In her letter to Andrew Bailey, Governor of the Bank of England, Reeves only confirmed “that the Government’s economic policy objective is to restore broad-based and resilient growth built on strong and secure foundations”.
This is nowhere near the full fat US Federal Reserve version, with its dual mandate of maximising employment alongside ensuring price stability. If that’s what Reeves wants, she would have to legislate.
Indeed, it is actually quite hard to figure out precisely what she does want. Does she plan to go full Trump, who intends to rip up the entire rulebook and reduce capital requirements to a bare minimum? This would be “race to the bottom” stuff, but it is perhaps the only way in which the City’s once-leading position as an international financial centre can be defended.
Prior to Brexit, the City had carved out a defining role for itself as Europe’s de facto financial centre, but it has struggled ever since to find a new raison d’etre, and as things stand, the US looks set to clean up, with international capital markets increasingly focused on New York, Chicago and America’s other major cities.
Already, certain types of capital markets activity in the City are in precipitous decline. Corporate capital-raising in London has plummeted, even as it has continued to grow worldwide.
Does Reeves intend to get serious about this loss of competitiveness, or was her Mansion House speech just a belated recognition of a shift away from London which she is powerless to stop?
In a recent paper, the Banque de France’s prudential regulator, Autorité de Contrôle Prudentiel et de Résolution, sounded the alarm over the growing incursion of big tech into areas of finance previously subject to prudential oversight, and said that it posed a significant threat to overall financial stability.
Playing its role as the “Silicon Valley of regulation”, Brussels would sorely like to clamp down on technology’s advance into non-bank forms of credit provision. But where does that leave already-struggling European competitiveness if it does?
These questions play into an emerging debate in Downing Street over whether it is best to slink back into the cosseted but slow-growth embrace of the European Union, or throw in its lot with Trump’s America.
Peter Mandelson, widely tipped as Labour’s next ambassador to Washington, talks – in an echo of Boris Johnson – of having his cake and eating it. Like Downing Street he dreams of playing both sides, with Britain performing its historic role as a bridge between the US and Europe.
Sadly, it is as unlikely to be an option for today’s Government as it was when Johnson dreamed of ridding himself of the EU’s obligations while at the same time continuing to enjoy its benefits. There was never any such deal on offer.
One way or another, Trump will force the UK to choose. With wildly different policies on Ukraine, the Middle East, tax, spend and virtually everything else besides, this will not be an easy choice for Labour’s high command to make.
As for Reeves, like Ed Balls, she’ll no doubt rue the day she promised a return to light touch regulation. Something will eventually go horribly wrong in the City, and when it does, her words will come back to haunt her.