The Government has launched a drive to encourage more ordinary people to start investing in a package of reforms to boost economic growth.
A new consumer campaign will lay out the long term benefits of investing for better returns, rather than keeping savings in cash.
Banks will nudge customers with large cash balances to consider investing instead.
Rachel Reeves revealed the plan today ahead of her Mansion House speech, in an echo of the 1980s ‘Tell Sid’ campaign around the privatisation of British Gas that is held up as a successful drive to engage the public with the stock market.
A much feared cut to the £20,000 annual cash Isa limit was not announced, though the Government says it will continue to consider ways to strike the right balance between cash savings and investment.
The ‘Leeds reforms’, unveiled in the West Yorkshire city by the Chancellor include reforming the bank ring-fencing regime and reducing burdensome regulation in the City.
Chancellor Rachel Reeves announced a raft of financial reforms in Leeds
The changes will reintroduce ‘informed risk-taking’ into the financial system, and ‘represent the widest set of reforms to financial services for more than a decade’, says the Government.
The new measures are intended to help drive increased levels of investment among both financial firms and individuals.
The Treasury said the ring-fencing regime – which was brought in after the 2008 financial crisis to separate banks’ retail and investment banking activities – will be reformed.
Economic Secretary Emma Reynolds will lead a review into balancing between growth and stability – including protecting customers’ deposits.
The UK is a global outlier in enforcing ring-fencing, and major banks have been divided over whether the system is necessary to protect savers or is overly burdensome.
The Treasury said it was backing regulatory reforms for mid-sized banks to free up money for lending and investment.
It also plans to cut layers of red tape for businesses in the City. This will see the UK’s Financial Ombudsman Service – which settles complaints between consumers and businesses – watered down and simplified to address backlogs in the system.
There will also be an accelaration of changes to the senior managers regime, which was also brought in after the 2008 crisis to vet individuals before they are appointed and hold them accountable for problems and risk-taking.
Meanwhile, efforts to encourage more individuals to invest rather than keep savings in cash include rolling out ‘targeted support’ from April next year.
This will involve banks alerting customers with cash sitting in low-return current accounts about investment opportunities.
Major banks and financial firms including Barclays, Lloyds, Vanguard and Hargreaves Lansdown are backing a new advertising campaign highlighting the benefits of investing.
Reeves told finance chiefs, when setting out the reforms in Leeds: ‘We are fundamentally reforming the regulatory system, freeing up firms to take risks and to drive growth.
The ‘much-needed’ measures are intended to ‘really invigorate our financial services sector, but with the core purpose of therefore reinvigorating the whole economy,’ she said.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the planned retail investor campaign would act as a loudspeaker to amplify the message about the opportunity investing can offer.
‘It will be important to stress the value that investing can bring to support crucial life events and retirement planning.
‘A reinvented ‘Tell Sid’ campaign, which shows how investment is helping people with their long-term needs like retirement, will build confidence and pave the way for greater participation in financial markets.’
The famous ‘Tell Sid’ adverts encouraged people to buy shares in British Gas when it was privatised in the 1980s.
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