Rachel Reeves has set out sweeping reforms to the UK’s finance industry in the hope of delivering much-needed economic growth.
The Chancellor hopes the drive to cut red tape and increase innovation, billed as the biggest changes in more than a decade, will turn around an economy which has shrunk in recent months.
Ms Reeves, who also hopes for increased taxes from a growing economy to help balance her books, said the reforms unveiled in Leeds would help with “reinvigorating the whole economy”.
The plans include measures to make it easier for first-time buyers to get on the housing ladder with increased levels of borrowing and efforts to support new financial technology – fintech – firms grow in the UK.
The Chancellor said: “We are fundamentally reforming the regulatory system, freeing up firms to take risks and to drive growth.
“Second, we’re providing certainty for banks operating in the UK, and ensuring that UK banks have the ability to compete internationally and drive economic growth.
“Third, we’re doubling down on making the UK an innovation capital and the place of choice for fintechs to start up, to scale up and to list in the UK.
“Fourth, we’re seizing opportunities in areas where we are already world leading, including asset management, sustainable finance and specialty insurance.
“And fifth, we are delivering prosperity by increasing the firepower of our capital markets and boosting retail investment.”
She said the “Leeds reforms” are intended to “really invigorate our financial services sector, but with the core purpose of therefore reinvigorating the whole economy”.
Ms Reeves said the financial services industry accounted for 9% of gross domestic product – a measure of the size of the economy – and was “a big source of tax revenue” for the Treasury.
More mortgages will be available at more than 4.5 times a buyer’s income following recent Bank of England recommendations that some lenders can offer more high loan-to-income mortgages if they choose to.
This will create up to 36,000 additional mortgages for first-time buyers over the first year, the Government said.
Britain’s biggest building society – Nationwide – announced last week that it is aiming to increase its high loan-to-income lending limit.
From Wednesday, eligible first-time buyers can apply for Nationwide’s Helping Hand mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary – down from £55,000.
It is estimated this will support an additional 10,000 first-time buyers each year.
The changes will sit alongside the creation of a permanent mortgage guarantee scheme, delivering on a manifesto commitment, and a review of Financial Conduct Authority (FCA) lending rules that could allow prospective buyers’ records of paying rent on time to be used to show they can afford mortgage repayments.