UK Financial Services

Tuesday 1st September 2026 Westminster Hall

[Derek Twigg in the Chair]

16:30

[Callum Anderson (Buckingham and Bletchley) (Lab)]

I beg to move,

That this House has considered the future of UK financial services.

It is a pleasure to serve under your chairmanship, Mr Twigg. Before turning to the topic of this debate, I congratulate the Economic Secretary to the Treasury, my right hon. and learned Friend the Member for Northampton North (Lucy Rigby), on her reappointment. In her first spell in the position, she was a formidable advocate for UK financial and professional services, so we are all very fortunate that we have her back for a second act. I wish her well for the time ahead.

Today, I want to make a positive case for the future of the UK’s financial services sector. I will say why it should lie at the very heart of this Government’s strategy for backing Britain’s wealth creators, standing behind the entrepreneur with a bright idea and ensuring that we channel capital toward the innovators and builders who will drive growth in every part of this country, while also ensuring that the sector provides people, wherever they live and whatever their circumstances, with the tools to participate fully in a modern economy and a modern society through a bank account that works, savings and investments that build real financial security, and insurance that protects families, homes and businesses when life throws its inevitable curveballs at them.

With financial and professional services employing around one in every 13 workers across the UK, two thirds of them outside London, they are no longer a niche interest in the UK or a City of London story alone. They are a genuine national endeavour. When I meet in Parliament the people I represent from Buckingham and Bletchley—from the owners of small businesses to the families who I also meet on the doorstep and the staff at Allica Bank or Santander UK, both of which have their headquarters in Milton Keynes while serving customers the length and breadth of Britain—I see the same thing: a national industry built for all of us. In the time available, I will set out five challenges and opportunities facing the sector in the years ahead.

First, there is the need to go even further in mobilising a greater share of domestic capital toward domestic assets, in particular high-growth businesses and especially those aligned with the eight sectors set out in the industrial strategy and infrastructure development. I welcome the Mansion House speech in July by the former Chancellor, my right hon. Friend the Member for Leeds West and Pudsey (Rachel Reeves), and the progress that this Government have made against the financial services growth and competitiveness strategy one year after its publication, building on the progress made by the previous Government. We have seen that £28 billion of equity capital has been raised in London since the start of last year. The Pension Schemes Act 2026 was also passed in the last parliamentary Session, which is expected to deliver an additional £29,000 in pension savings over an average career. Eight firms have now been authorised to provide targeted support to savers, benefiting around 18 million consumers—our constituents—over the coming decade. All of that is welcome progress in turning the overly cautious British saver into the responsible investor, but I believe that we can—indeed, must—go even further in unlocking our largest pools of pension, insurance and retail capital.

When we were debating the Pension Schemes Act earlier this year, the case against mandating UK investment rested on two grounds: first, the principle that Government should not tell institutions or individuals where and how to invest; and, secondly, that if UK investments were good enough, funds would already be backing them. However, what I think that argument missed is the trend towards passive global indexing that we have seen over the last few decades, which has mechanically reduced UK equity allocations to around 4%, regardless of the underlying fundamentals. I suspect that without further intervention, that trend will increase, leading to further declines in the years ahead. That risks creating a self-reinforcing cycle of declining investment in British companies by funds, regardless of where they are domiciled, depriving UK plc of domestic patient capital, and it would ultimately weaken our public equity markets and the strength of the London stock exchange.

In the light of that, I encourage the Government to look again at how they can actively incentivise our largest pools of domestic capital. For instance, we could build on the Pension Schemes Act by requiring default pension funds to adopt a UK-weighted approach to listed equity, with UK equities making up, say, 20% to 25% of listed holdings in order for them to continue enjoying the various tax reliefs on offer, but giving funds and individual savers full agency to opt out. According to the New Financial think-tank, that could unlock as much as £75 billion of additional investment into UK companies. I am aware that this idea is held by a number of right hon. and hon. Members in this House, as well as Members of the House of Lords.

We could also scale up the British Business Bank’s British growth partnership so that it is more in line with the scale of France’s Tibi initiative, while giving the British Business Bank and the National Wealth Fund complementary mandates to crowd in capital for the larger funding rounds. We could support UK scale-ups—which my right hon. Friend the Prime Minister just mentioned in his statement in the main Chamber—with the British Business Bank focusing on those companies from series B to C, and the National Wealth Fund acting as a direct investor in later-stage companies.

Finally, we should maintain our focus on unlocking some proportion of the £600 billion of retail capital currently held in cash, in individual savings accounts or other savings accounts. With the right mix of financial education, a simpler ISA product framework, tax incentives and, crucially, accessible investment research, we can ease access to capital from growing domestic companies while enabling British people to own a greater share of our economy’s future success.

[Peter Fortune (Bromley and Biggin Hill) (Con)]

I agree with many of the hon. Member’s potential solutions to increase investment. Does he agree with the Treasury’s assessment that the Financial Ombudsman Service is not fit for purpose? Does he agree with the Opposition’s suggestions that a new independent body to replace the Financial Ombudsman Service would probably increase legal certainty and encourage investment into the UK?

[Callum Anderson]

I confess I have not read the Conservative party’s full recommendations in this regard. The Government are clear that the Financial Ombudsman Service needs reform; it is not working for the sector, consumers or the UK’s international competitiveness. The Conservative party will put forward its recommendations, and the Government will make their considerations as part of the Financial Services and Markets Bill, which will be debated in the House of Commons Chamber in October. I recognise the downsides that the hon. Gentleman identified in his intervention, so I thank him for it.

The Minister already knows my views on retail capital. There is an excellent opportunity in the months ahead—certainly, in the run-up to the Budget in October—for the UK to establish a long-term retail investment strategy that is co-designed by industry, Government, civil society and regulators to be the best mechanism to realise the full potential of UK investors’ savings.

The second challenge that I want to turn to lies in how we manage artificial intelligence, which I became very familiar with when I was Parliamentary Private Secretary at the Department for Science, Innovation and Technology, and the broader digital revolution in financial services. Distributed ledger technology and tokenisation are having an ever-increasing influence on the international financial ecosystem. The UK should continue to act as a global leader and embrace that change now so that regulators, industry, investors and consumers alike can benefit from lower costs, widen access to capital, deliver a more efficient industry and enjoy the benefits of more productive investment.

At the same time, that requires us to fully build the infrastructure, regulatory framework and market confidence to allow innovators to scale safely and responsibly. I welcomed Chris Woolard’s first report as the UK’s wholesale digital markets champion. It marked an important step in delivering the Government’s wholesale financial markets digital strategy, but we now need to shift up a gear.

I would focus on two immediate priorities. First, the Government should publish a clear road map for DLT-enabled capital markets. UK financial markets—and global financial markets more broadly—need certainty about the sequence of reforms, the regulatory framework that the UK proposes to put forward and how new infrastructure will connect with the systems that are already in use by market participants. Second, we should use DIGIT—the digital gilt instrument—to build momentum across the market by setting a clear timetable for regular, benchmark-scale digital sovereign bond issuance so that we are properly mainstreaming UK Government debt in the financial market system.

On artificial intelligence, it is right that AI can transform productivity, investment management, fraud detection and customer service across the economy and society. But those opportunities also bring new and unfamiliar risks, from automated decision making that leads to unintended consequences to cyber-attacks by belligerent forces and operational disruption due to a greater dependence by industry on a small number of technology providers. With that in mind, I was proud to partner with Community trade union, which I should disclose that I am a member of, in May to launch its responsible AI charter for financial services; Zurich UK was its first signatory. The charter sets out practical principles for ensuring that AI is adopted responsibly, transparently and with people at the heart of its deployment. The Bank of England’s recent work makes it clear how quickly the risks that I just identified are growing. That is why we must maintain the urgent momentum on implementing the financial services AI adoption plan.

The third challenge facing the sector, which I want to address briefly, concerns the clean energy transition. I will not discuss the benefits or otherwise of which energy sources we may like to prioritise, but in my view, net zero cannot be delivered by public investment alone, however committed the Government are to that mission—and rightly so. Long-term, patient private capital also has a crucial role to play in supporting tomorrow’s energy infrastructure, from onshore and offshore wind and grid upgrades to next-generation nuclear power. In order for that capital to be committed effectively, I would welcome an annual published pipeline of investable clean energy projects so that firms and asset owners can plan and deploy investment at the scale and pace that our net zero commitments demand.

[Kerry McCarthy (Bristol East) (Lab)]

My hon. Friend will not be surprised to hear that I very much agree with the point that he just made. We have some excellent, innovative businesses in Bristol that came up through the Science Creates innovation hubs and attracted private capital. They are flourishing, but they need signals from the Government that we are sticking to our net zero agenda so that there will be a market for their products in due course. Does my hon. Friend agree that those signals are important?

[Callum Anderson]

I could not agree more with my hon. Friend. In this space and across many policy areas, what business and investors require and demand from us as policymakers—regardless of which party happens to be in power—is policy certainty. When we risk lurching in various directions, with various priorities and changing timelines, the only result is that investors withdraw or deploy their capital in other countries. Frankly, with regard to the clean energy transition, that will ensure that other countries, be they our competitors or our foes, will have a massive, global competitive advantage over us. I do not think it is a good idea for us to enable that.

Changing tack, the UK also faces the challenge of our constituents accessing affordable financial services and products. We need to honestly confront the barriers that still prevent too many of our constituents from opening a basic bank account, building even a very modest savings buffer for when times are hard, and accessing safe and affordable credit or securing the insurance that protects people from life’s shocks.

[Andrew Pakes (Peterborough) (Lab/Co-op)]

My hon. Friend’s constituency sounds a lot like mine, which is underserved in many ways by financial institutions. The recent takeover by Nationwide of Virgin Money means that, in a constituency like mine, Nationwide’s high street network will soon be able to offer support to small businesses and innovators in the postcodes covering Peterborough. Does he agree that that highlights the vital role the mutual sector, credit unions and member-owned banks play in extending financial services to every postcode of the city, widening prosperity in our country?

[Callum Anderson]

I could not agree more. Since entering Parliament in 2024, my hon. Friend has been a leading voice for the role that co-operatives and mutuals can play in the broader ecosystem of UK financial services. He will know well that the Government are committed to doubling the size of the co-operative and mutual sector. Financial services should play a big role in helping to deliver that agenda.

I started my career supporting the development of credit unions and community development financial institutions, which have many similar economic and social objectives to building societies, co-ops and mutuals. My conviction is as strong as it was 15 years ago that they have an important role, not to replace or be a substitute for mainstream high street banks but to be part of the integrated financial ecosystem described by my hon. Friend the Member for Peterborough (Andrew Pakes). The UK has a lot to learn from other countries, such as Germany, Canada and Australia, about how best to do that in a sustainable way.

The Government can already be proud of a strong record, from last November’s financial inclusion strategy to the commitment to roll out 350 banking hubs across the UK. My constituents in Buckingham and the surrounding rural communities greatly value the hub that opened just before I was elected in 2024, and the expansion of the reach of the Help to Save scheme to more than 3 million people through universal credit.

Specifically on the financial inclusion strategy, although it is no doubt thoughtful and well considered, I encourage the Government to go even further and prepare clear, measurable performance indicators against all six of its pillars, so that we can see in a year or five years how far it has advanced the UK in being financially more inclusive or otherwise. Government, industry, regulators and civil society can then best identify where the barriers to inclusion continue to lie.

I am conscious that I have spoken for almost 20 minutes, so my final point is about skills. Skills gaps in the financial services sector, if left unaddressed, not only threaten the sector’s productivity and future global competitiveness but, most importantly, its collective ability to innovate, grow and best serve our constituents, who are ultimately the customers of those companies. I commend the financial services skills compact, which according to my latest research is now signed up to by more than 20 firms, covering more than 250,000 employees.

Although such industry-led initiatives are crucial and valuable, the Government also have an essential role to play. Two things would strengthen that essential private-public partnership. First, Government can be much more ambitious in using the flexibility of the growth and skills levy to fund dedicated conversion pathways into financial services for adults outside London, perhaps matched by employer-funded boot camps in regional clusters, be that in Bournemouth, Edinburgh, Leeds or Belfast. The talent pipeline should grow where the jobs already exist and are growing.

Secondly, Government and industry, through the Financial Services Skills Commission, should build a shared live map of regional skills gaps, which would allow apprenticeship places, training, investment and further educational funding to target the specific shortages that each region faces, rather than rely on a slightly arbitrary national formula that takes no account of where the sector actually needs people.

Those are just a few of my summer observations on the future of UK financial services. The underlying drive and rationale are ultimately the same, starting from a familiar place. The UK already has a lot of the ingredients that allow it to be a global leader in so many parts of financial services. However, if we are to stay ahead of the other great global financial centres, be that New York, Frankfurt, Singapore or Hong Kong, we need the Government and Parliament to work together with industry to provide the right regulatory framework, the spirit of innovation and the commitment to making our constituents’ money work better for them so that the financial services sector itself can further strengthen the UK’s economic, energy, industrial and national security and sovereignty. I look forward to the contributions from Members across the House this afternoon and I would be happy to meet the Economic Secretary later this autumn to discuss any of the points I have raised if that would be helpful.

16:50

[Sir Jeremy Hunt (Godalming and Ash) (Con)]

It is a pleasure to speak under your chairmanship, Mr Twigg. I speak today as chairman of the all-party parliamentary group for financial markets and services. I refer hon. Members to my entry in the Register of Members’ Financial Interests, which states that I accept speaking engagements from financial services companies.

I thank the hon. Member for Buckingham and Bletchley (Callum Anderson) not just for securing this debate, but for an excellent opening speech. He has a background in the City—in the stock exchange and working for the City of London corporation—which is probably unusual in his party. I thank him for deploying his expertise, because it is incredibly important for UK financial services that the world sees that there are experts in financial services on both sides of the House. I particularly welcome his comments today.

I welcome the Economic Secretary to the Treasury back to her role, which she carried out previously with great distinction. She has always engaged extremely constructively when it comes to the interests of the City and financial services. I know that her return to that post was widely welcomed. It is also a pleasure to speak alongside my hon. Friend the Member for Wyre Forest (Mark Garnier)—an old friend—who himself has a background in the London stock exchange.

After the financial crisis in 2008, financial services had a pretty bad name. The Government had to put up around £1 trillion to support the sector. Chief executives of banks made very ill-judged decisions to continue paying themselves large bonuses at a time when the rest of the country was suffering, and the country suffered a longer and deeper recession at that time as a result of our exposure to the financial services sector, which was much greater than that of our peers. We learned many painful lessons in that period.

As well as the financial crisis, the sector had to deal with the loss of passporting rights post-Brexit. Despite those body blows, the sector employs 2.5 million people—more than at the time of Brexit—and two thirds of the jobs are outside London. It is worth around 11% of our national output. It generates more than £110 billion in tax revenues, which is more than any other single sector. Put another way, it funds more than half the cost of running the NHS.

Whatever one’s interest in financial services, from a fiscal perspective alone they simply cannot be ignored. The sector is also thriving today in very challenging circumstances. The City think-tank Z/Yen tracks the competitiveness of global financial service hubs. In 2020, London trailed New York. Now it has caught back up. It remains the world’s premier centre for foreign exchange and specialist insurance. It helps to make the UK the world’s second largest services exporter.

When I was Chancellor, I introduced the Edinburgh and Mansion House reforms to support this important sector. Regulations, including listing rules, were simplified and the mighty task of making our pension fund industry fit for purpose was started. To their credit, this Government have built on those reforms with the Leeds reforms, the Pension Schemes Act 2026 and the forthcoming Financial Services and Markets Bill, all of which are extremely welcome. But, as the hon. Member for Buckingham and Bletchley said, our competitors are not standing still.

With smart policies, our financial services sector could do even more for growth in the UK. Easy access to finance, alongside having the most respected universities in the world outside the United States, has helped to create, for example, the world’s third-largest tech ecosystem. In artificial intelligence, the UK has the potential to be the world’s next silicon valley. If we get there, easy access to finance will have played a major role in making that possible.

What needs to happen next? The first thing is to do no harm—in particular, to do no harm with additional taxes in October’s Budget that could potentially damage the sector. Uniquely, the UK already charges higher corporation tax to banks. Total bank taxes are about 45% here, compared with 32% in Dublin and 28% in New York. I totally understand the temptation—finances are extremely tight, and the banks have few friends—but international capital is mobile, and hiking taxes further will mean that the sector ultimately generates less tax revenue, not more, for the Chancellor.

Secondly, we need to make regulation in UK financial services more proportionate. Consumer protection really matters, but we cannot eliminate all risk, which is what our regulators sometimes appear to be trying to do. Compliance now costs the sector more than £39 billion a year—about 13% of operating costs. We should aim to at least halve that using the new international competitiveness and growth objectives, which the Financial Conduct Authority should apply to authorisation, supervision and enforcement decisions.

[Kerry McCarthy]

I too worked in the financial markets, although I think I have done a better job of hiding it in my 21 years in Parliament. I was more on the debt market side. In fact, I am so old that I was part of the salvage operation for Barings bank when it went under. That brings me to the right hon. Gentleman’s point about regulation. The management of Barings did not have a clue what its traders were doing, and the regulators certainly did not have a clue what Barings was doing. I strike a note of caution. I worked for an American investment bank, so I saw the Securities and Exchange Commission as well as the UK regime. Where do we strike the balance between ensuring that there is not another collapse of a bank and light-touch regulation?

[Sir Jeremy Hunt]

I thank the hon. Lady for her role in helping to salvage Barings. I did not know that before. She is absolutely right to raise that issue. I do not say this in a party political way, because my party pretty much supported it at the time, but there is no doubt that, in the run-up to the financial crisis, regulation was not as tight as it needed to be. That is one of the reasons why we needed such expensive rescue missions for the banks. Since then, regulation has made the UK financial services sector much more secure.

The Prudential Regulation Authority and the sector as a whole are very resilient. In one of my most difficult moments as Chancellor, one of the most reassuring things that happened was that the Governor of the Bank of England said to me, “This sector is solid. You don’t have to worry. We are in a much, much better state than we were in 2008.” But I do think that it has gone slightly too far in the other direction. Sometimes we can over-correct. Particularly when it comes to consumer risk, there is a danger that we restrict consumer choice by being over-restrictive about the products that banks and financial services companies can offer. That is not to say that we want a free-for-all but, in terms of competitiveness, we need to keep a weather eye on the relative burdens of our regulatory regime, compared with those in other places.

I echo what the hon. Member for Buckingham and Bletchley said about AI, tokenisation and digital identity. The UK legal system is widely respected, and this is an area where good regulation could attract a lot of investment. We really could be leaders in it. London should be the world’s most trusted centre for tokenised wholesale finance, with clear rules for tokenised securities, custody settlement, digital money and market infrastructure.

We also need to speed up the consolidation of the pension industry, not least, as the hon. Member for Buckingham and Bletchley said, to encourage more investment in UK infrastructure, equities and tech start-ups. If that was done in a sensible, controlled way and as part of a balanced investment strategy, the returns for pensioners would be much higher than they currently are. That would start to stem the tide of British unicorns, of which we have more than Tokyo, Paris and Berlin put together, but which invariably at the moment tend to go to New York when they want to IPO, rather than doing it in the UK.

The fifth thing we could do is to encourage more saving. If we are going to transform the way this country grows, we need an investment-led growth strategy, not just a consumption-led growth strategy. Although it is painful for me to say this, scrapping our crazy system of giving people a new pension pot for every job, and instead copying the Aussies’ pension system—giving everyone one pension pot that follows them around for their whole lives, but with the freedom to change provider whenever they want—would make saving much simpler. It would mean people could go into an app on their phone and immediately see the value of their pension pot. It would encourage them to top up their pension pots if they were able, perhaps because of an inheritance or whatever. The impact of doing that in Australia has been that they save more, they get better returns, and there is much fiercer competition to attract those savings in the domestic pension fund industry.

I know that everyone here today will agree with this, but I think it needs to be said: it is imperative, whatever the pressures, to keep Britain open to the world. Our advantage has always been our openness. We are at our strongest when we connect global capital, trusted law, deep markets and world-class professional services all together. That means the painful, often boring, but absolutely vital work of negotiating trade deals, securing digital market access, agreeing mutual recognition deals, and making sure we have proper mobility for talent.

I am really grateful to the Minister for coming today, and would ask her to briefly address the following questions. When he is considering measures for the Budget, will the Chancellor of the Exchequer keep the competitiveness of the City and financial services central to his considerations? Will the Government undertake a review of the UK’s international tax competitiveness, particularly when it comes to financial services? Will she set out some specific steps that the FCA and PRA can take to deliver their competitiveness and growth objectives? What further reforms will the Government bring forward to help London to become the world’s leading centre for tokenised finance?

What progress has been made in further unlocking pension fund investment into productive UK assets? What further action will the Government take to improve access to finance for small and medium-sized enterprises and scale-ups, which has been a particular issue in the period since the financial crisis? Finally, does the Minister agree that maintaining the UK’s position as a leading global financial centre should be treated as a core element of the UK’s growth strategy? The prize, if it is, is absolutely enormous. TheCityUK says that we could add £53 billion to our additional annual output by 2035. That is the entire output of the life sciences sector, and would generate about £22 billion of extra tax revenues—around the entire budget for the police or the Department for Transport. The opportunity is huge. The question is whether we have the political will to get there by going further and faster.

17:04

[Phil Brickell (Bolton West) (Lab)]

It is a pleasure to serve under your chairship, Mr Twigg. I congratulate my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson) on securing today’s important debate. He is a distinguished advocate for the financial services sector, and I reiterate his points about unlocking cash sat on deposit in ISAs and making it work harder, not only for savers but for British businesses. The previous Chancellor of the Exchequer, my right hon. Friend the Member for Leeds West and Pudsey (Rachel Reeves), was keen to support in that challenge, and I want to stress it again as we look towards this autumn’s Budget.

My contribution will make a slightly different point from that of my hon. Friend the Member for Buckingham and Bletchley. Before entering this House, I, too, spent my career in financial services: first, in a brief stint in commercial banking, and then, for a long time as a specialist tackling financial crime. I saw first hand the strengths of our world-leading financial sector and the vulnerabilities that can be exploited by those seeking to abuse them. That experience taught me a simple lesson: the future of financial services in this country has to be a clean one. A successful City—a successful financial services sector that works for everyone up and down the length of the country and, ultimately, a successful British economy—is not built on turning a blind eye to dirty money, but on trust, transparency and integrity.

As chair of the APPG on anti-corruption and responsible tax, I regularly engage with UK Finance, the City of London, compliance professionals and senior representative from across financial services. The message I hear repeatedly is that businesses do not want weaker regulation; they want smarter regulation, a point that the right hon. Member for Godalming and Ash (Sir Jeremy Hunt) alluded to. That should mean regulation that works to prevent bad faith actors, maintains the integrity of our economy and is looked at with envy by investors and competitors from further afield. A secure financial system is inherently more investable, as investors seek certainty, strong institutions and robust enforcement of the rule of law.

This Labour Government, building on the platform provided by the Economic Crime and Corporate Transparency Act 2023, have made significant strides on that issue. It would be remiss of me not to thank them for the anti-corruption and fraud strategies published over the last 12 months, and I welcome the Treasury’s move to consolidate the fragmented anti-money laundering professional body supervisors under the FCA via the forthcoming Financial Services and Markets Bill. However, to really capitalise on the opportunities that are available, I would like the Government to commit to two core deliverables as part of their wider approach to economic crime: better regulatory enforcement and better transparency.

On enforcement, the FCA will need to be adequately supported to fulfil its new regulatory obligations. The reality is that enforcement pays for itself many times over, across the wider landscape. The compliance work of His Majesty’s Revenue and Customs has generated around £22 for every £1 spent on compliance staff. Those are extraordinary returns on investment. We should view spending on economic crime enforcement not as a cost but as an investment in Britain’s prosperity and security.

Of course, we are in a difficult period for public finances, which is why we should look carefully at how financial penalties for firms that do not abide by the rules are used. Between 2016 and 2025, the FCA secured more than £1 billion in regulatory and criminal fines, but significant sums are ultimately returned through rebate mechanisms rather than being used to strengthen the enforcement capabilities that generated the penalties in the first place. There is a strong case for allowing the FCA to retain a greater proportion of anti-money laundering fines to meet its enforcement costs, particularly as it takes on significant new supervisory responsibilities.

I welcome the Economic Secretary to the Treasury to her place. As she knows, I am a long-term advocate for establishing an economic crime fighting fund, allowing a proportion of enforcement receipts to be reinvested in the agencies responsible for protecting our financial system. The financial sector rightly pays its way via the economic crime levy, so what about the criminals? Let us make them pay too. At present, billions of pounds have been raised through economic crime fines and enforcement activity, yet frontline agencies continue to face resource pressures. A sustainable, multi-year funding model would allow the likes of the FCA, the National Crime Agency and the Serious Fraud Office to further invest in specialist expertise, to build capability and to plan strategically for the long term.

The Financial Action Task Force is already in town, ahead of next year’s mutual evaluation review, in which it will mark the UK’s homework on enforcement against economic crime. I would welcome the Minister’s initial reflections on whether existing schemes, such as the asset recovery incentivisation scheme, are performing as hoped, and on whether we might expect to see some reform to police funding in the forthcoming economic crime plan. I appreciate that that might not all fall squarely within the Minister’s brief, but I know that she has taken a keen interest in these matters previously and has a strong grasp of the cross-cutting nature of these issues across Whitehall.

On the second point—transparency—equitable, clean growth can be achieved by reducing the compliance costs faced by legitimate firms, freeing up capital that could be more productively invested elsewhere. A major reason for those costs is the continued difficulty of identifying the true owners of companies hidden behind opaque offshore structures, as I saw first hand in my previous career.

That is why I have long argued that the UK’s overseas territories must finally implement meaningful and accessible public registers of beneficial ownership, as we have in this country via Companies House. Every hour spent by compliance teams untangling complex offshore ownership chains is an hour not spent supporting customers, financing businesses or driving growth. Every duplicated check increases costs for legitimate firms, while benefiting those who rely on secrecy.

Public registers of beneficial ownership would make “know your customer” checks faster, cheaper and more accurate. They would reduce duplication, lower compliance costs and strengthen confidence in our financial system. That would help to ensure that honest firms are not left carrying the burden created by hidden ownership structures and dirty money.

I will not relitigate past debates on the issue, but I do want to place on record once again my wholehearted desire to see all British overseas territories, particularly the Cayman Islands and the British Virgin Islands, finally fulfil long-made promises by throwing open their books.

Dirty money is not just a financial crime problem. It is a threat to economic growth, it distorts markets, it undermines trust, it damages fair competition and it weakens our institutions. I want a future financial services sector that is competitive because it is trusted, successful because it is transparent, and prosperous because it is clean. I will do everything in my power to support the Government achieve that objective.

17:11

[Bobby Dean (Carshalton and Wallington) (LD)]

I thank the hon. Member for Buckingham and Bletchley (Callum Anderson) for securing this debate and for bringing his great experience to it. I hope to build on his comments encouraging the Government to build on the momentum of the pension reforms they have recently introduced.

The UK investment system holds £6 trillion-worth of investable capital, mostly via pensions and life insurance schemes, so there can be no doubt at all that the financial services sector will be key to growth when it returns to this country properly, but access to that capital has become a problem. We hear it all the time from businesses. That can only be a systemic failure.

Central to the problem is the UK’s allocation of its pension funds, which, as has been noted, collapsed from levels of around 50% back in the ’90s to an average of just 4% now. Some of that is explainable. Some of it was inevitable, as capital markets went global and people diversified their portfolios—we were always going to see a decline from those heights of around 50%—but the UK sits below the global average of allocation, which is 13%, so the UK has a specific problem that it needs to address.

We have to ask how we got here. I think the root is a certain naivety in the way that we applied laissez-faire economics. As a liberal, I support free and open trade with the world, but with a narrow interpretation of what free and open means. We have marginalised the state’s role. We have moved its role of shaping the conditions for UK businesses to thrive to the periphery. We have been so hands-off that we have allowed our economy to be dominated by a handful of actors who have accrued pretty unchecked power in a fairly anti-competitive manner.

An example I would point to is the proportion of our pension funds that passively invest into big global indexes. An example is the MSCI world index. It allocates more of British pension savings to Apple than to the entire UK economy—around 5% to Apple and 3.8% to the UK.

What does that mean in practice? It means that when brilliant UK tech start-ups want to scale and are seeking out capital, their only option is to be sold out to one of the big US competitors that pension savers in the UK are funding. So the cycle continues, whereby Britain fails to scale its businesses to the level required.

Britain needs to be more streetwise and a bit more hands-on. We need to redesign our system so that it can still take advantage of global capital markets, while being clever about the way it incentivises and actively supports the growth of the UK economy. One way in which I believe we can do this has been suggested by the New Capital Consensus project, of which I am a member: to right-size some of our defined benefit pension funds so that they are big enough to actively manage funds and to identify and invest in the opportunities that exist across Britain. They should not be so big that they find those kinds of regional opportunities more hassle than they are worth, and they should not be so small that they choose to manage their funds passively in the way that I have just described.

At the moment, we have around 5,500 small defined benefit pension funds, and while each charges low fees for a fair return, I ask: at what cost is that a fair return? Is it really good value to get over 8% for the individual saver if the country around them is in decline? Should the real test of value not be about the return to not only the individual but society? After all, this is the country in which they seek to live and retire.

I encourage the Government to build on the progress they have made so far with the pension reforms and to look more broadly at investment funds across the sector. I believe that if we can right-size some of those pension funds to incentivise them to identify and invest in UK businesses, things will be delivered for not only those savers but the country as a whole.

17:16

[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to serve under your chairship, Mr Twigg. I thank the hon. Member for Buckingham and Bletchley (Callum Anderson) for setting the scene incredibly well, and for highlighting a vital debate around the future of our financial services sector. I thank him for bringing this matter to the Floor of the House; if there is one thing that affects every single household, from the City of London right across to the beautiful shores of Strangford lough, it is the stability, accessibility and integrity of our financial systems.

It is also a joy to see the Minister in her place again. I think we are level pegging for how many times we can speak in Westminster Hall today. We are both at the touchline, and if she manages to stay for the third debate, she will find herself equal with me. I thank her for all her answers this morning and this afternoon, in anticipation of the passion she has for the subject matter of this debate. I mean that sincerely, because I think we are all encouraged by her knowledge and helpfulness in trying to answer the questions we pose.

When we talk about the future of financial services, the pundits and the media often look straight at the glass towers of London—they look at fintech, AI and the complex global trading systems. I am a proud Unionist; I want the City of London to remain the pre-eminent financial powerhouse of the world—as it is and as it should be—because that benefits us all. It brings billions to the Treasury, and a strong City means a strong United Kingdom of Great Britain and Northern Ireland.

The hon. Member for Peterborough (Andrew Pakes), who just left, referred to Nationwide in an earlier intervention. As I said this morning, the Nationwide branch in Newtownards has committed to working with the community and to staying in the town until 2030, and we hope that the commitment will go beyond that. I am not a member, stakeholder or customer, but I have noticed the large numbers of people who come in, and I understand that Nationwide is filling in where the banks sometimes fall short.

My main concern—indeed, the common concern of the DUP—is what the future of financial services looks like for the working man and the working woman. That is what I want to focus on. It is about the squeeze on the middle class and the ordinary families who are trying to navigate volatile inflation and changing economic climates. If financial services are to have a successful future across the whole of this United Kingdom of Great Britain and Northern Ireland, we must ensure that they are built on three fundamental pillars: financial inclusion, regulatory fairness for small businesses and unwavering integrity.

As banks look to a digital future, they are shutting physical branches at an alarming rate, which we discussed this morning. It is all well and good to say that everything will be on a mobile phone app, but what about the elderly constituent in Portaferry in my constituency, who relies on the face-to-face chat to manage their life savings, and who has to travel some 22 or 23 miles up the road to Newtownards because there is no bank in the entire Ards peninsula? What about the young people trying to understand credit and mortgage products without an accessible high street presence? The future of banking cannot be one that locks out the vulnerable, the elderly or those without reliable internet. We must protect physical access to cash and also look after consumer support.

There is a duty to protect our small and medium-sized enterprises, our small charities and family-run shops. In Newtownards we are privileged and honoured to have so many family-run shops. Whether they are agribusinesses or local hospitality venues, they are the backbone of our economy—certainly they are in my constituency. The future regulatory framework of the Financial Conduct Authority must be tailored to protect those businesses from hidden credit liabilities and predatory lending practices. The hon. Member for Buckingham and Bletchley referred to that in a previous debate in Westminster Hall—I remember it well. We need a financial system that acts as a springboard for entrepreneurship, providing firm, clear foundations of support rather than wrapping our local shopkeepers in suffocating red tape.

The future must be defined by absolute transparency and a transformation of corporate culture. Trust in our financial institutions was severely damaged in the past. As the FCA continues its work on transforming the culture in financial services, we must demand that the big banks treat customers with the respect they deserve. Every pound looked after by a financial institution is a pound earned by hard work. There must be no question of dishonesty or systematic unfairness.

The United Kingdom’s financial services sector has a bright future—I believe that with all my heart—but only if it remembers its core purpose, which is to serve the people. As we as MPs serve the people we are elected to serve, they should also serve the people that we represent. So let us ensure that as we innovate, we build a system that levels up every corner of our great nation, the United Kingdom of Great Britain and Northern Ireland, and preserves our high streets, supports our small businesses, and protects the hard-earned money of the working-class families who are the backbone of this country.

17:21

[Charlie Maynard (Witney) (LD)]

It is a pleasure to serve under your chair, Mr Twigg. I thank the hon. Member for Buckingham and Bletchley (Callum Anderson) for securing this important debate and for making it a large enough subject for us all to pick and choose, because it is hard to cover such an enormous range. It is much appreciated. I thank him for such good points made, and I thank the Minister for returning to her role. I look forward to working with her. I refer Members to my entry in the Register of Members’ Financial Interests and my ownership stake in BDA Partners, the business I founded in 1996, which focuses on Asian mergers and acquisitions, in which I have no management role.

Everybody here believes that our financial services sector is a strategically important national asset and a key competitive advantage for our economy. We all want the sector to continue to thrive, boosting businesses, jobs and growth all across the UK. We all want Britain’s financial and professional services industry to remain possibly the leading such services cluster globally. Such services make us a trade superpower. We benefit from our unique combination of language, law and location. We have strong institutions and dynamic markets. We are the world’s second largest destination for fintech investment after the US, and we are a material player in the AI space.

Those are huge strengths that we must continue to build on, but we must also be clear about the challenges. Our financial services sector has lost ground on a relative basis and on a global basis. Other economies are rapidly growing, innovating, investing and preparing for the future. We have no cause for complacency. We need to be ambitious and take decisions now, which will help the UK over the short, medium and long term.

Post Brexit, the City has continued to be an excellent location to base a global financial services business. However, our departure from the EU has substantially weakened our financial services industry, both in terms of the UK serving as the centre of European finance and a slower-growing UK economy that has not provided the traditional tailwind that it previously did. UK financial services remain a bright spot, but it would be a lot brighter if we were inside the EU’s single market. Do not just take that from me. TheCityUK notes that even though overall services trade has held up,

“Exports of financial services have declined 5.9 per cent…likely at least in part due to the impact of Brexit frictions.”

If the Government are serious about growth, they need to fix this. We should be pursuing a growth and defence partnership with Europe, including joining both the single market and the customs union. That would be revolutionary for the future of the UK financial services sector; it would tear down the barriers to trade in services that we have erected, which are still holding back our financial sector. In particular, joining the single market would secure again passporting rights for the sector, reducing costs and administration burdens and enabling financial firms to offer services across the whole of the EU without requiring further authorisations.

In the shorter term, the Government should move quickly to immediately improve financial services co-operation with Europe. For example, they should be making the most of the UK-EU financial regulatory forum to secure a deal on the mutual recognition of professional qualifications, building on the dialogue that was agreed at the UK-EU reset last May. We must also finally see the UK-EU youth mobility scheme, which was agreed in principle last year, through to implementation.

Secondly, if the Government are going to boost financial services and seriously compete with the US, they must look at the business landscape as a whole. We need far more ambition to boost UK plc—especially our high-growth, high-tech businesses—and pull every available lever to encourage capital formation, so how can we do this? Traditionally, the UK has been a fantastic harbour for international capital on the back of a cast-iron reputation for strong, fair regulation that safeguards investor rights. We need to ensure that our regulators continue to live up to that benchmark, and I think there is a question about that today.

The same goes for competition. The Competition and Markets Authority needs to be using its powers under the Digital Markets, Competition and Consumers Act 2024 to demonstrate it has the will to enforce both quickly and effectively against strong players as well as weaker ones and, where applicable, it should be working closely with its EU counterpart to magnify its impact. This is not an issue that is just floating in the ether; it matters to people across my constituency, because it brings down costs. Everybody talks about the cost of living; if we allow people to control markets so that there is no competition, costs go up, and everybody feels that in their pockets. It is really important to draw that link, so having the CMA move fast, at scale and at speed matters.

We also need to fix how we support business innovation. Research and development tax reliefs are a powerful tool, but too often they are undermined by uncertainty, delays and a “compliance first” mindset. A more liberal, pro-innovation approach should move towards an expert-led pre-clearance system for R&D tax reliefs. We could have up-front assessments by scientists and engineers—people who understand the technology—rather than retrospective scrutiny by compliance teams. Models in countries like the Netherlands show that this can work effectively. It provides certainty to the founders, reduces disputes, and ensures support is directed towards genuine innovation.

We must also look at reducing regulation where it is not required, as the right hon. Member for Godalming and Ash (Sir Jeremy Hunt) mentioned. For example, why is the regulatory burden on the venture capital industry so much higher in the UK than in the US, including in terms of time, which is as critical as cost? How about the UK taking the approach of using exempt reporting advisers—as they do in the US, focused on professional investors—to more effectively balance regulation with levels of risk?

Many Members have talked about AI, and I am going to do so too. Any discussion of the future of financial services has to take AI into account. Earlier today, the Governor of the Bank of England, Andrew Bailey, published an open letter warning G20 Finance Ministers that artificial intelligence could pose a major cyber-security risk to financial systems. Writing in his capacity as chair of the international Financial Stability Board, he said that the potential impact of frontier AI is “the most immediate concern” for the global financial system, and that financial institutions, financial market infrastructures, and technology providers all need to

“strengthen vulnerability management, response and recovery capabilities, and prepare for more severe scenarios involving simultaneous disruption across multiple firms or shared technology dependencies.”

These risks are inherently international, and many jurisdictions still lack the systems to manage them—frankly, I think we do too.

The UK Government must make AI security a top priority to safeguard not just UK financial services but the international financial markets on which we all depend. I would therefore be grateful if the Minister could set out what steps the Government are taking to promote the safe and responsible deployment of AI internationally, and how the cyber-security of the financial system is being strengthened.

The other technological revolution that will shape the future of financial services is digital assets, stablecoins and cryptocurrency. A few days ago, the Treasury gave the Bank of England the new objective of supporting payment systems innovation. That is welcome, and having the right regulatory conditions in place to make the most of digital innovations is critical, but we need more clarity from the Government about how they intend to balance the opportunities and risks generated by new digital assets.

A key question is what stance the Government intend to take on stablecoins and a central bank digital currency or digital pound. The global stablecoin ecosystem is now dominated by two US dollar-pegged issuers, Tether and Circle, which together account for around 90% of the market. The UK’s own GBP stablecoin is, per the House of Lords Financial Services Regulation Committee’s assessment, “nascent”. Many are therefore worried that the digital financial infrastructure of the future is likely to default to dollar-denominated instruments issued by foreign private firms.

I urge the Minister to address those concerns clearly, and to set out how this Government plan to make the most of the opportunities presented by this new technology while safeguarding against the risk and, crucially, whether there is or will be a timeline for a decision to be made jointly with the Bank of England.

17:31

[Mark Garnier (Wyre Forest) (Con)]

It is a pleasure to serve under your stewardship, Mr Twigg. I thank the hon. Member for Buckingham and Bletchley (Callum Anderson) for securing this debate. He speaks with great authority, and it is refreshing to hear a positive vision of the financial services sector, especially given his experience working for the London Stock Exchange Group. He raised a number of points, some of which I will deal with in my speech.

The hon. Member raised some interesting points that are strongly related. The first was the lack of growth capital and the fact that we are not seeing a huge amount of money invested into the UK by UK pension funds. Companies looking for growth capital seem to go to places such as America, where they can do better. He also talked about the undervaluation of the UK stock market, which is part of that problem, as well as clean energy and the fantastic opportunity it provides for investment in long-term patient capital. It is interesting that, during the passage of the Pension Schemes Act, one complaint thrown up by a very large annuity asset manager was that it wanted to invest in the equity of wind farms, where there is a predictable income because of contracts for difference, but the Pensions Regulator would not allow it because it had to be invested in bonds, which have a more liquid market.

Although the Conservatives completely support the Mansion House compact and the Mansion House accord, there is too much stuff getting in the way. We had a long debate on this during the passage of the Pension Schemes Bill, now an Act. We are trying to work with the Government on how not just to force more money into the UK equity market, but to clear away the clag that gets in the way of investments. That comes to the point about regulation and the regulatory environment. I will discuss more of the hon. Member’s points in the main thrust of my speech, but I wanted to get that point over early on.

As we heard from my right hon. Friend the Member for Godalming and Ash (Sir Jeremy Hunt), the financial services sector matters hugely to the UK. It is often described as the engine room of our economy, for two good reasons. The first is that the banking sector provides the plumbing that moves finance around our economy, making sure that money, where it is accumulated through wealth, is distributed to people who need it. The second is our international position: the financial services sector generates 11% of national economic output and contributes £12 in every £100 of tax paid—it pays for a lot of the NHS. As we heard, the sector makes up more than 3% of all jobs in the UK, with 2.5 million people employed in it, and we have the most unicorns in Europe. The sector here is the second-largest asset sector globally, the third-largest insurance market globally and the fifth-largest domestic banking market globally. I could go on, but the point is that the UK is absolutely a world leader in financial services, and we need to continue to be that. It is vital that we get this right.

It is worth comparing London to New York. New York is the biggest financial services centre in the world and London is the second biggest, but in New York, 80% of the turnover is driven by the domestic market of America, while just 20% is international; those numbers are reversed in the UK, where 80% of the activity is international. International competitiveness is four times as important for us as it is for those in America. The Conservative party recognises that, and that is why the Leader of the Opposition has promised to deliver a new economic revolution and to create conditions that will allow the financial services sector to innovate, take risks and be an economic powerhouse.

Before discussing the future of UK financial services, we need to understand the past. The City of London has been innovating and leading the way for a few hundred years now. The Knights Templar issuing receipts to crusaders for their gold created the first ever bank notes. In the 17th century, Jonathan’s Coffee House—the hon. Member for Buckingham and Bletchley will be familiar with it—was the first to advertise share prices. From there the London stock exchange grew, setting the model for equity ownership the world over. Similarly, Lloyd’s Coffee House created the insurance market that we see today. By continually innovating, the UK led the way for centuries. It is vital that the UK continues that spirit of innovation to maintain its international lead.

Although we have enjoyed much success over the years, a recent report by TheCityUK and PwC shows that over the past decade growth has stalled. Technologies such as artificial intelligence and distributed ledger technology are fundamentally rewiring financial market infrastructure, and it is vital that the UK keeps up with the pace of change. Financial services firms are ready to do that, but they need policy makers to create the right conditions and then get out of the way, allowing them to innovate and take advantage of that.

That brings me to what we need to do to unlock the future of UK financial services. First, we need to look at regulation in the UK. Although it is important to recognise that the UK’s regulatory and legal frameworks make us an attractive destination—that is really important; our rule of law is vital to this—we believe that the UK has gone too far and that regulation has become too burdensome. Research from TheCityUK suggested that the cost of regulatory compliance across the financial services sector now exceeds £33.9 billion. That represents more than 13% of firms’ annual average operating cost.

An interesting number was presented to the Treasury Committee by Nationwide Building Society, which estimated that, as a result of over-regulation by the regulators and over-compliance by their own internal compliance department, their lending book was £35 billion smaller than it would have been, had they been complying with the original rules and regulations. That is an awful lot of money taken out of the economy, getting stuck in one building society—admittedly the biggest one, but none the less, that is an important measure that we need to consider. This money could have been better spent across the whole of the wider sector, but more worryingly, it has affected our international reputation. The chief executive officer of Marsh McLennan said that it cost six times more to comply with regulation in the UK than in any other country it operates in. That does not foster an attractive business environment. Something needs to change.

That is why the Conservatives recently announced three policies that would reduce the regulatory burden. First, we would remove the ringfencing on banks. Secondly, we would reduce bank capital requirements. Thirdly, we would replace the Financial Ombudsman Service with a financial adjudication service.

[Bobby Dean]

The description of the regulatory regime since 2008 is fair. There has been a degree of over-correction, particularly on things such as capital requirements, and the regulators themselves are saying that we could do with some tidying up, but abolishing the ringfencing regime—one of the fundamental protections put in place for everyday bank users in relation to the risks presented by investment banking—does not seem like addressing an over-correction. It seems like a revolution back to the 2008 regulatory regime. Can the hon. Gentleman defend that Conservative party proposal in that context?

[Mark Garnier]

Yes, I can, from having been on the Treasury Committee from 2010 to 2016, when we looked at creating the Financial Conduct Authority and the Prudential Regulatory Authority, and, more relevantly, on the parliamentary commission on banking standards. Our report recommended that we introduce the measures in the Davies review, which was bringing ringfencing in. The hon. Member may remember that, at the time, the Liikanen review in the European Union looked at ringfences. The subtle difference between our ringfencing and theirs is that it was described as caging the tigers in Europe and as putting a fence around the deer park in the UK. Our retail banks were ringfenced. The problem we have found is that it has become increasingly complex to operate the regime, and the Europeans did not bring it in; as a result the resolution regime on banks—the recent Bank Resolution (Recapitalisation) Act 2025 looked at this—actually means that we now have an awful lot of other stuff in place and do not necessarily need the ringfencing.

The problem with ringfencing is that banks end up with a cliff edge, where their customers are traversing from the ringfenced bank to the commercial and investment banks, and it becomes very difficult. Only one bank has managed to satisfy itself that it is okay, and it has set that ringfence limit at £100 million worth of turnover; all other banks have been at the lower end, which is close to £5 million or £10 million in turnover.

It is costing us more and becoming less internationally competitive to have a ringfencing regime that other countries did not adopt. When we adopted it we were the first mover, but we were not followed. International competitiveness is the key point, as well as the bank resolution. There are MRELs, bullion bonds and a lot of stuff out there that makes up for that, brought in since the financial crisis. It just looks like we have too much. I hope that answers the question from the hon. Member for Carshalton and Wallington (Bobby Dean).

Analysis shows that the annual cost to the UK’s banking sector of ringfencing alone is £1.5 billion. At the same time, reports from industry are clear that ringfencing is duplicated and is not responsible for post-crisis improvements. In 2022, the independent review of ringfencing and proprietary trading said that

“the reduction in the implicit government guarantee and progress in ending too-big-to-fail was not found to be attributable to ring-fencing.”

We understand that the Government are looking at this, and at reforming the ringfencing regime through the Financial Services and Markets Bill. The Economic Secretary to the Treasury and I will be spending a lot of time in the coming months going through the minutiae of banks’ balance sheets—frankly, I find it fascinating; I hope she does too. However, like most of the Bill, while welcome, we feel that the Government are not fully utilising the opportunities that the Bill will provide, and that they could go much further. As I say, I will not delve into too much of the detail because we have a long time to go through all this, but I hope that the hon. Member for Buckingham and Bletchley will throw his weight behind the Financial Services and Markets Bill when it comes to the House of Commons.

I have a second point on taxation. If we are to unlock the future of UK financial services, the other area we have to look at is the level of taxation. In a world where capital, talent and business activity are highly mobile, the UK needs to remain an attractive place to do business. That is especially important given the international nature of the UK’s markets. While our competitors such as the US have a high domestic focus, the UK is the exact opposite: the London Stock Exchange Group found that more than four fifths of the revenues of FTSE 100 constituents now stem from outside the UK. Despite that, data from across the industry shows that the UK is an outlier when it comes to the level of taxation on our financial services sector.

Taking the banks as an example, data from UK Finance and PwC in 2025 suggests that the total tax rate on banks in London is 46.5%, which is significantly higher than in other financial centres such as Amsterdam, Frankfurt, Dublin and New York, as we have already heard. In fact, compared with the US, our banks are paying 60% higher tax than theirs are. Another example is the insurance sector. Data from the Association of British Insurers shows that their membership’s total tax contribution increased by 77% between 2014 and 2024. Analysis suggests that that has mainly been driven by increases in the insurance premium tax.

[Derek Twigg (in the Chair)]

Order. I am conscious of time. I assume that the shadow Minister is coming towards the ends of his comments, but I want to make sure that the Minister and Member in charge have plenty of time to respond. I will call the Minister in about a minute’s time.

[Mark Garnier]

I will draw my remarks to a close, Mr Twigg—I have been rambling on a bit. I thank the hon. Member for Buckingham and Bletchley again for his words. This has been a very intelligent and thoughtful debate. As I say, the most important point is that we have to be incredibly mindful of our international competitiveness, which is so vital for our country. It is so important that we get this right. If we fail, we may find our descendants sitting in this Chamber in 20 or 30 years’ time, wondering what on earth happened to the UK’s financial services sector. We must get it right.

17:44

[The Economic Secretary to the Treasury (Lucy Rigby)]

It is a pleasure to serve with you in the Chair, Mr Twigg. I am not sure either of my descendants wants to serve in this Chamber yet—to the point made by the shadow Economic Secretary to the Treasury, the hon. Member for Wyre Forest (Mark Garnier)—but there we are.

I thank my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson) for securing this debate and for his consistent advocacy for the importance of financial services to the United Kingdom. While I am not sure I needed any convincing, even in the short time since returning to this brief I have seen that importance at first hand: in Leeds, home to an incredibly vibrant financial services cluster; in conversations that I have had with debt advice organisations about the difference that timely support can make to those in difficulty; and in Bournemouth, where I met degree apprentices and those at the beginning of their careers who are building the sector’s future.

Those few engagements have reinforced for me just how much a thriving financial services sector matters to communities right across this country. I wholly appreciate the contributions of all hon. Members to this debate, whether they wear their financial services experience on their sleeve or seek to hide it—whatever experience they have, it has been a very informed debate.

My right hon. Friend the Member for Leeds West and Pudsey (Rachel Reeves), to whom I pay tribute, put financial services at the heart of this Government’s growth agenda and launched our 10-year strategy for the sector. The new Chancellor has been equally clear about its importance. Within days of taking office, he went to Bloomberg, reiterating his support for the central importance of our financial services sector. I think that that answers, at least in large part, one of the questions put to me by the right hon. Member for Godalming and Ash (Sir Jeremy Hunt); the remainder of his questions I shall seek to answer as well. I look forward to supporting the Chancellor as we continue to deliver on the Government’s financial services strategy.

In doing so, I recognise the challenges, but also the opportunities, in the five areas that my hon. Friend the Member for Buckingham and Bletchley has identified as central to the future of financial services. I will take each of those themes in turn. I thank him for his continued advocacy for strengthening UK capital markets and ensuring that those long-standing strengths support long-term investment in the British economy. He is right to recognise the progress that has already been made.

Through the financial services strategy, the Government have taken decisive action to increase investment, to improve outcomes for savers and to support growing British businesses. We have delivered the Pension Schemes Act 2026, established a framework to monitor delivery of the Mansion House accord, enabled targeted support for consumers and launched measures to help to build a stronger retail investment culture, a point I will come back to.

Mobilising more domestic capital must go hand in hand with ensuring that firms can access the right finance at the right time. Innovative businesses need clear funding pathways, from start-up right the way through to scale-up and into public markets, if they are to invest, expand, create jobs and, of course, remain headquartered in the UK. That is exactly why we are strengthening funding pathways at every stage of business growth. The expanded British Business Bank is helping to address market gaps and crowd in investment, while the National Wealth Fund is mobilising investment into the sectors and infrastructure that will drive long-term economic growth.

We also recognise the particular challenge of later-stage funding. Our reforms are intended to support a more diverse range of funding sources and connect high-growth firms with the capital that they need to scale domestically and internationally. Strong capital markets are central to that objective. The UK has deep markets, global expertise and a position as Europe’s leading investment hub. There is no complacency, to answer my hon. Friend’s point, in my saying that we must ensure that our markets consistently deliver what companies need and make the UK the best place for firms to start, scale, list and stay.

PISCES—the private intermittent securities and capital exchange system—provides a stepping stone from private to public markets. Hon. Members may have recently taken note of its first major auctions, which saw Wayve and Moneybox sell more than £100 million of shares between them. We have removed barriers to secondary fundraisings, improved market liquidity and eased accounting and reporting requirements for the smallest companies, because listing must be the beginning of a company’s growth story, not the end.

Alongside these reforms, we are encouraging pension funds to diversify—I acknowledge the passionate case made by the hon. Member for Carshalton and Wallington (Bobby Dean)—supporting investment in private markets and helping savers to access better information and guidance. Trustees and fund managers must, of course, remain responsible for decisions made in the best interests of their members and customers. Sustainable success will come from making UK assets an attractive investment proposition.

On retail investment, I share the view of my hon. Friend the Member for Buckingham and Bletchley that too much capital remains in low-yield savings when it could be working harder for individuals and the wider economy. We are therefore helping people to understand the opportunities and risks of investing, and giving them access to appropriate guidance and support. We have also been working closely with the Bank of England’s Financial Policy Committee to increase the financial system’s ability to support economic growth, which relates to another of the questions put to me by the right hon. Member for Godalming and Ash on financing for SMEs.

Taken together, those measures join up the full investment chain: mobilising more domestic savings, directing capital towards productive assets, widening access to finance for growing businesses and ensuring that UK capital markets help business to build and grow global companies here.

Secondly, I am grateful to my hon. Friend the Member for Buckingham and Bletchley for pointing out the opportunities presented by the digitalisation of financial markets. That is something I am particularly passionate about. The shadow EST, the hon. Member for Wyre Forest, talked about the importance of innovation to financial services—something that I talk about almost on an hourly basis in this job. The UK is a global leader in financial services because we have consistently embraced innovation; I will not go through the coffee houses that were set up on the banks of the Thames decade by decade. I should say at this point that it is fantastic to have leaders in the insurance industry listening to this debate from the Public Gallery. Innovation is important. We must consistently innovate, because it is key to our global competitiveness and the future of our financial services industry.

Our ambition is to digitalise the UK’s financial markets and make the UK a world leader in tokenised finance. It is reassuring and encouraging to hear the right hon. Member for Godalming and Ash indicate that he thinks that is a sensible ambition. We are moving from experimentation to adoption at scale, as set out in our wholesale financial market digital strategy. We appointed Chris Woolard as the Government’s wholesale digital markets champion, and he published his first report in July. We are enabling firms to adopt tokenised securities through the digital securities sandbox, where the first firm recently received permission to conduct live activity. The regulators have committed to publishing a full cross-authority road map on tokenisation of wholesale markets later in 2026.

We have committed to issuing DIGIT, a digital sovereign debt instrument, no later than quarter 1 2027. Alongside that, we are modernising and optimising the foundations of our markets, moving to a T+1 settlement cycle from quarter 4 2027 to reduce risk and improve efficiency. The hon. Member for Witney (Charlie Maynard) talked about the importance of stablecoins, and I think he welcomed the innovation objective that we are giving to the Bank of England. Stablecoins are important because they can enable faster and more efficient transactions, which means that money that would otherwise be held up can be spent by businesses on other things—they free up capital by being an efficient means of payment. The Government want to see Great British pound denominated systemic stablecoins and, as he is aware, we have established the regulatory regime. There really is no shortage of ambition from the Government when it comes to stablecoins—[Interruption.] The hon. Gentleman is gesturing as if I have forgotten something; I think that means he wants me to address the matter of a central digital bank currency. Work in that regard is ongoing among the Government, the Treasury and the Bank, and we will set out the next steps very shortly.

Many Members mentioned AI, which is already delivering benefits across financial services, from improved customer services to tackling fraud, enhancing productivity and supporting decision making. We now have an AI adoption plan; I will not rehearse that, but I want to pick up on the hon. Gentleman’s points, since he rightly highlighted the extreme importance of resilience in our financial system—as he pointed out, the Governor has been speaking about that recently. Work is going on across Government, including with the regulators and in international fora. I hope I can reassure him that the Government are taking the issue about as seriously as it is possible to take it.

The third area that my hon. Friend the Member for Buckingham and Bletchley mentioned was clean energy. The UK is playing a leading role in supporting and financing the global net zero transition, which my hon. Friend the Member for Bristol East (Kerry McCarthy) has spoken passionately about in this place on many occasions. As my hon. Friend the Member for Buckingham and Bletchley will be aware, the UK is already one of the world’s leading sustainable finance centres, and the Government’s focus is on how we can evolve and expand that leadership. We are delivering a number of targeted initiatives and prioritising changes that will have the greatest impact, such as UK sustainability reporting standards. We are also focused on making the UK a global hub for transition finance, which is not only essential to meeting our global net zero goals, but a major opportunity for UK growth and investment.

I will speed up, but I want to mention financial inclusion as another aspect of my brief that I am particularly passionate about. I am grateful to my hon. Friend for his recognition of the financial inclusion strategy; I intend to make it a step change in how easily all our constituents can access the financial services they need. He rightly recognised that the ability to open a bank account, to build a modest savings buffer, to access safe and affordable credit, to secure insurance and to protect against life’s shocks is fundamental to participation in our economy and, therefore, to participation in our society. The hon. Member for Strangford (Jim Shannon) spoke passionately about the importance of ensuring that financial services are available to all who need them. For all those reasons, those areas are the focus of our financial inclusion strategy, with actions ranging from supporting those without a fixed address to open a bank account, to supporting our credit union sector through a £30 million transformation fund.

You are indicating, Mr Twigg, that I should draw my speech to a close. Before I do so, let me again thank my hon. Friend the Member for Buckingham and Bletchley for securing the debate and all Members for their contributions.

17:59

[Callum Anderson]

I will keep it short, so that we do not overexcite ourselves on the first day back after summer recess. I can only thank right hon. and hon. Members from all parties for their contributions and for adding extra dimensions to the debate. I thank the Liberal Democrat spokesperson, the hon. Member for Witney (Charlie Maynard), the shadow Economic Secretary to the Treasury, the hon. Member for Wyre Forest (Mark Garnier), and my right hon. and learned Friend the Economic Secretary to the Treasury for their constructive contributions. It is clear that we have a united front and a shared collective recognition, not only of the value of UK financial services in their own right, but of their importance for all our constituents.

Question put and agreed to.

Resolved,

That this House has considered the future of UK financial services.