UK lawmakers have been asked by the head of the Financial Conduct Authority, Nikhil Rathi, to define an acceptable level of harm to consumers in return for looser regulations. The FCA last week responded to government calls for regulators to support growth in the mortgage market, outlining a series of regulatory changes it plans to introduce in 2025. But speaking at the House of Lords financial regulation committee on Wednesday, Mr Rathi warned: “One or two things are going to go wrong here and not everybody is going to play completely by the rule book, and is there acceptance of that?” He said the Mortgage Charter, which was introduced to reduce the risk of defaults and repossessions, would not be compatible with relaxing lending standards. However, an upside would be improving the chances of young people getting on the housing ladder. “So there are positive benefits for the economy”, he said, “but ultimately, that risk calculus is something we do need a bit of political guidance on, a political discussion on, and it needs to stick over time.” Meanwhile, Rachel Reeves told an audience at Davos that having more than 100 regulators adds to the overlapping burdens businesses face, opening the door to scrapping some bodies.

The Government’s Bank Resolution (Recapitalisation) Bill aims to protect taxpayers from the financial fallout of small bank failures. Treasury minister Emma Reynolds said: “The Bill creates a recapitalisation mechanism which will ensure that certain costs of managing the failure of banking institutions do not fall to the taxpayer.” The legislation allows the Bank of England to direct the Financial Services Compensation Scheme (FSCS) to recapitalise struggling banks, funded by industry levies. While the Bill has garnered support, concerns remain regarding its application to larger banks, with calls for amendments to prevent FSCS funds from being used for them.

In a victory for the City of London, the European Commission has proposed extending access to UK derivatives clearing houses for banks and other financial institutions in the EU for another three years.

Businesses are set to incur an additional £2.3bn in costs following Labour’s decision to freeze the threshold for automatic pension enrolment at £10,000 for 2025-26. Torsten Bell, the pensions minister, said the move will lead to more low-earners being included in the pension system due to rising earnings. The private sector’s pension contributions are expected to rise from £49.6bn to £51.9bn. Ian Futcher, a financial planner at Quilter, remarked: “While freezing the thresholds provides stability for both employers and employees, it is still a missed opportunity to drive higher contributions that could secure better retirement outcomes for millions of workers.”

Rachel Reeves has announced that Labour will publish an immigration white paper later this year, including a review of visas to entice more high-skilled workers to the UK. The Chancellor told an event at the World Economic Forum in Davos: “We are going to look again at routes for the highest skilled people, visas particularly in the areas of AI and life sciences.”

In 2024, the UK experienced a significant outflow of wealth, losing 10,800 millionaires, more than double the previous year. This trend is attributed to Labour’s tax increases, including a £40bn rise in Rachel Reeves’s first Budget, and changes to the non-dom tax regime. According to the Adam Smith Institute, each departing millionaire would have contributed at least £393,957 in income tax annually, equating to a revenue shortfall comparable to losing 529,200 average taxpayers. Andrew Griffith, the shadow business secretary, remarked: “This research shows Rachel Reeves’s Marxist maths has put the economy in real danger of drowning in Labour’s tepid bath of decline.”

Experts are calling on the Treasury to reconsider its inheritance tax (IHT) proposals for pension funds, warning that the current plans could lead to delays and increased costs for bereaved families. The bosses of AJ Bell, Hargreaves Lansdown, Interactive Investor and Quilter have written to the Chancellor, Rachel Reeves, warning that subjecting pensions to IHT could lead to bereaved families paying interest on tax they did not know they owed. Richard Wilson, chief executive of Interactive Investor, said: “The current proposals are an affront to people who have done the right thing by diligently investing through a pension throughout their working lives to ensure financial resilience in retirement, while also taking proactive steps to create an effective estate plan that complies with existing tax rules.”

Inheritance tax (IHT) payments reached £6.3bn over the nine months leading to December, marking a £600m increase from the previous year, according to HM Revenue and Customs. Nicholas Hyett, an investment manager at Wealth Club, remarked: “Inheritance tax continues to be something of a golden goose for HMRC.”

Following the Treasury’s move to intervene in the motor finance commission case set for April in the Supreme Court, lawyers warn of a risk to public trust in the financial sector if consumers are denied justice. The case rests on whether it is illegal for car dealers to earn commission from lenders without obtaining the customer’s fully informed consent to the payment. But the Chancellor is concerned a £30bn bill for banks could harm the industry and make securing car finance loans more difficult. But Elizabeth Comley, COO of Slater and Gordon, argued: “While we recognise the importance of maintaining confidence in British lenders, this cannot come at the expense of justice for the individuals affected. Consumers deserve accountability and redress when they have been wronged, and Rachel Reeves’ attempts to shield lenders from the consequences of their actions risk undermining public trust in the financial sector as a whole.”

Government borrowing exceeded expectations in December, reaching £17.8bn, significantly higher than the £14.6bn anticipated by the Office for Budget Responsibility. This figure marks the third highest December borrowing on record and the highest in four years. Jessica Barnaby, ONS Deputy Director for Public Sector Finances, said: “Compared with December 2023, spending on public services, benefits, debt interest and capital transfers were all up.” Public sector net financial liabilities are now estimated at 84.5% of GDP, while public sector net debt stands at 97.2% of GDP. In response to the rising fiscal pressures, Darren Jones, Chief Secretary to the Treasury, stated that the Government would rigorously review spending, promising to cut unnecessary expenditures to ensure taxpayer money is used effectively.

Consumer confidence in the UK’s economy has plummeted, with the British Retail Consortium’s (BRC) consumer sentiment index revealing a drop to -34 in January, down from -27 in December. The survey indicates that only those aged 18-27 expect improvement, while two-thirds of individuals aged 60-78 anticipate a worsening economy. Helen Dickinson, chief executive of the BRC, said: “On top of this challenging market backdrop, retailers are facing £7bn in additional costs from the budget and new packaging levy.” She added: “To mitigate this, and shore up investment in shops and entry level jobs, the government must ensure that no shop ends up paying a higher business rates bill because of its proposed reforms.” Retailers are now warning of potential price increases and job cuts as they navigate these financial pressures.

A new report by the International Longevity Centre UK (ILC) and M&G has found that people in their late sixties increased their wealth by nearly 50% between 2010 and 2020, contrasted with those in their late 30s who saw the value of their savings and assets grow by 9%. However, only 6% of over-20s surveyed in 2019-2020 said they had received a gift worth more than £500 in the last two years, and the likelihood of being given a significant gift also falls with age. David Sinclair, chief executive at the ILC, said: “Wealth has become increasingly concentrated among older generations. If we don’t act now, these inequalities will only worsen, leaving younger generations facing even greater challenges.”