Sunak’s banking bill threatens to drive up food and energy prices, campaigners warn
Date: 7 December 2022
Campaigners are calling on the government to back down on its plans to scrap regulations on commodity speculation ahead of today’s parliamentary debate on the Financial Services and Markets Bill.
Global Justice Now, which campaigned for rules on speculation introduced more than a decade ago, claims the proposals would exacerbate the cost of living crisis and make future economic crises more frequent by giving investment banks and hedge funds more power to gamble on commodity markets.
Commodity speculation has been shown to increase market volatility, with large investments banks like Goldman Sachs vastly increasing their profits from this activity in recent months.
The government’s proposals, part of Rishi Sunak’s plan for a second ‘big bang’ in the City of London, would make it easier to speculate in these markets, removing rules which limit the amounts market participants can hold (position limits) as well as removing transparency requirements.
Speculation on commodity markets is widely regarded to have increased food and energy prices in the last year, exacerbating the cost of living crisis in many countries. Some economists believe that these markets post a systemic risk to the financial system, with the potential to cause wider economic turmoil unless better regulated.
John McDonnell MP has tabled an amendment to remove the commodity speculation changes to the bill on Wednesday.
Nick Dearden, Director of Global Justice Now, said:
“Giving banks more power to take risks is unsafe, unnecessary and unpopular. Rishi Sunak should be using his experience in financial services to make the City of London serve society, not encouraging hedge funds and investment banks to make a fortune from gambling on food and energy prices in the middle of a cost of living crisis.
“The prime minister is risking creating more hunger both here and globally, making pension funds more volatile and heightening the systemic risk which this activity poses to the economy as a whole.
“Government ministers want to make the UK a better place to be a bank. The result will be that the UK, and indeed the whole world, will be a worse place to be an ordinary person.”
See Global Justice Now’s briefing on the Financial Services and Markets Bill: https://docs.google.com/document/d/1znNY7zv8_JzXMFKPy7Pgl-pnIqIyoooXRxa0EZ3A_gE/edit
Photo: Simon Dawson/No 10 Downing Street (CC BY-NC-ND 2.0)