UK banks fear a ‘disaster’ with Ed Miliband as Chancellor
City banks are fretting over the prospect of Ed Miliband as Chancellor as Andy Burnham mulls who he will give the keys to Number 11.
The banking industry is bracing for a shake-up at the Treasury and fears it could be hit with a fresh raft of taxes under a new Chancellor while key deregulatory efforts are sidelined.
Ed Miliband – who is seen as a front-runner along with former health secretary Wes Streeting – has already spooked some in the industry due to his approach to the oil and gas sector as energy secretary.
“Ed Miliband would be a disaster… I just don’t think he believes in a deregulated system,” one senior UK banking source told Morning Wire.
“He’s suspicious of bankers who he thinks can exploit customers”.
The c-suite banker instead would prefer “Wes Streeting or Jonathan Reynolds”, because the pair show an “understanding [of] the free market”..
Another industry source said: “I’m not sure if it will be Ed anymore but it would be the biggest concern”.
The boss of investment bank Cavendish told Morning Wire that markets would react “in a worse way” for Miliband than if Streeting is nominated for the post. Julian Morse said the energy secretary had the “wrong angles” and markets would “come off a bit if he became Chancellor“.
Burnham is expected to give a speech in the City in the coming weeks in a bid to shore up his economic credibility and bring stability to markets. He is expected to promise to bring down the national debt and the cost of borrowing as he sets his growth vision within the current fiscal rules, according to The Times.
Could Miliband pull the plug on the deregulation agenda?
Over the weekend, Miliband’s chances at securing the spot in Number 11 appeared to have dwindled after an onslaught of industry alerts, including from the boss of the Unite union, who warned the current energy secretary would be a “noose around the neck” of job creation.
“The weakening of Miliband’s prospects is undoubtedly welcome from a banking sector standpoint,” John Cronin, banking analyst at Seapoint Insights, said.
Industry concerns centre on fears that it will be viewed as ripe for a tax raid, and that planned reforms – including ring-fencing and updates to the banks’ ombudsman – will be abandoned.
Reeves avoided a cash grab on Britain’s banks in back-to-back tax-raising Budgets despite lobbying calls from across the political benches, including former deputy Prime Minister Angela Rayner.
The Chancellor unveiled her Financial Services Growth & Competitiveness Strategy last year but has faced criticism for failing to deliver the economic boost as hoped.
“I think these were just political gestures to tidy things up,” a banking source said, adding they don’t expect momentum to pick up if Miliband was to take the post.
Should Burnham run uncontested for the Labour leadership, he could take the helm mid-July where he would deliver his hotly-anticipated shake-up to the Cabinet.
A coronation for the former mayor of Manchester would come as a row heats up over the Financial Services and Markets Bill, unveiled with significant fanfare in the King’s Speech in a bid to bolster the sector.
The legislation is in the committee stage of the House of Lords, but peers have hit out at the Treasury for “eliminating” its oversight of financial watchdogs in a move that threatens to clog up the trajectory of the bill before Starmer and Reeves are expected to leave office.
“A period of uncertainty for the banking system lies ahead,” Cronin said.
Miliband has not publicly commented on a Cabinet position. His parliamentary office did not respond to a request for comment.