Policy Update — Week of the 13th March
The Government’s U-turn over National Insurance Contributions
In last week’s Budget the Chancellor, Phillip Hammond’s mentioned plans to increase the national insurance contribution (NIC) paid by the self-employed, calling for an increase from 9% to 11% by April 2019. One week later this policy has now been dropped.
As mentioned in last week’s newsletter the NIC policy seemed to contravene a 2015 General Election Manifesto pledge to not put up national insurance, income tax or VAT. Accordingly, the Chancellor made clear “it is very important both to me and the prime minister that we are compliant not just with the letter, but also the spirit of the commitments that were made”.
This U-turn raises several questions. Firstly, economically how will HMT maintain fiscal credibility in light of increased funding for social care, given that the increase in national insurance was due to raise over £2bn by 2022? Secondly, as some commentators have suggested with upcoming Brexit negotiations, and the prospect of a Scottish Independence Referendum looming, Conservative MPs are hoping the Budget U-turn is not a forbearer for further troubles ahead.
Queen gives Royal Assent to Brexit Bill
This week Parliament passed The European Union (Notification of Withdrawal) Bill. The bill passed without adopting the amendments put forward by the House of Lords on EU residency rights and a ‘meaningful’ vote on the final Brexit deal.
The Queen has subsequently given Royal Assent to Bill, clearing the way for the prime minister to trigger Article 50 and start talks to leave the European Union- now expected in the last week of March.
EST Simon Kirby delivers keynote at LSE Global FinTech Investor Forum
The Economic Secretary Treasury to the Treasury (EST), Simon Kirby MP today delivered a keynote address highlighting the strength of UK financial services, with an emphasis on FinTech as the means to help maintain this global advantage. The EST mentioned the on-going successes of the FCA’s regulatory sandbox, the Bank of England’s FinTech Accelerator, and the FinTech Delivery Panel, as well as the drive towards Open Banking.
The EST also mentioned what more the Government hopes to do to help support UK FinTech. This includes: a continued drive towards attracting highly qualified / skilled talent; working closely with international markets (building on existing ‘FinTech Bridges’ with Singapore, Rep. of Korea, China); and creating a connected investment environment.
Anti-money laundering supervisory regime — FCA office and JMLSG Review
- HMT has issued a call for further information, alongside its response to the consultation on its Anti-money laundering supervisory regime, first published in April last year.
- As part of the response to the call for information, and the Cutting Red Tape Review of the Anti-Money Laundering and Counter Financing for Terrorism Regime, the government committed to create a new Office for Professional Body Anti-Money Laundering Supervision (the office), hosted within the Financial Conduct Authority (FCA)
- The Government confirms in its response that it seeks to support the use of technology in accessing financial services, addressing the challenges highlighted by FinTech firms in the cutting red tape review and elsewhere. At Autumn Statement 2016, the government announced that it had agreed with JMLSG that they will update their guidance on electronic ID verification to support the use of technology in accessing financial services. Meanwhile, the FCA’s Innovation Hub and Regulatory Sandbox has been approached by businesses offering new approaches to electronic ID.
- The Anti-Money Laundering Red Tape Review, which collates business views on the guidance and supervisory regime can be seen here: http://bit.ly/2mS0Bq6
- The Bank of England’s new Deputy Governor, Charlotte Hogg, has resigned. Ms Hogg’s resignation came after the Treasury Select Committee of MPs said they felt her “professional competence falls short of the very high standards” required. This is in reference to Ms Hogg’s omission that her brother was a senior executive at Barclays.
- The UK government is looking at the prospect of utilizing Blockchain as part of a broader plan towards digitisation. The Department for Culture, Media & Sport (DCMS) published its UK Digital Strategy 2017 on 1st March which looks at the public (and private) sectors role in pursuing digitisation within Government.
- The UK FCA and the Financial Services Agency of Japan (JFSA) have exchanged letters on a Co-operation Framework to support innovate FinTech companies. The exchange provides a regulatory referral system, and will encourage regulators to share information about FS innovation in their respective markets.
- Across the Atlantic the OCC has pressed ahead with plans to offer a speciality license for FinTech firms that would allow the industry to enter the Federal banking system. Separately, J. Christopher Giancarlo, acting chief of the CFTC has also instructed his staff to examine the role the CFTC could help in promoting FinTech. In particular, Giancarlo said, “the CFTC must be a leader in adopting the “do no harm” approach to financial technology similar to the US approach to the early Internet”.
- The US Securities and Exchange Commission (SEC) denied a request to list, what would have been the first US exchange traded fund built to track bitcoin. The Winklevoss twins have been trying to convince the SEC for more than 3 years to let it bring bitcoin to the ETF market. Following the decision, the value of bitcoin fell as much as 18%, and last traded 7.8% down.