Big Bang 2. Woe

The UK government has announced plans to de-regulate the City – some of this should be welcomed, but most of it should be avoided.

The good part is the plan to allow pension companies to invest in long-term key infrastructure projects. This is a sensible step as it frees up available capital to be put to good use, particularly as successive governments have under-invested in the UK.

However, we are not entirely sure this is required as pension companies already invest in infrastructure projects via other commercial entities, such as HICL Infrastructure plc.

The worrying part of these proposals is the watering down in ring-fencing. Ring-fencing is the separation of consumer assets (consumer bank accounts, mortgages etc.) from banks' riskier investment banking part. Ring-fencing was brought in after the 2008 financial crash when consumer assets were threatened due to negligence by investment banking arms. UK banks effectively used consumer assets as collateral and as bargaining chips with the government – the UK government had no choice but to bail out the banking sector to avoid consumer assets being lost and continued runs on individual banks. Ring-fencing protects consumers from the follies of investment banking.

These "reforms" are being sold as a "Brexit benefit" – however, they are also taking place in other markets, such as the EU.

The UK taxpayer does not have the money to underwrite investment banking with its potential for almost limitless losses. Further, there is no direct benefit to UK taxpayers as any profits go to the banks – only risks pass to UK taxpayers.