Second Report - Edinburgh Reforms One Year On: Has Anything Changed?
Select Committee
Treasury Committee
HC 221
8 December 2023
Government response
Second Special Report - Edinburgh Reforms One Year On: Has Anything Changed? Government Response to the Committee’s Second Report · published 21 Feb 2024
Recommendations & Conclusions
18 results
1
Conclusion
Rejected
Para 17
Completing Edinburgh Reforms is a vital step to address over-zealous regulation.
Conclusion
The full Committee has previously concluded in its report on the Future of financial services regulation that “there should be a secondary objective for both the Financial Conduct Authority and the Prudential Regulation Authority to promote long-term economic growth” but …
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Government Response Summary
The government rejects the committee's conclusions, asserting that the Edinburgh Reforms will have a substantial impact, cannot be delivered faster, and are progressing well, with 21 of 31 commitments already delivered as of October 6.
HM Treasury
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2
Conclusion
Not Addressed
Para 18
Economic growth best promoted by a strong, well-regulated, resilient financial services sector.
Conclusion
The Sub-Committee agrees with the Treasury that the UK’s regulators should consider economic growth when designing new regulations, and the best way to promote economic growth in the UK is through a strong, well respected, independently regulated, and financially resilient …
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Government Response Summary
The government's response rejects any suggestion that its reforms will not significantly impact the economy or could be delivered faster, affirming confidence that its current wide-ranging package is promoting growth and competitiveness, but it does not directly address the committee's supportive conclusion.
HM Treasury
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3
Conclusion
Not Addressed
Para 21
Concerns about risks of wider retail investment in Long-Term Asset Funds persist.
Conclusion
The Sub-Committee has raised concerns with the FCA about the risks to widening retail investment in Long-Term Asset Funds, since they are riskier non-liquid assets. These concerns are in part formed by our work looking into the failure of London …
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Government Response Summary
The government's response focuses on the Advice Guidance Boundary Review consultation to improve consumer access to affordable advice in the retail investment market, without directly addressing the specific concerns raised about Long-Term Asset Funds and protections against misuse of investor exemptions.
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4
Conclusion
Para 23
Continued support for appropriate pension scheme consolidation remains the Committee's view.
Conclusion
In our July 2023 report on venture capital funding we concluded that we were in favour of pension scheme consolidation where appropriate. Our view has not changed since. We therefore restate our conclusion on pension scheme consolidation in this report:
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5
Conclusion
Para 24
Urge Government to urgently progress work on pension fund consolidation proposals.
Conclusion
Our evidence suggests that UK pension funds may be an untapped source for a deeper domestic capital market more inclined to risk investment in high-potential businesses. We welcome the Government’s announcement of work on pension fund consolidation in the autumn. …
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6
Recommendation
Not Addressed
Para 35
Continue monitoring market impact of the new consolidated tape by Government and regulators.
Recommendation
The Sub-Committee remains sceptical that a government-approved monopoly for providing data to market participants through a consolidated tape is good for competition. Once a monopoly were granted, the incumbent would have little incentive to reduce costs or to innovate. Given …
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Government Response Summary
The government notes that the Financial Conduct Authority (FCA) published rules for a UK consolidated tape for bonds, but does not directly address the recommendation to monitor its impact on market forces.
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7
Conclusion
Rejected
Para 36
Treasury's initial actions are preparatory work, not delivered financial services reforms.
Conclusion
While the Treasury has delivered what it set out to do in these six strands of work, namely publishing documents, welcoming a regulatory consultation, and establishing reviews or taskforces, none of these are in of themselves reforms to the UK’s …
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Government Response Summary
The government rejects the committee's conclusion, asserting that the Edinburgh Reforms are substantial and cannot be delivered faster, emphasizing that regulatory change is a multi-step process involving consultation and that 21 of 31 commitments have already been delivered.
HM Treasury
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8
Conclusion
Para 42
Explore small changes to ring-fencing framework, but only remove with substantial evidence.
Conclusion
Based on the evidence the Sub-Committee has heard, there is the potential for small changes to the ring-fencing framework to improve its interoperability with the PRA’s resolution regime, but any longer-term plans to eventually remove the ring-fencing regime entirely should …
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9
Conclusion
Para 46
Continued viability of building societies and mutuals is vital for a strong financial sector.
Conclusion
The continued viability of building societies and mutuals is of high importance to the Committee. A diverse, competitive and vibrant financial services sector is strengthened by the presence of mutuals and building societies.
HM Treasury
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10
Recommendation
Rejected
Para 47
Prioritise progress on secondary legislation for building society mutual deferred shares.
Recommendation
Given that Parliament has expressed its will through the Mutual Deferred Shares Act 2015 that building societies should be able to raise finance through mutually deferred shares, the Committee expects the Government to address the lack of progress made on …
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Government Response Summary
The government rejects the implicit criticism of slow progress, stating that delivering ambitious regulatory change requires careful work and consultation, and is progressing responsibly, with 21 of 31 Edinburgh Reforms commitments already delivered.
HM Treasury
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11
Conclusion
Significant problems identified within the PRIIPS regime and wider cost disclosures.
Conclusion
There is consensus among the Treasury, industry, and the Financial Conduct Authority that there are problems within the Packaged Retail and Insurance-based Investment Products (PRIIPS) regime in addition to a wider problem with cost disclosures. Such an example can be …
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12
Conclusion
Rejected
Para 53
Edinburgh Reforms achievements fail to make substantial difference to UK economy.
Conclusion
The Chancellor’s Edinburgh Reforms speech made big promises. However, from what has been completed so far, the Sub-Committee is of the view that none of the achievements to date will make a substantial difference to the UK economy.
Government Response Summary
The government rejects the conclusion, stating that 21 of 31 Edinburgh Reform commitments have been delivered and asserts that these reforms will substantially impact the UK economy and financial services sector, promoting growth and competitiveness.
HM Treasury
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13
Conclusion
Rejected
Para 54
Many Edinburgh Reforms are preparatory work, not substantial regulatory changes.
Conclusion
Many of the strands of work included in the Edinburgh Reforms are not reforms, but are more preparatory work for potential reforms in the future and should be 28 Edinburgh Reforms One Year On: Has Anything Changed? treated as such. …
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Government Response Summary
The government rejects the committee's conclusion that many Edinburgh Reforms are merely preparatory work or lack significant impact, asserting that the reforms are substantial and that 21 of 31 commitments have already been delivered to promote growth and competitiveness.
HM Treasury
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14
Conclusion
Rejected
Para 55
Excessive delays in implementing Treasury financial services policy changes observed.
Conclusion
The Sub-Committee understands and supports the Treasury in carrying out reforms that follow the appropriate processes. Reforms to the financial services rules should be evidence-based, taking into consideration views from both industry and wider society. This engagement takes time and …
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Government Response Summary
The government rejects the committee's conclusion that the implementation of reforms takes too long, arguing that delivering ambitious regulatory change is a multi-step process requiring careful work and consultation, and asserts that 21 of 31 Edinburgh Reforms commitments have already been delivered.
HM Treasury
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15
Recommendation
Accepted
Para 56
Prioritise financial services reforms that boost economic growth and protect consumers.
Recommendation
The Treasury’s priorities in its financial services reform plan should be reforms that will make the most difference to the UK’s economic growth, and reforms that prevent harm to consumers and businesses, making sure they are provided with well-designed, suitable …
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Government Response Summary
The government implicitly accepts the need for reforms that promote growth and protect consumers, claiming the current wide-ranging package is already achieving this. They cite the Advice Guidance Boundary Review consultation as a significant step towards ensuring consumers receive affordable financial advice.
HM Treasury
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16
Recommendation
Rejected
Para 57
Ensure sustained pace for moving onshored rules into financial regulators' rulebooks.
Recommendation
The Treasury and the regulators have told us the process of moving the onshored rules into the regulators’ rule books will take many years. The regulators and the Treasury must ensure that there is a sustained and focussed pace of …
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Government Response Summary
The government rejects the recommendation for a faster pace of change, stating that the reforms cannot be responsibly delivered any quicker and are well underway, with 21 of 31 commitments already delivered.
HM Treasury
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17
Conclusion
Para 58
Duplication of work with proposed Lords Financial Services Regulation Committee must be avoided.
Conclusion
The Sub-Committee notes the proposed establishment of a Lord’s Committee on Financial Service Regulation. While its remit is a matter for the House of Lords, duplication of work should be avoided. The Sub-Committee will continue to carry out its scrutiny …
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18
Conclusion
Regulators' cost benefit analysis consistently fails to capture full costs for firms.
Conclusion
The Financial Services and Markets Act 2023 legislated for the creation of Cost Benefit (CBA) Panels dedicated to supporting the regulators in producing cost benefit analysis for each of their reforms. The Sub-Committee has consistently been of the view that …
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