Warning to prepare for reform as Labour backs out of LibDem talks
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Industry experts have warned that the financial services industry should gear up for major reform following last week’s hung Parliament result.
At the time of writing, the Liberal Democrats and the Conservatives were still locked in talks regarding a possible coalition or pact after the Labour party walked away from discussion with the LibDems.
Cicero Consulting director Iain Anderson says if there is a Con/Lib agreement, the LibDems are likely to be granted separation of retail and investment banking in exchange for the Conservative proposal to scrap the FSA.
He says: “Banking reform is high on the agenda and that means the price for scrapping the FSA will be the so-called Glass Steagall deal, which the LibDems want, separating the retail banks from their investment banking subsidiaries.”
It is believed that under a Con/Lib agreement, there would be immediate deficit reduction, as favoured by the Conservatives in their manifesto.
However, the Tories are likely to drop their proposed increase in the IHT threshold and their proposed cuts to corporation tax and would agree to income tax cuts for low earners. The LibDems have called for the income tax threshold to be increased to £;10,000 as part of a £;17bn package that would remove higher-rate pension tax relief, create a mansion tax on properties over £;2m and end child trust funds.
Lansons public affairs director Ralph Jackson says: “George Osborne thinks banks should be smaller. That accords with the LibDem approach to splitting up banks so you can see that might be part of some settlement between them, which would have a profound impact for lending, investment and consumer decision-making.”
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