The Labour Party has released its proposals for reform of the UK financial services sector, including commitments to support credit unions and mutuals.
The announcement also contains a commitment to supporting the green initiatives in the financial services sector. It came amid continued press speculation over the party’s £28bn green investment pledge, with reports it had been dropped; today (6 February), leader Keir Starmer reiterated his support for the figure in an interview on Times Radio.
In its Financing Growth report, Labour says it will “unlock the full potential of the mutuals sector to support regional development” and “aim to double the size of the UK’s co-operative and mutual financial services sector”.
The party – which has a longstanding commitment to doubling the UK’s overall co-op economy – adds that “the structure of member-owned mutual organisations makes them more community-oriented than other banking institutions. The reach of the sector spans the whole of the UK – for example, all major building societies are headquartered outside London.”
Labour supported last year’s reforms in the Financial Services and Markets Act which allow credit unions to offer more products, and in the new document it says that, if elected, it would build on this to “require financial services regulators and policymakers to report annually to Parliament on how they have considered the specific needs of mutuals and the need for a level playing field with the wider financial services sector“.
Regulatory reform has long been on the wishlist for the co-op and mutuals sector, spurred on by cases such as the attempted demutualisation of LV= in 2021. Labour’s sister organisation, the Co-op Party, has been a leading voice in the campaign for reform, and last year Labour / Co-op MP Sir Mark Hendrick saw his Co-operatives, Mutuals and Friendly Societies Bill passed into law.
Now, Labour says it will “modernise the Building Societies Act including new provisions to change which fund sources count towards building societies’ retail funding limits” and “strengthen the SME bank referral scheme to support more businesses who are rejected for loans from banks to secure financing from alternative sources including co-operatives, building societies, and community development finance institutions.” It will also explore the need for a similar referral scheme for households.
Responding to the document, Robin Fieth, CEO of the Building Societies Association, said: “We were delighted to see to see the Labour Party renew its commitment to doubling the size of the UK’s co-operative and mutual financial services sector as a core element of its plan for financial services, including a commitment to update the Building Societies Act.
“Building societies provide a vital service to the communities they serve but are currently prevented from doing more by archaic legislation. The changes proposed in Julie Elliott MP’s current Private Members Bill will help societies to help more people buy a new home and save for the future and it is great to see Labour commit to keeping this important legislation up to date.”
Andrew Whyte, CEO of the Association of Financial Mutuals, added: “We’re pleased to see that Labour’s plan recognises the contribution mutuals already make and the commitment to unlock the full potential of the sector is especially welcome. Turning the aspiration to double the size of the mutual and co-operative sector in financial services into reality will call for active support for the sector from government and concerted action on a range of policy and regulatory issues.
“Our recent joint mutual prospectus, published together with our partners BSA, ABCUL and Co-ops UK, sets out the steps that whoever wins the next election need to take to enable the sector to thrive and contribute even more to the economy, our communities and society as a whole.”
James Wright, Co-operatives UK’s policy and development lead, said: “It’s great to see a plan for unlocking the full potential of the mutuals sector. Policies to ensure departments and regulators consider the specific needs of mutuals, to ensure a level playing field with the wider financial services sector, directly reflect proposals in our mutuals prospectus released in November.
Labour’s plan also includes pledges to boost green financial services – which could benefit co-op players in the renewable and retrofitting sectors. It says it will work with the finance sector “to evaluate a potential model for tracking green finance flows to enhance the availability, consistency and reliability of sustainability related data, which will help attract investment to the UK to finance the net zero transition”.
It says better data “will enable a future government to track investment in the UK’s net zero transition, identify key sectors where there is underinvestment in relation to sectoral roadmaps, monitor green finance which transacts through London, and track the growth of the UK green economy”.
The document adds that Labour will work with the financial services sector “to support greening the housing stock”. with 19 million homes needing to be retrofitted in the next decade. “This requires a comprehensive cross-government approach to provide policy certainty and stimulate demand for existing schemes and loans. This review looks specifically at the role of financial institutions in supporting greening the housing stock.”
Meanwhile, Labour faces continued speculation over its pledge to invest £28bn a year in green industries, which, when originally announced, had been welcomed by campaigners including energy co-op apex Community Energy England.
Last year, the party watered down the policy – which has been attacked by the Conservative Party and its supporters in the media – revising its pledge to invest £28bn in green industries every year for a decade, instead promising to reach £28bn in the second half of the first parliament, citing concerns over a “crashed economy”.
Renewed media speculation came at the start of the month, with the Guardian citing “party sources” which claim the pledge is to be scaled back. The sources said the party was still committed to investing in green infrastructure, alongside the creation of publicy owned renewable company GB Energy and a mass home insulation programme. But, the Guardian claimed, this “will in effect cut its green ambitions by about two-thirds, given that the previously announced schemes are set to cost just under £10bn a year by the end of the parliament”.
Further doubt was cast when Darren Jones, shadow chief secretary to the Treasury, told Sky News the £28bn figure will be “subject to the state of the economy”, adding: “We know we’re going to inherit a bad economy from the Conservatives, but we have plans to turn that around, and of course, we hope to be successful doing that. But it will also be subject to case-by-case business cases that if, I’m the chief secretary to the Treasury in the next Labour government, I will have to sign off.”
Jones said the amount will also depend on “what the types of projects are, what the types of partnerships are with the private sector, and also our ability for the market, for our country, to deliver on those projects”.
He added: “The number will move around just as a matter of fact … it will depend on the strength of the economy – we will only invest when it’s affordable – but also on a case-by-case basis working with the private sector.”
And on 2 February, deputy leader Angela Rayner told reporters: “It’s not about just throwing a figure out there willy-nilly, and saying we’ll just put that in. It’s got to be part of applying to our fiscal rules.
“This is about identifying where that money will be spent, and when, how quickly we can get that off the ground in a sustainable way to secure the public money and secure that three times the amount of private investment.
“Therefore it’s arbitrary to say, well every year it will be £28bn by immediately the first day. We don’t even know what the public finances are going to be like.”
She added: “We’re saying that we want to ramp up to £28bn. But we’re not just going to throw money out there.”
But. the party’s official line is that the policy remains unchanged since its last iteration. Shadow chancellor Rachel Reeves this week refused to back the figure during an interview on Sky News, adding: “The fiscal rules will come first and all of our policies will be subject to the iron discipline” – but party leader Keir Starmer has reiterated his support for the £28bn figure, telling the BBC: “We will ramp up to that £28bn during the second half of the parliament subject to of course what the government has already allocated and subject to our fiscal rules.”
On 6 February, Sir Keir ramped up his support for the figure, telling Times Radio the pledge is “desperately needed”, and denied there were plans to scale it back.
“We’re going to need investment, that’s where the £28bn comes in. That investment that is desperately needed for that mission,” he said.
“You can only understand the investment argument by understanding that we want to have clean power by 2030 … We need to borrow to invest to do that.
“That’s a principle I believe in and I’m absolutely happy to go out and defend. And of course, what we’ve said as we’ve got closer to the operationalisation of this, is it has to be ramped up, the money has to be ramped up … and everything is subject to our fiscal rules.”
Emma Bridge, CEO of Community Energy England, said: “We are pleased that the Labour leader, Keir Starmer, has restated his party’s commitment to ramping up significant investment in clean energy. Labour’s mission to deliver 100% clean power by 2030 can only be realised if we empower and fund local communities to drive action on net zero.”
- This report was updated on 6 February to include the most recent comments from Sir Keir Starmer