John Healey has rallied behind the government’s financial services bill that allows the City to take advantage of post-Brexit freedoms, despite consumer groups claiming it would harm the redress system. 

The Chancellor said the bill, which was part of the package introduced in Sir Keir Starmer’s King’s Speech, would create a “clear set of standards” and avoid “confusion and inconsistency” for consumers.

The legislation will put a time limit on complaints to the Financial Ombudsman Service (FOS) of 10 years.

It will also introduce a new test where, if the firm can prove it followed the watchdog rules, the ombudsman must assume it acted fairly, even if the customer believes they got a bad deal.  Under the new system, cases must be referred to the Financial Conduct Authority (FCA) where there is ambiguity.

Treasury committee chair Meg Hillier said the bill could be seen as “moving the pendulum more towards the financial services sector and further from regulation to support consumers”.

Healey responded that the assertion that the bill acts as though “the firm is always right is incorrect.”

Consumer champions such as Fairer Finance, Which? and Martin Lewis’ Money Saving Expert have warned consumers could be locked out of free, independent redress because of changes in the Bill.

Burnham to back City in EU negotiations

The City has hailed the move in the King’s Speech as a bid to take advantage of Brexit’s regulatory advantages.

The split from the EU paved the way for London’s financial hub to break from restrictive Brussels-era directives and burdensome capital rules. This has included lifting the banker bonus cap, overhauling insurers’ Solvency II regime, and streamlining wholesale market regulations. 

Prime Minister Andy Burnham has called for closer ties with the European Union, sparking friction over what it could mean for the City’s new regulatory framework.

According to Bloomberg reports, the government is seeking to maintain the City’s independence in EU negotiations and does not want the 27-state bloc’s regulations to apply to UK financial services.

The new bill replaces rigid EU rules on consumer loans with powers that let the UK financial watchdog update cancellation and information rules quickly in its own handbook. 

It also scraps the old system for approving foreign financial firms, allowing the government to let overseas companies operate in the UK as long as their home rules achieve similar results, rather than forcing them to copy UK laws word-for-word.