Chancellor sets FPC remit and recommendations with Budget

As part of the Budget announcements, the Chancellor published a letter to the Governor of the BoE with recommendations for the FPC.

The letter focuses on the government’s often-stated priority of regulating for risk and growth, and says the FPC should play an active role in delivering on the vision. The letter welcomes the review of bank capital requirements, and says the next steps should identify what could support the supply of long term capital for productive investment, specifically for firms with high growth potential that are looking to scale up. It also notes the increasingly important role of NBFIs and says the FPC should continue to prioritise building resilience in that sector. An equally important priority is to regard non-financial risks, such as cyber and operational risks, as relevant to the financial stability objective. Equally, also both physical and transition risks related to climate change should be part of the primary objective, with the FPC considering how related risks could impact stability over the shorter and longer term.

The Committee also should act to support the general economic policy, and specifically the 10 year plan for the financial sector – and seek to support the particular initiatives of:

• leading the world in sustainable finance;
• supporting home ownership; and
• reinvigorating capital markets.

Otherwise, the main budget deliverable relevant to the financial institutions sector focused on the reform of the ISA system, such that, from April 2027 only over 65s will be able to invest their entire £20,000 per year allowance in cash, while all others can put a maximum of £12,000 of their allowance in cash. Rachel Reeves said that over 50% of the ISA market is planning to launch new online hubs to help savers. The Government will also introduce a cap of £2,000 on salary sacrifice into pensions from 2029.

Responding to the Budget, UK Finance welcomed the ongoing support for the financial sector, and noted that the changes to Stamp Duty for newly-listed companies should help to encourage increased trading in UK companies.