Kemi Badenoch has attacked plans by the City regulator to set diversity targets for finance companies, arguing the proposals are counterproductive and will stifle Britain’s growth.
The Business Secretary, who is responsible for setting rules for UK companies, has written to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) urging them to rethink the proposals.
Both regulators want financial firms to set ambitious targets for gender diversity but Ms Badenoch, who has spoken frequently of her opposition to greater compliance demands for firms, said they went too far.
Speaking in the City of London on Wednesday, she said: “My role as minister for women and equalities in particular often involves the killing of bad ideas.
“Sometimes it means doing things like writing to the FCA and PRA as I did a few weeks ago, warning them against their proposed mandate of equality quotas, something the law does not require and could be counterproductive.”
In the letter addressed to Nikhil Rathi, chief executive of the FCA, Ms Badenoch said she was concerned about “regulatory overreach” from the agency.
She wrote: “Far from being a central part of the FCA’s objectives, the proposed requirements will be a distraction which will hold back regulated firms from priorities such as delivering economic growth and improving services to consumers.”
The FCA launched a consultation last September proposing that firms collect and report diversity and inclusion data to the regulator.
As part of the plan, the regulator wants firms to recognise a lack of diversity as a “non-financial risk”. It plans to publish the final rules later this year.
Ms Badenoch’s comments came as part of a broader attack on City red tape.
The Business Secretary criticised the growing compliance culture engulfing Square Mile, arguing it was holding back the UK’s “wealth generation”.
She said: “Regulation has moved from protection against fraud and systemic failure to everything from diversity to green finance and this ever rising tide of micromanagement will not necessarily make us or the financial markets stronger.”
Ms Badenoch spent 14 years in the private sector working in tech, engineering and banking before moving into politics.
She worked at Royal Bank of Scotland and its private bank Coutts in compliance roles which she said had prompted an “intense dislike” of excessive regulation.
Ms Badenoch said: “I worry that in the 21st century, we take for granted many of the successes or productive parts of our economy.”
Labour hit back at Ms Badenoch’s comments, criticising the Tories for creating a “high tax, low growth economy”.
A Labour spokesman said: “Business leaders aren’t asking for a watering down of workers rights. They want the policy certainty they need to make long-term investments, stable corporation tax and action on business rates and late payments.”
Labour has pledged to “strengthen workers’ rights and make Britain work for working for people” by giving staff the right to claim unfair dismissal on day one of a new job.
Ms Badenoch has said the changes will hurt employers’ ability to recruit.
The spat between Ms Badenoch and the regulators came as Britain’s pensions lifeboat urged Jeremy Hunt to expand its role in a move that it said would unlock up to £10bn in UK investment.
The Pension Protection Fund (PPF) said giving it more power to consolidate underperforming defined benefit schemes would help to support fast-growing companies as well as the gilt market, helping to keep borrowing costs down.
Responding to a consultation on the future of private sector final salary schemes, the PPF, which is currently used to rescue funds when their parent company goes bust, estimated that it could hoover up as many as 2,300 out of roughly 4,500 defined benefit schemes. These would be worth £130bn out of £1.4 trillion in assets, giving it the firepower to invest up to £10bn in the UK.
