The Chair of the Treasury Select Committee answers Prospect's questions about Brexit, China and the future of the banking sectorby Jay Elwes / October 16, 2018 / Leave a comment
Published in November 2018 issue of Prospect Magazine
Prospect: What does your City experience do to the way you think about public policy?
Nicky Morgan: I hope it means I can think through not just how a policy looks in Whitehall but how it works in practice and how much extra work it will cause. I also hope I can see issues and problems from all angles, and have an instinct about how commercial people are going to try to solve them.
Prospect: How much damage would Brexit do to the City?
NM: Brexit could do tremendous damage to the City—there will be a short-term impact seen in the contingency planning for a hard Brexit. But I worry much more about the longer term damage—the talent from overseas that decides London isn’t for them, the overseas HQ that decides to invest elsewhere in Europe when, previously, London would have been an automatic choice. London has faced many challenges and will succeed—the question is how long it takes for the bounce back to happen.
Prospect: Are digital currencies a threat or an opportunity for financial stability?
NM: It seems that they are not a threat to financial stability now, but they are a threat to unsophisticated consumers and people investing in them need to know they could lose their entire investment. The Treasury Select Committee has heard evidence from people who lost their online access codes and lost everything.
Prospect: Are people saving enough—is the pension system fit for purpose and have recent innovations like the Finance ISA done what we might have hoped?
NM: We did our inquiry on household finances to try to understand this. Most people aren’t saving enough, the pensions system clearly works better for some than others. Auto-enrolment has been a success and needs government to push it on—for example, to the self-employed and we’d like to see more focus on schemes such as Help to Save rather than the Lifetime ISA.
Prospect: What will the regulatory position be post-Brexit?
NM: Until our post-Brexit financial services sector settles down to the new landscape then unfortunately I think this great sector will be trying to do deals and compete with its rivals with one hand tied behind its back.
Prospect: Might a post-Brexit city become more attractive to “illicit” finance?
NM: Not automatically because of Brexit, but it might if those working here feel a pressure to still get the same returns as before March 2019, but then find the only way to do that might be to cut corners and turn a blind eye to some of the risks.
Prospect: How do we deal with China’s banking sector?
NM: We should work with it although, as with any new sector, always tread with some care.