Rachel Reeves’ attack on regulators has sparked alarm from consumer groups

It was a bold move for a Labor chancellor: Rachel Reeves went to Davos to tell an audience of global plutocrats that she wanted to make life easier for British consumers by creating a dangerous regulatory environment.

Reeves attack away from the Swiss mountains Controllers He was cheered by the right-wing Conservatives, but some Labor MPs despaired that their chancellor’s pursuit of progress was taking the party into dangerous territory.

A senior Labor MP said: “People are holding their heads and they don’t believe it.

Reeves“You have to get the balance right,” he said in a speech at the World Economic Forum. I think the balance is too far in controlling risk. You have to be able to protect consumers, but people also have to take risks.

The Chairman of the Competition and Market Authority Markus Bockkern on Tuesday High-profile damage Reeves’ new approach forced ministers to oust him because of his lukewarm appetite for growth-oriented reform.

His firing is intended as a warning to other regulators, government officials said. This month, Reeves asked 17 guards to come up with action plans to increase progress and warned she would be looking into them.

John McDonnell, Labour’s former shadow chancellor, said Reeves could score a propaganda victory for Nigel Farage, the leader of the populist Reform UK party, if she pursues her agenda at the expense of consumers.

“I am concerned that all of this will give our opponents, especially Reform, an opportunity to portray the Labor Party as a protector of corporate violence and profiteers,” he said.

Reeves’ efforts to protect business from what is seen in government circles as a harmful “compensation culture” has taken many turns in recent months, with a common theme: less money for consumers who have been wronged.

This week, Revs He wanted to intervene In a Supreme Court case to protect banks and other car loan providers from multibillion-pound fines, they argued it would “severely damage the UK’s reputation as a place to do business”.

Last year, Treasury regulators successfully pressured Slaughter The new regime is set to cap compensation for victims of payment fraud from £415,000 to £85,000, amid concerns that it could hit some fintech companies hard.

Reeves has pushed for a review of the Financial Ombudsman Service to prevent further mass consumer compensation incidents, such as the £50bn paid out by banks in the Payment Protection Insurance scandal.

Conservatives Conservatives are keen to further push forward the agenda launched by Rishi Sunak in 2023, with regulators given a “secondary objective” to boost economic growth and competitiveness.

Andrew Griffiths, the shadow business secretary, wants to see a wider range of regulators and has been critical of the Financial Conduct Authority, the City watchdog. He thought that sacking Bokkernk was a “curious place to start.”

Bim Afolami, a former Tory city minister, said: “The chancellor is doing the right thing about regulators. I would recommend that she continue.” Another former Tory Treasury minister said simply: “I think she’s probably right.”

But conservatives also believe that Reeves, who presides over a stagnant economy, is using regulators as leverage. Senior Tory Harriet Baldwin said the chancellor should “admit some of her own mistakes instead of blaming everyone else”.

Given that Sir Keir Starmer’s government is in the process of introducing regulation for a wave of employment, many business leaders agree with Tory criticism that it should move from regulation to Number 10. Ministers may still proceed. water down that package.

In return for focusing on growth, Reeves has given a clear signal that she will stand by regulators when things go wrong — as they will, regulators say. “We feel like she has our back now,” said one.

Nikhil Rathi, FCA chief executive, told the House of Lords on Wednesday that proposed regulatory changes – such as easing regulation on mortgage lending – could lead to more defaults. “One or two things are going to go wrong here,” he argued, adding that Parliament should give the regulator a “tolerable failure measure.”

Consumer groups have issued warnings. “The combination of anti-regulation talks – and now the firing of the CMA chair – shows consumers that the government is ready to loosen the protections built in for consumers,” said James Daley, head of research at Fair Financial.

Rocio Concha, director of the consumer group, said it was “absolutely right” for the government to focus on growth and the role of regulators. But she added: “Stronger consumer protections are not a barrier to growth. They are critical to economic growth because they help create a level playing field for dynamic competition that ensures consumers are protected from being ripped off.

Professor John Thanasoulos of Warwick Business School, also an independent CMA panel member, said the government “should”.Resist the temptation to hit CMAHe said.

He added: “It will not lead to market-wide productivity growth.” Instead, it rewards some well-connected firms with countless, but silent, mostly low-cost marketers whose firms put the consumer first.

Dame Meg Hillier, Labor chair of the Commons Treasury Committee, said while she supported Reeves’ aim to push regulators to boost growth, “economic stability and consumer protections are not unduly at risk”.

For now, most Labor MPs are not moving against Reeves. “There is little grumbling about not going back to 2008,” he said, referring to the “light touch” regulatory landscape that preceded the financial crisis. But it is not yet in the main part of the party – it is still seen as a small place.