Chancellor Nadhim Zahawi considers power to overrule financial regulators

Mr Zahawi wants to 'consider all of the arguments before making such an important decision'

Chancellor of the Exchequer Nadhim Zahawi speaks at Mansion House in the City of London on Tuesday. PA
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The government is considering new powers to intervene in financial regulators’ decisions in a post-Brexit overhaul to regulation, Chancellor Nadhim Zahawi has said.

Mr Zahawi said he was still undecided on the move, which could cause tension with the independent Bank of England.

The government is set to unveil the Financial Services and Markets Bill on Wednesday, which Mr Zahawi says is a “landmark piece of legislation” that will revoke retained EU law on financial services.

“There’s been some speculation about the government taking further powers to intervene in financial regulation, in the public interest," Mr Zahawi told the City at Mansion House, in his first speech as Chancellor.

“That is something we’re looking at and I’m keeping an open mind.

“But I can confirm that it’s not in the Bill tomorrow, because I want time to consider all the arguments before making such an important decision.”

Mr Zahawi said the country should be “confident” the government could get a handle on inflation as the cost-of-living pressure on households continues to bite.

He promised that the government was dealing with the “task at hand”.

The recently installed chancellor, fresh from his ill-fated bid to become Tory leader, delivered the speech as the remaining candidates to replace Boris Johnson clashed over proposed tax cuts.

Mr Zahawi's priorities for the coming months, he said, would be to control inflation, create the conditions for a private sector recovery and a “post-Brexit vision” for the financial services industry.

“That means delivering sound public finances, carefully designed to avoid adding to inflationary pressures, while still providing help for households with the worst impacts of inflation,” he said.

“Where we can, we must also ease the supply constraints that are so often the underlying cause of higher inflation.

“The country should feel confident that we can, and we will, get inflation back under control.”

Seizing the opportunities created by Brexit also dominated the speech.

“Our objective is clear: to keep the UK the most open, inclusive, welcoming, competitive, safe, and transparent place to do financial services business, in the world,” Mr Zahawi said.

He also committed to repealing “hundreds of pieces of retained EU law”.

The Financial Services and Markets Bill “enables us to reform Solvency II”, he said, giving “UK insurers more flexibility to invest in long-term assets like infrastructure” and increasing “the competitiveness of our capital markets”.

Mr Zahawi alluded to the “tears and the tantrums” in the Tory leadership race, and joked that he knew how Love Island contestants knocked out in the early rounds felt.

He said that despite the “short-term uncertainty” caused by Boris Johnson’s resignation as Tory leader, the work of the government continued, pledging “stability, reassurance and continuity”.

“We are steadying the ship. We are stabilising the economy. We are getting on with the task at hand,” Mr Zahawi said.

“I know where the best ideas, the most sustainable growth, the new jobs, the higher wages, are going to come from. It’s from the wealth creators and risk takers.

“So how do we get that growth? It’s by unleashing the power of enterprise — to allow businesses to invest, innovate and create jobs.”

But Tulip Siddiq, Labour’s shadow economic secretary to the Treasury, accused him of offering “woolly” promises.

“As Labour has long set out, what we need is long-term plan to build a stronger, more secure economy," Ms Siddiq said.

“But instead, the Tories have spent the last two years raising taxes on working people 15 times, and now spend every waking minute indulging in unfunded fantasy economics.

“It has been six years since the Brexit vote, and the government still has nothing to offer the City other than rhetoric, empty promises and desperate threats to undermine the independence of our world-leading financial services regulators.

“Labour will provide the City and our economy with the certainty and ambition it needs to thrive.”

Updated: July 20, 2022, 5:37 AM