The government has planned to introduce wide-ranging powers that would allow ministers to override regulators, including the Bank of England, following multiple warnings that such a move would damage the UK’s global reputation.
The Treasury confirmed on Wednesday evening that it “would not proceed with the intervention power at this time”, noting that the government was “committed” to the independence of city watchdogs, including the Financial Conduct Authority.
The powers would have given the government the ability to make, amend or withdraw rules on matters ministers deemed to be of “significant public interest”.
Opposition MPs and senior officials, including from the Bank of England, warned the move would threaten the independence and international reputation of the UK and its regulators.
Concerns were exacerbated after the government’s mini budget, which shook international investor confidence and sent the pound and UK government bonds plummeting to record lows.
“Following further consultation, we believe that the existing provisions in the Bill are currently sufficient and will already enable us to seize the opportunities presented by Brexit by aligning financial services regulation with UK markets to enhance our competitiveness. to strengthen,” said the city secretary, Andrew Griffith. said in a statement Wednesday.
He added: “We are always keen to strike the right balance between increased responsibility for regulators, with clear accountability, appropriate democratic input and transparent oversight. We remain committed to the operational independence of financial services regulators.”
The intervention powers were intended to be introduced through an amendment to the comprehensive Financial Services and Markets Act, which broadly aims to revise city rules originally inherited from the EU.
Following the resignation of Liz Truss as prime minister, the Treasury Department announced last month that it was delaying the change to allow the new government under Rishi Sunak to “consider the details carefully”.
The Treasury’s latest announcement suggests the government had given in to domestic and international pressure over the amendment.
Sunak was the first to propose the powers during his time as chancellor. The plans were later adopted by Truss and her chancellor, Kwasi Kwarteng, leading to further tensions between the government and Bank of England officials, who were already blamed for failing to keep Britain’s inflation under control.
Commenting on the U-turn, shadow city minister Tulip Siddiq said: “The government should never have threatened the independence of financial services regulators in the first place. The Conservatives have done untold damage to the UK’s international reputation not only in the last 12 weeks, but also in the last 12 years. What we need now is the restoration of financial credibility and a serious growth plan that puts working people first.”