned financial services industry.

Together with associated professional service businesses, it employs more than 2.3 million people around the UK and contributes £193 billion to the economy – including £75 billion in taxes – yet some fundamental changes to its operation currently risk going ‘under the radar’.

Somewhat overshadowed by the announcement, in the Queen’s Speech, of 37 other pieces of legislation, the Financial Services and Markets Bill will cover everything from cash access to cryptocurrencies and scam prevention to the latest financial technology (fintech). Above all, the Government plans to introduce a new regulatory regime which will diverge from the EU model, encourage greater investment (especially in infrastructure) and, in the process, provide some of the ‘Brexit dividend’ that ministers are desperate to deliver before the next general election.

It will be a far-reaching piece of legislation. Moreover, it was accompanied in the Queen’s Speech by the dry-sounding but highly significant Draft Audit Reform Bill, which recognises that some high-profile company collapses (e.g. Carillion) have shaken people’s faith in the UK’s existing audit, governance and corporate reporting systems. As a result, competition will be increased, a new regulator will be created and, if the Bill is successful, trust should be rebuilt.

Both pieces of legislation will be subject to exhaustive scrutiny by MPs and peers, so each is certain to be amended and neither will be enacted any time soon.

In the meantime, however, significant changes are still afoot. In particular, the Financial Conduct Authority has recently published its new three-year strategy, which will result in the FCA becoming both a larger and a “more assertive” regulator which, in its words, wants to be “testing the limits of our own powers”. Indeed, after concluding that, at present, “firms are not consistently putting consumers first”, it will be publishing both an important “fair value” policy and an overarching “Consumer Duty” for financial services firms.

Due for introduction in late July, the ambitious new “Consumer Duty” will “set clearer and higher expectations for the standard of care firms give customers” and require them “to act in good faith, avoid foreseeable harm to their customers and support and empower them to make good financial decisions.”

At GK, we believe it represents a far-reaching tightening of the UK’s system of financial services regulation and, accordingly, it will be essential for firms to understand their new obligations and prove their compliance.

The Government’s legislative agenda, outlined in the Queen’s Speech, certainly dominated the headlines for much of the following week; its 38 bills will keep Parliament busy throughout the coming year; but some important policy changes are already imminent in the financial services sector – despite their low political profile – as the FCA prepares, even without new legislation, to flex its muscles as never before.

GK Insights - Perspective by Dr Iain Wilton on the Procurement Bill

GK Insights – Perspective by Dr Iain Wilton on the Procurement Bill

Despite its scale and economic importance, government procurement is seldom the most exciting or newsworthy subject.

 It hits the headlines only rarely and, when it does, it’s usually for the wrong reasons.

 During the Coalition Government, for example, public procurement briefly led the news when an independent review –  led by a successful retailer, renowned for his company’s tight cost controls – found that different parts of the public sector were paying vastly differing prices for the same basic goods and services.

 For example, boxes of paper were found to cost between £8 and £73 while daily car rental varied from £27 to £117 – even within the same Mondeo-sized category. The review also criticised the lack of centralised purchasing, “poor negotiation” with major suppliers and the “shocking” state of procurement data, which was “both inconsistent and hard to get at.”

 Some positive progress was made, especially in rationalising government buildings, but the review’s status was soon undermined by complaints about the tax arrangements of its author, Sir Philip Green – whose own business empire, starting with BHS, gradually began to unravel.

 More recently, government procurement during the Covid pandemic attracted widespread criticism, with many items of personal protective equipment (PPE) proving to be high cost but low quality. Indeed, official figures show that PPE storage costs have recently been running at around £500,000 per day – even though many of the items have passed their expiry dates.

Over the coming months, government procurement policies are likely to return to their usual low public profile while, at the same time, attracting considerable behind-the-scenes attention in Westminster, Whitehall and the UK’s business community.

The reason is simple. After a Green Paper in 2020 and an extensive consultation process early last year, the Government finally announced, in the recent Queen’s Speech (10 May 2022), that it will be introducing its long-awaited Procurement Bill.

Its main aims are two-fold. First, to demonstrate that the Government is “taking back control” by creating a new procurement system that is simpler, more transparent and more attuned to UK’s particular needs than the previous regime – based on European Union directives. Accordingly, it is intended to form part of the “Brexit dividend” that Ministers need to demonstrate in the run-up to the next general election.

Second, it aims to provide a boost to UK businesses by making it easier for smaller firms and new market entrants to compete for – and win – public sector contracts. Plans include the creation of a single digital platform for supplier registration, so that a business needs to submit its data only once – rather than repeating the process whenever it’s interested in a competing for a public sector contract.

The stakes are certainly high as, according to the Government’s announcement, public procurement amounts to approximately £300 billion per year – “around a third of all public expenditure every year” – so some exciting opportunities could be created by the new system.

No one should be under any illusions, though. Neither the opportunities nor the “dividend” is likely to delivered any time soon. Not only are other proposals from the Queen’s Speech more politically pressing but the Government is committed to providing stakeholders with a six-month notice period, between the legislation being concluded and the new system going ‘live’, in the interests of effective implementation.

As a result, the change-over is unlikely to happen until some time next year, at the earliest. Given the sums involved, however, even a modest improvement in UK government procurement could mean that it’s well worth everyone’s wait.

GK Strategy will be monitoring the Procurement Bill’s passage through both Houses of Parliament and can advise on its contents, progress and any amendments to this important legislation. 

 

GK Insight - Perspective of Dr Iain Wilton, Director, Policy

GK Insight – Perspective of Dr Iain Wilton, Director, Policy

Whenever we have a Queen’s Speech, the focus is invariably on what it contains – rather than what’s missing.

Yesterday, however, was an exception. As well as the Queen herself being absent, for the first time in nearly 50 years, the sovereign’s throne was not merely empty but had been moved elsewhere.

In the monarch’s absence, the Prince of Wales moved off the substitute’s bench and into, in effect, the early stages of regency mode – so it was a field-day for historians in general and constitutional experts in particular.

Other conspicuous absentees, of course, included Government references to the ‘cost-of-living crisis’ which the Chancellor had sought, but failed, to adequately address in the last set-piece Parliamentary event – his Spring Statement.

Indeed, when Rishi Sunak sat down after delivering that speech, the immediate comments of Opposition backbenchers (“Is that it?”) caught the public and Parliamentary mood much better than the formal response from the Shadow Chancellor – Rachel Reeves.

It was also the moment at which the political fortunes of the Chancellor – previously famed for his “whatever it takes” approach – began their downward spiral.

It’s noticeable, however, that few people have been posing the same “Is that it?” question after yesterday’s Queen’s Speech – for two main reasons.

First, there’s a recognition (behind the rhetoric) that financial, tax and cost-of-living issues are addressed in Budgets, Spring Statements and Finance Bills, rather than a ‘Gracious Speech’.

Second, the Speech, although shorter than normal, contained much more political and legislative ‘meat’ than might have been expected – not only for a mid-term government but for a governing party that has been in power (either independently or in coalition) for the past 12 years. There is clearly much that it still wants and needs to do.

In part, it’s about playing catch-up after the statis of the Theresa May years, when the government lost its majority and became preoccupied with trying (but failing) to deliver on the result of the Brexit referendum. Since then, the challenge of handling the pandemic has been her successor’s overwhelming priority – to the exclusion, domestically, of almost everything else. More positively, though, there’s the ‘levelling up’ agenda that the Prime Minister regards as essential to retain the ‘Red Wall’ seats that he won so unexpectedly in 2019’s General Election.

Together, those delays, diversions and political imperatives explain why the Queen’s Speech outlined not only a surprisingly large number of Bills (38) but some measures of real significance.

For example: the Energy Security Bill will hasten the UK’s transition to cleaner electricity and greater energy independence; the Financial Services and Markets Bill will create a new regulatory regime, in conjunction with some upcoming and important reforms from the Financial Conduct Authority; and the Procurement Bill will have a low profile but could affect vast swathes of public expenditure – creating new commercial opportunities, in the process, for many small and medium-sized suppliers.

Above all, perhaps, housing, local government and levelling up, taken together, account for a sizeable proportion of the legislation outlined in Parliament yesterday. Perhaps that’s hardly surprising, in view of the political importance (especially to the Prime Minister) of levelling up and the extent to which many Conservatives fear that housing issues are becoming increasingly toxic for them, especially in London – as last week’s local elections seemed to confirm.

It means a bigger role for the Secretary of State for Levelling Up, Housing and Communities – Michael Gove. Inside Westminster and Whitehall, he’s renowned both for his radical ideas and his strong record on delivery. Elsewhere, however, he’s still best remembered as the person who sabotaged Boris Johnson’s original bid, in 2016, to enter 10 Downing Street. After yesterday’s Queen’s Speech, the Prime Minister has surely never been more reliant on his former foe.