A POST-BREXIT “bonfire of banking rules” planned by the UK Government risks driving up food and energy prices even further, campaigners have warned.
The Financial Services and Markets Bill, which is currently going through the House of Lords, will bring a massive shake-up of how the sector is regulated in the wake of leaving the EU.
Social justice campaign organisation Global Justice Now has raised concerns the move towards deregulation could sow the seeds for another financial crash and will make it easier for bankers to gamble on food and energy prices in the middle of a cost of living crisis.
When the bill was introduced to Parliament, the UK Government said it would “seize the opportunities” of Brexit, by “tailoring financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre.”
Nick Dearden, director of Global Justice Now, said it was part of a bigger package of changes known as the Edinburgh Reforms which have mostly “gone under the radar” apart from an outcry over the scrapping of a cap on bankers’ bonuses.
He said: “The bill itself is essentially a massive shake-up of how we regulate financial services, and the reason for it is we’ve left the European Union now – so [the UK Government] basically see it as a big Brexit dividend essentially, that we can regulate our financial services differently.
“For us as an organisation, it’s not the doing it differently that it’s so important, it’s the fact that you’re doing it less.
“It’s the biggest shake up of financial services in a generation, which will really set the tone and the guidance for how financial services are allowed to operate from this point forward.
“It’s only 15 years since the financial crash, where the kinds of activities and behaviours that they’re now looking at deregulating were widely at that time seen as the cause of the economic crash.”
Dearden said the heart of the bill was ensuring the action of regulators had to take into account the international competitiveness of Britain’s financial services industry.
“What that likely means in practise is the regulators being forced just to accept that we have to apply lower levels of regulation to encourage more people to come here and trade in financial markets,” he said.
Dearden said there was a specific concern in relation to the part of the bill which revokes rules on commodity trading – which involves buying and selling raw products in energy, agriculture and metals - passed in the wake of the last financial crash.
“The problem is, if you deregulate these markets too much, they become utterly overwhelmed with speculation and speculators have an interest in making markets more volatile, not more stable, as that’s where they make their margins,” he said.
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“And that’s exactly what happened pre-2008 – at that time because there was an enormous food crisis right the way around the world.”
He added: “We campaigned at that time for a bunch of rules to be applied to these markets – we didn’t get exactly what we wanted but it made the situation somewhat better, it constrained those markets a little bit and it made them more transparent and constrained how much of the market any one trader can hold.
“What the Government is planning here is to basically strip away those regulations again, which I think particularly perverse given we are in another cost of living crisis, where high price of food and energy is a huge concern for people here, but just as much a concern for people around the world.”
Global Justice Now has set up a petition to raise awareness of the concerns it has about the bill, which will be going through the committee stage in the House of Lords in the coming weeks.
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SNP economy spokesperson Stewart Hosie MP said: “While families are being forced to contend with the worst of the Tory-made cost of living crisis, the UK government is busy carelessly forcing through legislation that would reward the richest in society.
“Deregulation and a lifting of the cap on bankers bonuses are the last things we need to see right now, offering up nothing but another insight into the warped priorities of a Tory party who’ve just taken a wrecking ball to the UK economy and household finances
“The economic chaos created at Westminster is a cost the people of Scotland can no longer afford – demonstrating exactly why we need a permanent escape with the full powers of independence.”
The UK Government did not respond to a request for comment.
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