Labour and the City of London: What the party would offer the financial services industry

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From the meetings and conversations I’ve had in the last two-and-a-half years with people from across the finance sector, from different organisations and with different responsibilities, there has been a consistent message.

People want to know where they stand. They want to know where we as a Labour Party are coming from, what we in Labour want from financial services, and what we as a government can offer them in return.

We stand for the creation of a society and an economy that is fairer, more democratic, and more prosperous than it is today, where that prosperity is sustainably produced and shared by all. We believe that the finance sector has an important role to play in that.

Labour in government will end austerity spending cuts, and we will do so in a way that is fiscally responsible. Our fiscal credibility rule means we will target eliminating the current deficit in five years, and have debt lower as a share of trend GDP at the end of five years.

We will charge the Office for Budget Responsibility with overseeing our progress, and make it genuinely independent by having it report to parliament.

We will ask those fortunate enough to earn the most in our society to pay a little extra towards the cost of our shared public services.

But at best, this could repair the damage caused by eight years of Conservative austerity. Securing high quality public services into the future will mean building an economy that can support them.

That can only be achieved through long-term, patient investment in new technologies and productive enterprises. Britain is a laggard in investment – we have, for example, the lowest rate of robot use in manufacturing of any OECD country.

To drive up that rate of investment is at the heart of Labour’s economic programme.

But the evidence is clear, as laid out in Graham Turner’s recent report for Labour: those countries that prioritise key sectors and have governments prepared to support innovation, whether the US, Germany, or China, consistently outperform those, like Britain, that do not.

To deliver long-term, patient investment will require new institutions, like the National Investment Bank, and a new deal between finance and the rest of the economy.

Britain’s financial sector is one of the largest in the world – but now faces three critical challenges. Each could prove existential, but it will only be through rebuilding trust with the British people that those challenges can be successfully met.

The first challenge is Brexit. Labour will respect the result of the referendum, which means we are ending our membership of the European Union. But in doing so we will not adopt the car-crash approach of the Conservatives. We want a deal that builds in place the rights of British financial businesses to trade in the EU, and vice versa, and we believe that a negotiation based on a new partnership with Europe offers the potential to win that.

Second is climate change. We will be a government that supports our financial services as it faces the costs of adaptation and transformation. Where new, innovative forms of finance are developed to support low-carbon technologies we will look to support them.

Finally, technological change is accelerating. Changes like open banking have huge, disruptive potential, but are poorly understood. The increasing use of machine learning and other artificial intelligence (AI) in finance also runs the risk of failure, unless it is built on public trust.

The example of Facebook helps underline the need for regulation enjoying public support.

So as well as delivering the investment in R&D and skills that will secure Britain’s place as a leading AI nation, we will look to build in place the regulations that oversee it. And we will support innovations like platform co-operatives that spread the ownership of new, data-driven technologies.

Labour will be the party in government for those who can see the challenges ahead, and want to rise to them. We’re not interested in supporting business models that no longer work, whether in banking or any other part of our economy. We aim to be a transformational government, and we want a reformed finance sector to help deliver the change our society needs.