Conservative leader Kemi Badenoch will declare “war” on Britain’s economic decline under Labour today, as she unveils plans for what she describes as an “economic revolution”.
The proposals would dismantle regulations introduced by then-prime minister Gordon Brown following the 2008 financial crisis, marking a significant shift from almost two decades of oversight in the City.
At the centre of the package is a proposal to abolish ring-fencing requirements, which currently require banks to separate their retail banking operations from investment banking activities.
Britain is the only major economy to maintain such stringent separation rules, with critics arguing the regime has reduced London’s competitiveness compared with Wall Street and other international financial centres.
The Tories estimate their reforms could unlock £450billion in additional investment.
The plans would also reduce the amount of capital banks are required to hold against their assets.
Shadow chancellor Sir Mel Stride has argued existing requirements oblige banks to set aside substantial sums that could otherwise be used to support mortgage lending and loans to small businesses.
The Conservatives also intend to abolish the Financial Ombudsman Service and replace it with a new adjudication body that would be required to operate strictly within existing legislation and regulatory guidance.
The party argues the ombudsman’s ability to rule against firms that have complied with the law has created uncertainty within the financial sector.
Conservatives say concerns about retrospective decisions have encouraged banks to adopt a more cautious approach to lending, reducing access to credit and increasing costs for consumers.
Ms Badenoch is expected to tell delegates at TheCityUK conference: “You may have heard I am a culture warrior.
“I am going to fix the culture.
“The culture of regulators. The culture of the Treasury. The culture of risk aversion.”
She is also expected to describe the plans as “an economic revolution”.
The Conservative leader is expected to argue Britain’s financial services sector has become more heavily regulated than other major global markets.
“The desire for a zero-risk environment means Britain’s financial services sector is now more regulated than any other major market in the world,” she will claim.
“It is cheaper and easier to do business elsewhere, and so London is having its lunch eaten.
“We expect this to free up hundreds of billions of pounds in capital and help to create new jobs, increasing prosperity and bringing down the cost of living.”
The Government has already announced plans to ease ring-fencing requirements, with Chief Secretary to the Treasury Lucy Rigby stating in May reforms could unlock £80billion in additional lending.
However, the Conservative proposals would go further by removing the regime entirely rather than modifying existing rules.
The banking sector has welcomed engagement from political parties on measures aimed at boosting competitiveness.
A spokesman for UK Finance said: “Financial services are vitally important to the UK economy, and we welcome engagement on how to get the best from the sector and enhance UK competitiveness.
“Ensuring reforms are delivered, from enabling responsible risktaking to reform of bank capital requirements, will help the sector support investment and growth across the wider economy.”
Reform UK has also sought to strengthen ties with the financial sector, with deputy leader Richard Tice hosting a series of breakfast meetings with City professionals.
