FCA’s diversity requirements go ‘far beyond remit’, report warns
The Financial Conduct Authority (FCA) and other public sector diversity initiatives go “far beyond” remits set by legal requirements, a report has warned, prompting Reform UK to vow to reset systems to reward “talent and merit alone”.
Analysis in a paper by the Institute of Economic Affairs (IEA) has suggested that diversity policies advanced by the FCA and the funding body UK Research and Innovation have come at the cost of meritocracy and reduced productivity growth.
The report’s findings have resulted in Reform UK pledging to take a more active approach in setting remits by the FCA and other bodies as deputy leader Richard Tice said the party would “restore a merit-based system that rewards talent and merit alone”.
“Equality, diversity and inclusion (EDI) has served as a major public expenditure, a way of lowering standards, and rewarding people based on identity politics rather than merit and skill,” Tice said.
“It is a system that is inherently prejudiced and oppressive.
Tice added that Reform would “reinstate” the principles of talent and merit if the party were elected into government.
Reform vows public sector reform
Reform has already tested some of their EDI pledges by scrapping specific training courses at councils it runs. Doubling down on pledges to end EDI requirements across the public sector, including at independent regulators and other arms-length organisations, party leaders have suggested that it could drive higher economic growth.
The report by the IEA pointed to a consultation by the FCA, which ended in 2023, as evidence for the regulator pressuring businesses on diversity.
It takes aim at the Public Sector Equality Duty, which requires public bodies to help “equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it’.
The author of the report, Alex Morton, accused the FCA of exceeding the duty’s powers and taking an activist agenda, referencing a document in 2019 which said the body put the duty “at the heart of our activity”.
It also pointed to comments from an FCA adviser claiming that the duty was at the “heart” of activity at the regulator as suggesting that “literally every firm dealing with the FCA will have to take EDI seriously.”
The FCA emphasised that no plans from its consultation in 2023 were set to be taken further and targets on inclusion across company boards were voluntary.
An FCA spokesperson said: “We remain committed to supporting diversity and inclusion across the financial services sector, recognising its importance in building inclusive cultures, attracting a wide range of talent, and driving better outcomes for consumers and markets.”
Diversity push ‘undermining search for truth’
The IEA report also criticised UKRI for pushing EDI given a 2021 grant document stating that people dealing with the fund should be expected to “exceed all relevant legal obligations” relating to equality law.
“Forcing a version of EDI into universities risks undermining the primary purpose of university, which is to search for truth, unafraid of power,” Morton argued.
“In this case, UKRI seems to be arguing that supporting its agenda rather than any version of academic freedom is the priority – a major shift in the prioritisation of truth and knowledge within academia.”
A government spokesperson said: “We are focused on supporting businesses to grow and contribute to our economy.
“This country has a long-standing history of supporting rights in the workplace. This is important because we know when people are settled they can work at their best.”