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Rachel Reeves’s Mansion House speech mattered less for what it changed than what it confirmed: she’s staying – and backing the City. After spooking markets with tears in the Commons, appearing with the Bank of England governor was damage control. The “Leeds reforms” were billed as bold, but the real message was a return to business as usual.
Delivered to a City audience, the speech confirmed a deregulatory tilt that is striking not for its boldness but for its familiarity. Her “reform” of the ringfencing regime for banks is code for loosening constraints under pressure from the finance lobby. Streamlining the regime brought in after the 2008 crash to hold bank leaders personally responsible for regulatory breaches will weaken post‑crisis accountability standards.
One of the City’s regulators, the financial ombudsman, will be reined in after industry gripes that its consumer-friendly stance over complaints has exposed banks to compensation claims worth billions of pounds. Mortgage borrowing caps are being eased, allowing lower-income buyers to stretch their finances further. And most revealingly, the Treasury will launch a national campaign next spring to promote stock market investing – because, in 2025, betting on stocks is public policy.
It’s a curious prescription for an economy whose GDP per head has grown more slowly than any other major high-income country since 2008. A new government promising change might have offered a broader rethink. Instead, it has given us rightwing tropes about red tape being the “boot on the neck” of business. Today’s financial sector is less a source of productive capital than a machine for asset inflation, property speculation and leveraged buyouts. Encouraging households to put their savings into equities, or to take on larger mortgages, will not fix Britain’s broken growth model. It will simply shift more risk on to households already burdened by wage stagnation and unaffordable housing.
Pushing stock ownership as financial inclusion shows just how Labour has internalised the logic of private enterprise. The state won’t raise living standards directly, so individuals are nudged to become their own portfolio managers. This will do little to address the technological and organisational drift of the economy. But it highlights Ms Reeves’s deeper misdiagnosis that Britain’s stagnation stems from overregulation, not underinvestment; from hesitant consumers, not cautious governments. The real barriers to growth – weak demand, low public investment, regional imbalance – go unaddressed. So too does the self-imposed fiscal straitjacket that constrains state action.
The Leeds reforms may boost asset prices, but undermine balanced regional growth. They will enrich the City, not the nation. Instead of building a resilient, innovation-led economy for all, they revive the ideology of asset-led prosperity for the few. They claim financial markets will backfill decades of underinvestment. History suggests they won’t.
A world-class financial centre isn’t the problem – until its priorities outweigh the public’s. Reeves says that her reforms will “ripple” through the economy. But beneath the City-friendly gloss lies a misplaced faith in trickle-down economics – the very model that drove deindustrialisation, inequality and financial crises. Real wages are rising now, lifted by fiscal stimulus, but that can’t undo 15 years of stagnation. The issue isn’t too much state action – it’s too little. Asking households to fix growth by becoming part‑time speculators isn’t a plan. It’s a cop-out.
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