Reeves’ flawed growth plan: Bashing regulators won’t deliver the upsurge Britain needs, says ALEX BRUMMER

Nearly two years into office, and Rachel Reeves is seeking to light a fire under Labour’s growth agenda.

As encouraging as it is that the Chancellor has decided to back innovation, AI and quantum computing, it is all too little, too late.

Other ideas in Reeves’ approach, contained in today’s Mais Lecture, are also falling as flat as a pancake.

A closer economic relationship with the EU may seem sensible given that it is geographically Britain’s closest trading partner but there are formidable obstacles.

Politically, it would mean the UK undoing the 2016 Brexit vote and the divorce agreement signed by Boris Johnson, defying democratic decisions.

It is not clear that attaching the UK to a divided EU, currently squabbling over defence spending, is a great idea.

The Chancellor is fond of telling us that the UK is the fastest-growing European economy in the G7. Joining a community in stagnation is not the wisest idea.

So what of Reeves’ other big idea? She thinks growth can be unleashed by easing regulation. The Chancellor’s latest proposal is to overhaul the Financial Ombudsman Service, which it is claimed is deterring investment in the country. 

The compensation culture may have gone too far as the troubles of Close Brothers demonstrate. 

Nevertheless, Labour never stops banging on about working people and they are among the biggest victims of the car finance scandal which is the Ombudsman’s current focus.

Its procedures may be too slow. But it is the friend of consumers, daily fighting against poor customer service and rip-offs. 

It ill behoves a government handing out compensation to oil heating users to attack an organisation seeking to deliver financial justice.

Reeves’ approach to regulators is misplaced. Appointing the former head of Amazon as chairman of the Competition & Markets Authority (CMA) is hardly going to be to the advantage of UK tech.

In the recent past, the CMA is all that has stood between UK tech and creativity being overrun by giants such as Microsoft.

Giving it, and the rest of the Magnificent 7 – Nvidia, Apple, Alphabet, Amazon, Meta Platforms and Tesla – the right to climb roughshod over UK pioneers will not work. 

The new growth brief for the Prudential Regulation Authority, empowered after the Great Financial Crisis, is badly timed.

Given recent events in private credit markets, capital requirements should be tightened rather than loosened. Yes, the City and business need less bureaucracy, but they also need to be constrained from excess.

Yesterday, I met with one of Britain’s most successful tycoons. He understands that the fiscal deficit needed fixing. 

He believes that throwing money at a malfunctioning NHS is simply good money after bad. As for inheritance taxes, which could mean the break-up of his empire, his words are best not repeated in a family paper.

Last stand

Close Brothers is one of the few of Britain’s historic merchant banks still operating. 

Yet, if one takes the word of short sellers Viceroy Research its days as an independent source of finance for Britain’s army of middle-sized companies, seeking to update their plant, could be numbered.

Under chief executive Mike Morgan, the firm has been engaged in a valiant effort to restore its finances following exposure to the car finance scandal.

It sold its asset management arm, stockbroker Winterflood Securities and cancelled the dividend. 

The steps taken are intended to keep the ship afloat after making £300million of provisions. Viceroy suggests that the liability could be as much as four times this at £1.2billion, which would effectively wipe a City stalwart out.

We must hope, for the sake of Close clients across the regions, that Viceroy mangled its analysis. The damage may already have been done.

Bad smell

Offloading Thames Water to its senior creditors would save the Government from the fiscal risks of taking Britain’s largest water utility into special administration. 

It would be wrong if the price of the rescue, as demanded, is that a company which so often dumps sewage into the Thames were to escape fines and is allowed to go on polluting.

Ofwat, Whitehall and the courts should not be intimidated by financial sharks.