Experts call on Chancellor to assess FCA Diversity Proposals for potential overreach

A group of 40 MPs and peers have called on Chancellor of the Exchequer Jeremy Hunt to assess the Financial Conduct Authority’s (FCA) diversity proposals for potential overreach. In a letter, these parliamentarians argue that the FCA’s proposals “promote pseudoscience and gender ideology” and may exceed the regulator’s remit. The FCA’s proposals require large businesses regulated by the authority to report employees’ demographic data, including age, ethnicity, religion, disability, and sexual orientation, with the option to report data on gender identity, socio-economic background, and parental and carer responsibilities. The MPs and peers claim that the concept of “gender identity” has no basis in science or law and that recording data on “gender” instead of “sex” will prevent firms from monitoring important workplace metrics for women. They also question whether the FCA has the authority to require firms to report this data and set diversity targets.

The signatories of the letter argue that the growing bureaucratic requirements may directly impact business performance and deter companies from listing on the London Stock Exchange. They believe that these proposals will shift economic resources towards unnecessary compliance and bureaucracy instead of meaningful economic output. The MPs and peers have asked Mr. Hunt to review the FCA’s proposals with respect to potential overreach, excessive bureaucracy for firms, risks to UK competitiveness, and the promotion of gender ideology at the expense of women’s rights.

The concerns raised in the letter also extend to the Prudential Regulation Authority (PRA), which ran a parallel consultation with the FCA on a similar set of rules for financial institutions it regulates. The letter expresses disquiet about unelected quangos taking an “activist approach” in interpreting equality law and calls for a careful examination of these proposals.

In response to the letter, a spokesperson for the FCA stated that their consultation on diversity and inclusion aims to tackle misconduct such as bullying and sexual harassment while supporting a well-functioning financial sector. They will consider feedback and the conclusions of the Treasury Committee’s inquiry on sexism in the City before reporting back later this year. A spokesperson for HM Treasury affirmed that while the regulators are independent, they will carefully review any proposals.

This debate highlights the ongoing tensions around diversity and inclusion measures in the financial sector. While some argue that these proposals are necessary to address issues of inequality and discrimination, others believe they go beyond the remit of financial regulators and may have unintended consequences. The outcome of this review will have implications for how diversity and inclusion are addressed in the industry and could shape future policies in this area.