The City of London wrapped up in red tape – another Brexit benefit?

While the EU reforms financial regulation – Britain languishes in the slow lane, argues James Moore

Red tape central? Brussels is proving a dash more nimble when it comes to regulatory reform than is Britain (EPA)

In a more sensible country, Jacob Rees-Mogg would be a figure of pantomime fun. In Britain, he boasts the title of “minister of state”. So I guess this is another example of the government throwing pie in the faces of all of us.

The Moggster has decided to be a little more specific with his targeting of late, aiming pies topped with custard and the Eton mess he’s making – wait, can you top a pie with that? – at Britain’s financial watchdogs who reside at the Bank of England’s offices or at the FCA’s Stratford HQ.

He’s clearly trying to “put it about a bit” in his new role as “Brexit opportunities minister” or should that be “Brexit oxymorons minister”.

With that in mind, he’s been out and about urging a rapid rewriting of legacy financial rules to create an “investment big bang” for Britain. Hey, d’you hear that, you lot in Threadneedle Street? Get your scissors out!

One of the chief benefits that has always been claimed for the Tory tribe’s anti-European project is the supposed ability to do away with irksome EU red tape, even though Brexit has created more of the stuff than WH Smith has managed to sell in its entire history as a stationer.

The real Brexit pie in the face comes via an inconvenient truth: when it comes to irritating financial rules, the EU is rewriting them with a degree of alacrity Britain’s batty band of Brexiteers can only dream of.

This (now please don’t go to sleep, there’s a point coming) can be seen with respect to banking in this country’s response to the finalisation of the international Basel III regulatory reforms. Brussels is both getting on with dealing with the impact and fixing up its rules, while also showing a degree more flexibility than the UK, although not necessarily in a good way. It may decide to simply ignore the bits it doesn’t like.

As for insurance, well the government and insurers would both like to free up some of the funds the latter hold so they that they be invested in things like green energy and infrastructure projects instead of boring old government bonds. This would help further the government’s much vaunted “levelling up” project. Trouble is, the EU’s tough Solvency 2 rules, which are still on the books here, are seen as holding this up.

Care to guess where efforts to reform them are proceeding at the quicker pace? If you said across the channel, ding, ding, ding, give yourself a gold EU star.

Part of the problem here is that Brexit has left UK regulators with a piping hot potato in their laps. They’re being asked to find the the way forward on their own. Life used to be much easier for them. Brussels was a handy place to pass the buck to, and to pin the blame on. It was the same for Britain’s politicians, although they still occasionally try pointing the finger at the EU over, say, the failures of the “oven ready” deal they negotiated but didn’t properly read.

Now that option is no longer available to the watchdogs, they’re smack in the pie firing line. And they are only too well aware who will be getting gunk all over their work clothes if the new softly softly regime they are charged with creating leads to banks exploding or insurers imploding, taking people’s savings and/or policies with them. And making a mess of the global financial system while they’re at it.

What do you do when you’re being called upon to make uncomfortable – even, dare I say it, “courageous” – decisions by politicians who are going to dump on you if things go wrong?

Easy. You play for time. You drag things out. You promise a consultation paper months after decisions have been taken across the channel. You kick the conclusions into the long grass for a while then you promise another paper. Then you pinch what you regard as the best bits of the EU’s reformed framework. But by then it’s too late. The business has all gone. The slow bleeding of the City of London has done its worst.

Right now, the doctrine of CYA (cover your arse) rules over all. And it doesn’t matter how many pies Rees-Mogg throws or how cross Iain Duncan-Smith – watching the show from the cheap seats – gets.

The consolation is that Britain’s financial services businesses, those that remain, will at least be pretty safe.

The history of Britain’s financial services industry is one of scandal, followed by fines, followed by non-apologies, promises to do better that aren’t lived up to, more fines and then rules that shut the stable door with the horse half way down the road to the mortgage broker because that third home in the Caribbean looks lovely at this time of year.

There are people who see the relatively tough “legacy” rules the City is being left to grapple with as a good thing, even a benefit of Brexit, albeit an accidental one.

So perhaps Rees-Mogg’s ministerial title isn’t quite the misnomer it seems to be.