The body charged with overseeing the regulation of payments systems will be abolished, the government has announced.
The Payment Systems Regulator (PSR) — which governs payment systems like Faster Payments and Mastercard — is set to be consolidated into the Financial Conduct Authority (FCA).
It follows reports of complaints from businesses that the regulatory environment was too complex, with payment system firms having to engage with three different regulators.
Downing Street has said this is the latest step in the prime minister’s drive to create an environment that will kickstart economic growth.
The PSR is given regulatory powers under the Financial Services (Banking Reform) Act 2013, which created the body, as well as competition powers under the Competition Act 1998. Within its remit, it can issue requirements to different parties, and take action against those who breach relevant regulations and directions. The quango (meaning quasi-autonomous non-governmental organisation) claims to deliver safe, competitive and innovative payment systems.
The body came into force in 2015 and is currently chaired by Aidene Walsh, ex-boss of financial wellbeing charity, the Fairbanking Foundation. The PSR employs roughly 160 people, according to its website.
However, it has been criticised by industry and politicians over its regulatory approach, including in relation to fraud reimbursement by financial services firms.
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Announcing the plan, Keir Starmer said: “For too long, the previous government hid behind regulators – deferring decisions and allowing regulations to bloat and block meaningful growth in this country.
“And it has been working people who pay the price of this stagnation.
“This is the latest step in our efforts to kickstart economic growth, which is the only way we can fundamentally drive-up living standards and get more money in people’s pockets.
“That’s why it is the priority in the plan for change, and it’s why I’m not letting anything get in its way.”
Chancellor Rachel Reeves added: “The regulatory system has become burdensome to the point of choking off innovation, investment and growth.
“We will free businesses from that stranglehold, delivering on our plan for change to kickstart economic growth and put more money into working people’s pockets.”
The government has said that the announcement will not result in any immediate changes to the Payment Systems Regulator’s remit or ongoing programme of work. Rather, the regulator will continue to have access to its statutory powers until legislation is passed by parliament to enact these changes.
In the interim period, it is said that the PSR and the FCA will work closely to deliver a smooth transition of responsibilities to ensure the market remains competitive.
The government has vowed to continue to review the entire UK regulatory landscape in a bid to kickstart economic growth.
The PSR announcement comes after the prime minister told cabinet ministers Tuesday that they must take more responsibility for decisions and stop “outsourcing” them to regulators.
Starmer said he wants to reverse what he described as a “trend” under the previous government of decisions being made by other bodies.
A No 10 readout of the prime minister’s contribution to cabinet read: “[Starmer] emphasised that recent global events had shown the pace at which the world is changing, and the impact that global insecurity has domestically.
“He said that to deliver security and renewal we must go further and faster to reform the state, to deliver a strong, agile and active state that delivers for working people.
“This included cabinet assessing processes and regulations that play no part in delivering the plan for change, and the government taking responsibility for decisions rather than outsourcing them to regulators and bodies as had become the trend under the previous government.”
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In December last year, the prime minister and chancellor wrote to around fifteen major regulators — including Ofcom, Ofgem and Ofwat — demanding ideas for how to remove bureaucracy from the economy and more proactively encourage growth.
Speaking in January, business secretary Jonathan Reynolds signalled that a number of watchdogs could be abolished, saying: “We’ve got to genuinely ask ourselves the question: have we got the right number of regulators?”
Also in January, the chairman of the Competition and Markets Authority (CMA), Marcus Bokkerink, was ousted by ministers amid concerns that the body was paying too little heed to UK competitiveness. He was replaced by former Amazon executive Doug Gurr — and the chairman and the chief executive of the Financial Ombudsman Service later confirmed plans to step down.
The Financial Times reported in February that cabinet ministers were to be instructed to carry out a comprehensive audit of the UK’s roughly 130 regulators, with a view to potentially scrapping some of them.
The announcement of the decision to scrap the Payment Systems Regulator comes ahead of a planned “intervention” on Thursday in which the prime minister is expected to announce plans to overhaul how the British state works.
Speaking in the House of Commons on Tuesday, Labour MP Jonathan Hinder argued that governments in recent years have “given too much power away” to unelected bodies.
Addressing the controversy relating to the new guidelines handed down by the Sentencing Council, Hinder said: “As the secretary of state [for justice] has said, this parliament is sovereign, and the fact is, we’ve given too much power away to these unelected bodies in recent years.”
Shabana Mahmood, the justice secretary, responded: “I am very much looking forward to my meeting with the Sentencing Council later this week.
“And as I’ve made clear, I am looking into the roles and powers of the council and I will not hesitate to legislate if I need to do so.”
Josh Self is Editor of Politics.co.uk, follow him on Bluesky here.
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Labour MP says governments have ‘given too much power away’ to quangos
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