Rachel Reeves’ offensive against regulators sparks alarm from consumer groups

It was a bold move for a Labor chancellor: Rachel Reeves went to Davos and told an audience of global plutocrats that she wanted to make life easier for UK consumers by creating a risk-free regulatory environment.

Offensive against Rives, far from the Swiss Alps controller It was cheered by the right-wing Conservatives, but some Labor MPs were frustrated that their chancellor’s quest for growth was taking the party into dangerous territory.

“People are holding their heads in disbelief,” says a senior Labor MP.

ReevesSpeaking at the World Economic Forum, he was adamant: “You have to strike a balance. I think the balance has gone too far in controlling risk. You have to be able to protect consumers but people should also be able to take risks.”

On Tuesday, the chairman of the Competition and Markets Authority, Markus Bokarink, was appointed The highest-profile casualty Reeves’ new approach comes as ministers oust him from his job over his alleged lukewarm appetite for growth-focused reforms.

According to government officials, his dismissal was intended to serve as a warning to other regulators. This month, Reeves demanded that 17 watchdogs develop action plans to boost growth and warned them he would be watching.

John McDonnell, the former Labor shadow chancellor, said Reeves could hand the campaign victory to Nigel Farage, leader of the populist Reform UK party, if he aggressively pursues his agenda at the expense of consumers.

“I am becoming increasingly concerned that this will provide an opportunity to portray our opponents, particularly the Reform, Labor Party, as defenders of corporate abuse and profiteers,” he said.

Reeves’ efforts to protect businesses from what is seen in government circles as a harmful “compensation culture” have taken many forms in recent months, with one common theme: less money for alleged consumers.

This week, Reeves wanted to intervene A Supreme Court case seeks to protect banks and other car lenders from multi-billion-pound payouts in a landmark mis-selling case, arguing it would “adversely affect the UK’s reputation as a place to do business”.

Last year, the Treasury successfully put pressure on regulators Slash A proposed compensation limit for victims of payment fraud is £415,000 to £85,000, amid fears that the new regime could severely damage some fintech companies.

Reeves also pushed for a review of the Financial Ombudsman Service to prevent more mass consumer compensation cases, such as the £50bn paid by banks for the Payment Protection Insurance scam.

Conservatives find themselves in a curious position, having to push Reeves further with an agenda that began under Rishi Sunak in 2023, when regulators were given “secondary objectives” to boost economic growth and improve competitiveness.

Andrew Griffiths, the shadow business secretary, wants to see a wider clearout of regulators and has been critical of City watchdog the Financial Conduct Authority. He thought Böckering’s dismissal was “a curious place to start”.

Former Tory City minister Bim Afolami said: “The Chancellor is doing exactly the right thing on the regulators. My advice to him is to keep going.” Another former Tory Treasury minister said simply: “I think he’s probably right.”

But conservatives also believe that Reeves, presiding over a stagnant economy, is using regulators as a scapegoat. Harriet Baldwin, a senior Tory, said the Chancellor should “acknowledge some of his own mistakes rather than blame everyone else”.

Given that Sir Keir Starmer’s government is in the process of introducing a wave of employment deregulation, many business leaders agree with Tory criticism that deregulation should start around No.10. Ministers are still water down That’s the package.

Regulators say that in exchange for focusing on growth, Reeves has given a clear signal he will stand by regulators when things go wrong — as they inevitably will. “We feel he has our back now,” said one.

Nikhil Rathi, FCA chief executive, told the House of Lords on Wednesday that proposed rule changes – such as easing controls on mortgage lending – could lead to more defaults. “There’s going to be one or two things going wrong,” he said, adding that Parliament’s watchdog should be given a “tolerable failure metric”.

Consumer groups have expressed concern. “The combination of anti-regulatory rhetoric — and now the firing of the CMA chair — signals to consumers that the government is ready to roll back the protections it created for them,” said James Daly, head of Fairer Finance Research Group.

A director of the consumer group, Rocio Concha, said the government was “absolutely right” to focus on growth and the role of regulators. But he added: “Strong consumer protections are not a barrier to growth. They are vital to economic growth because they help create a level playing field for dynamic competition, and ensure that consumers are protected from being ripped off.”

Professor John Thansolis of Warwick Business School, himself an independent CMA panel member, said the government should “Resist the temptation to bash CMA”

He added: “It will not drive market-wide productivity growth. It will instead reward a few well-connected companies at the expense of the countless, but silent, majority who want a market that is not expensive, that is fair and whose companies put the consumer first.”

Dame Meg Hillier, the Labor chair of the Commons Treasury Committee, said that while she supported Reeves’ aim to push regulators to boost growth, it was “not to put economic stability and protection for consumers at undue risk”.

For now, most Labor MPs are not campaigning against Reeves. “There is some grumbling about not going back to 2008,” said one Labor grandee, referring to the “light touch” regulatory landscape before the financial crisis. “But it’s not yet in the mainstream of the party – it’s still seen as a bit of a niche.”