Latest news with #Andrew Bailey
Daily Mail
3 hours ago
- Business
- Daily Mail
Bank of England Governor Andrew Bailey hits back at Rachel Reeves over regulation
Andrew Bailey yesterday put himself at odds with Rachel Reeves over the Chancellor's outspoken attack on regulation. The Bank of England Governor made clear that he did not share Reeves' recent claim that the enforcement of red tape acted as a 'boot on the neck' of business. Speaking to MPs on the Treasury select committee, he urged caution over a proposed shake-up of the ring-fencing system that separates traditional lending and deposit-taking from riskier investment banking. The comments appear to be a shot across the bows of the Chancellor as she seeks to unravel some of the reforms put in place during the financial crisis in a bid to boost growth. They suggest she may face an unwanted battle with Threadneedle Street to add to friction with Labour backbenchers over spending cuts and the battle to balance the books, amid dismal economic growth and deteriorating public finances. Reeves took aim at regulators during her Mansion House speech to the City earlier this month. Cautious: Andrew Bailey (pictured) made clear he did not share Rachel Reeves's claim that the enforcement of red tape acted as a 'boot on the neck' of business But Bailey chose to dissociate himself from the 'boot on the neck' comments. He said: 'It's not a term I'd use. 'I think there are areas that we clearly should look at it – we've announced a whole range of things we're doing, and that's a good thing. But we can't compromise on basic financial stability and that would be my overall message.' Reeves has also promised 'meaningful reform' of the ring-fencing regime – something being demanded by the bosses of a number of major banks who say they are a drag on business. But Bailey said he favoured keeping the rules. He told MPs: 'I do think that the ring-fencing regime is an important part of the structure of the banking system.' Bailey said the rules make it easier to deal with banks that get into trouble in a way that spares consumers, businesses and households. He added: 'I'm sure there are things that can be improved and we will work constructively to get through that process. 'I think it has established itself as part of the system and to me it would not be sensible to take it away at this point.' Asked how he would respond if the Treasury seemed to be going 'too far' in stripping back regulation, Bailey said he and Bank officials would 'start by making our views very clear'.
Times
4 hours ago
- Business
- Times
Rachel Reeves warned that deregulation risks financial crisis
The governor of the Bank of England has warned Rachel Reeves that cutting red tape on the banking sector risks sparking another financial crisis as he downplayed the rise in UK government debt costs. Andrew Bailey told a group of influential MPs on Tuesday that rolling back restrictions on the City and ditching bank ringfencing guidelines could destabilise the UK financial system and 'would not be [a] sensible' decision for the time being. In a near two-hour long session with the Treasury select committee before the parliamentary summer recess, Bailey also said that the rise in long-term government debt costs was not 'unique' to the UK. He said investors were ditching US assets to curb their exposure to the dollar owing to concerns about the economy since President Trump returned to the White House. The governor, who, alongside his role at the central bank, recently took up the chairmanship of the Financial Stability Board, said he could understand why some people would think that 'the financial crisis is now way in the past, we've got past that, that's all solved, that's all out of the way, move on'. However, he said that 'for those of us who were veterans of sorting the problems of [the financial crisis] out' there remained a live threat to financial stability which required lawmakers to retain robust regulations. His comments come after the chancellor told bankers at the annual Mansion House dinner this month that the UK's regulatory regime was a 'boot on the neck' of businesses which risked 'choking [them] off'. Bailey, 66, said he would not have used such phrasing. Reeves announced that the government would reform laws that require lenders to separate their retail and investment banking businesses, a requirement put in place after the 2008 global financial crisis to shield depositors from banks' riskier activities. Several City grandees, including Sir John Vickers, the architect of the ringfencing rules, have expressed concern at the government's deregulation drive, which is intended to reverse weak economic growth. Bailey also downplayed the rise in UK government borrowing costs and said that it was part of a worldwide trend created by Trump's volatile tariff policymaking and a general rise in public deficit spending. 'We've seen an increase in term premium in government bond markets… yield curves have steepened', Bailey said, adding this was 'a global phenomenon, it is not in any sense unique [to the UK]'. The rate on the 30-year UK government bond, or gilt, stands at 5.43 per cent, up from 4.67 per cent compared to a year ago. The yield, which moves inversely to prices, on the US equivalent has risen to 4.93 per cent from 4.48 per cent over the same period. Bailey's comments come as figures from the Office for National Statistics on Tuesday showed that UK debt interest spending jumped to £16.4 billion in June, the second-highest for that month since the records began in 1997. Government borrowing topped £20 billion in the month also, above the Office for Budget Responsibility's projection for the month, strengthening expectations for tax increases at the autumn budget. Trump's erratic decision-making on how much to tax imports from specific countries had led to 'rebalancing' among markets 'which involves a reduction in exposure to dollar assets', Bailey said. The dollar index, which measures the greenback against six comparable currencies, is down nearly 10 per cent since the start of the year. The governor said that, judging by conversations with market participants and based on granular data, 'the most crowded trade in the market at the moment is short dollar'. He said that since Trump first announced his 'reciprocal tariffs' in April, there had been 'a breakdown in established correlations in markets'. Stock markets globally jolted lower in the immediate aftermath of Trump's first tariff announcements, with the S&P 500 index posting one of its largest losses since the Great Depression. However, an equity rally has since pushed several indices to a record high. This week, the FTSE 100 closed at its highest-ever level of just over 9,000 points. Taxes on goods imported to the US from most countries will increase sharply from August 1 after Trump delayed the implementation of his 'reciprocal tariffs' several times.
Daily Mail
9 hours ago
- Business
- Daily Mail
Reeves admits there is no 'ceiling' on the tax burden as government borrowing hits new record outside Covid in June - with £16bn spent on debt interest alone
dodged on whether the tax burden could go even higher today - as government borrowing hit a new record for June outside of Covid. Challenged on whether taxes at 38 per cent of GDP represented a 'ceiling', the Chancellor stressed that her rules only covered spending and debt. Appearing before peers, she suggested the level could only be reduced by boosting the economy - which currently looks to be slowing down. Ms Reeves was giving evidence to the the Lords Economic Affairs Committee amid mounting concerns about the state of the government's finances. The public sector borrowed £20.7billion last month, far higher than the £17.6billion analysts had pencilled in. The level was £6.6billion higher than a year earlier and only behind the height of the pandemic in 2020 since comparable figures began in 1997. Alarmingly for the Chancellor, the surge was driven by debt interest as well as higher spending. Servicing debt cost £16.4billion over the month, more than double the number for the previous June. Bank of England governor Andrew Bailey tried to calm nerves this morning, insisting rising interest rates on government borrowing was a global phenomenon and the UK was not 'out of line'. Borrowing for the first three months of the financial year to date stood at £57.8billion, £7.5billion more than the same three-month period in 2024. Challenged on whether taxes at around 38 per cent of GDP represented a 'ceiling', the Chancellor stressed that her rules only covered spending and debt Ms Reeves is desperately hunting for options to increase taxes as she faces an estimated £30billion black hole in the public finances at the Autumn Budget. The tax burden is already set to hit a new high as a proportion of GDP after the last Budget imposed a £41billion increase - the biggest on record for a single package. Labour has ruled out increasing income tax, employee national insurance or VAT. Tory peer Lord Blackwell pointed out that previous governments had not managed to 'sustain' the tax burden at more than 35 per cent of GDP. Highlighting the the level was on track to reach 38 per cent, he asked whether Ms Reeves had a Do you have a 'ceiling or a view on what's the right level of taxation once you get through the current debt problem'. But Ms Reeves replied that the tax to GDP ratio was 'not a target... that reflects the fiscal rules'. 'Those are the things that are my constraints, the anchor for fiscal policy are those two fiscal rules rather than a tax to GDP ratio,' she added. Ms Reeves said: 'The best way to reduce that ratio but still have public services that we need is to increase the denominator, increase GDP. That is where all my focus is.' The Chancellor flatly refused to rule out a wealth tax, arguing that no minister should get into speculation ahead of the Budget. And she vowed to remain tough on the government's debt levels, insisting there is nothing 'progressive' about spending £100billion a year on interest payments, 'often to US hedge funds'. Many believe the Chancellor will opt to extend the long-running freeze on tax thresholds in the Autumn. The policy, in place since 2022, is due to end in 2028-29. By that point it will have dragged an extra 4.2million people into the tax system as wages rise. Ms Reeves has been carefully avoiding ruling out a 'wealth tax' - with backbenchers pushing for 2 per cent levy on assets worth more than £10million. However, she is thought to be privately opposed to the move, with tax experts and Cabinet ministers warning it would only drive away more wealth people from Britain. A raid on pensions is still said to be on the table, with fears that the Treasury is again looking at slashing reliefs. Currently higher-rate earners are spared 40 per cent tax on money that is put into retirement funds. However, reducing the relief to the 20 per cent basic rate could raise around £15billion for the government. The idea was rejected at the Budget last year, but Ms Reeves' situation has dramatically worsened. Chief Secretary to the Treasury Darren Jones said: 'We are committed to tough fiscal rules, so we do not borrow for day-to-day spending and get debt down as a share of our economy. 'This commitment to economic stability means we can get on with investing in Britain's renewal, including fixing our NHS, strengthening our national defence and building hundreds of thousands of affordable homes through our plan for change.' But shadow chancellor Mel Stride said: 'Rachel Reeves is spending money she doesn't have. 'Debt interest already costs taxpayers £100billion a year – almost double the defence budget – and it's forecast to rise to £130 billion on Labour's watch. 'Labour's jobs tax and reckless borrowing is killing growth and fuelling inflation – paving the way for more tax hikes and more borrowing in the autumn. Make no mistake – working families will pay the price for Labour's failure and costly U-turns. 'Only the Conservatives, under new leadership, will break this cycle. Only the Conservatives believe in sound money and low taxes.'
Telegraph
10 hours ago
- Business
- Telegraph
Andrew Bailey warns Rachel Reeves against bonfire of red tape
Andrew Bailey has warned Rachel Reeves against slashing red tape to boost growth, cautioning that looser regulation will increase the risk of a crisis. The Bank of England Governor was asked by MPs on Tuesday if he agreed with the Chancellor's recent claim that regulation is 'the boot on the neck' of business. 'I do not use those terms,' he said. 'There are areas where we clearly should look at [revising regulations]. But we cannot compromise on basic financial stability, that would be my overall message.' His comments come a week after Ms Reeves announced a roll-back of regulation in the City in an effort to boost growth. The Chancellor used her Mansion House speech to urge financiers to ditch their 'excessive caution' and called for regulators covering industries beyond the City to loosen the rules to aid the economy. Mr Bailey hailed the opportunity to ditch EU red tape that was not designed to suit Britain's market, but said Ms Reeves should be wary of going too far. He told the Treasury select committee: 'When I hear people say, 'The financial crisis is now way in the past, we've got passed that, that's all solved, that's all out of the way, move on' ... For those of us who were veterans of sorting the problems of that out, I think we probably all feel in some ways ... erm ... no. 'Yes of course the world moves on ... [But] we had a very serious recession in this country after [the financial crisis]. So I do react to people who say that.' He added: 'Success in financial stability is when nothing happens. The fact we've had market volatility this year and we haven't had a financial stability problem and we're not worrying about banks failing ... is of course a success. 'It's not always easy to point to it and say, look, this is good news. But the UK banking system is very resilient.' Relaxing ring-fencing rules Mr Bailey specifically warned Ms Reeves against relaxing so-called ring-fencing rules, which divide retail banking from the racier world of investment banking. The Chancellor last week announced the ring-fencing regime would be 'reformed' as part of her overhaul. She has instructed the economic secretary to the Treasury to review the policies, 'looking at how changes can strike the right balance between growth and stability'. However, Mr Bailey said: 'The ring-fencing regime is an important part of the structure of the banking system. 'It makes resolution of banks, if they get into trouble, much easier, and it benefits, particularly in terms of UK customers and UK consumers, businesses and households. That is a helpful feature of it, I don't think it hinders banks fundamentally. 'It has established itself as part of the system and to me it would not be sensible to take it away at this point.' Risks are growing in financial markets, the Governor added, with heavy government borrowing in the UK and around the world driving up debt interest costs. High prices in stock markets also pose dangers, he said. He sounded the alarm over American tech stocks, singling out the soaring valuation of chip company Nvidia as a sign of the extent of market enthusiasm. 'In the US, it is a very strong tech-led growth story. The market capitalisation of Nvidia is now larger than the UK's GDP,' said the Governor. 'It is up 20pc this year. That is a pretty striking fact. It is 7pc of the overall market capitalisation in the US.' While Mr Bailey warned Ms Reeves not to go too far on City reforms, he said allowing banks to make more loans worth over four and a half times the income of homebuyers could help tens of thousands first time buyers onto the property ladder. He urged more banks to apply for permission to dish out larger mortgages. He said: 'It is very simple. We have changed the policy overnight. All you need to do is send us an email, ask for what we call a modification by waiver, it is yours.' The Governor said one bank has already obtained that permission, with another going through the process.
The Guardian
13 hours ago
- Business
- The Guardian
BoE governor warns Reeves over weakening banking rules too much
The governor of the Bank of England has warned the chancellor, Rachel Reeves, against a radical watering-down of City banking rules because it would risk repeating the mistakes that led to the 2008 financial crisis. Andrew Bailey said that while some changes to the rules could be helpful, wholesale changes to unleash risk-taking in the City of London in the name of economic growth would be counterproductive. 'There isn't a trade-off between financial stability and growth. We've had that experience,' he told MPs on the Treasury select committee. Reeves last week used her annual Mansion House dinner to announce sweeping changes to banking industry rules, telling City bosses she believed that in too many cases regulation was a 'boot on the neck' of business. Bailey refused to back the chancellor's analogy when pressed by the Treasury committee chair, Meg Hillier, saying: 'I do not use those terms, let me say that … It is not a term I use.' The governor said veterans of the 2008 financial crisis recognised there were clear dangers linked to slashing City red tape. 'Sadly I can understand when I hear people say the financial crisis is now way in the past, we've got past that, that's all solved, that's out of the way, move on … Yes of course the world moves on,' Bailey said. 'But that was the experience of losing financial stability and we had a very serious recession in this country after that.' However, he said regulations should not be set in stone, highlighting how the government could tweak City rules after Brexit to make Britain's banking industry regulations more reflective of the UK than the EU. 'There are areas where we should clearly look at it. And we'll look at it, we're very open to that. We've announced a whole range of things we're doing. That's a good thing. But we can't compromise on basic financial stability, that would be my overall message.' Bailey's comments come after several leading figures involved in Britain's post-2008 drive to prevent a repeat of the financial crisis warned Labour against unpicking bank ringfencing – a key measure to separate high street banking from riskier investment banking that was introduced after the collapse. Sir John Vickers, the architect of the UK's ringfencing rules, told the Guardian a wholesale retreat would be a 'very bad idea'. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Against a backdrop of intensive lobbying from leading banks to water down the regulation, Bailey said such a change would have little benefit for lenders and put UK households at heightened risk. 'It [ringfencing] has benefits in terms of UK customers and UK consumers; businesses and households. I think that is a helpful feature of it. I don't think it hinders banks fundamentally in terms of their business models,' Bailey added. 'Again, at the margins, I am sure there are things that can be improved and we will work constructively to go through that process. It has established itself as part of the system and to me it would not be sensible to take it away at this point.'
