Rishi Sunak has been forced to outsource key aspects of the Treasury’s post-Brexit legal work after admitting that his department does not have the resources necessary to unleash an overhaul of financial regulation.
Hogan Lovells, a top City law firm, has been brought in to advise the Government on everything from regulatory equivalence and crypto assets, to trade deals and the powers and duties of the Bank of England and the City watchdog.
The Treasury admitted that its in-house legal team was “unable to support the demand” the department has for legal services as it reshapes Britain’s financial services regulation post-Brexit, according to official documents.
It said this was owing to “a period of continued change as the UK consolidates its position, both internationally and domestically, following its exit from the EU”.
It comes as ministers seek to slash EU-era red tape in a wide range of areas in a bid to make Britain’s financial services industry more competitive.
The Queen’s Speech, which will be read at the state opening of parliament this week, is expected to include a financial services bill that will lay out plans to legislate on regulatory reforms.
Ministers have indicated that they plan to overhaul the controversial Solvency 2 rulebook that forces insurers to hold vast sums of cash on their balance sheets and reform parts of Mifid II, following its wholesale markets review, which was intended to reduce conflicts of interest but is widely felt to have harmed capital markets.
City chiefs have broadly been supportive of the mooted reforms.
The decision to bring in a team of top City lawyers highlights the complexity of the task and sheds light on the limitations of government departments, which have been criticised for relying on expensive private specialists.
The documents reveal that Hogan Lovells will advise the Government on the negotiation and implementation of international agreements and aid it in drafting legislation.
The firm, which will be paid at least £2m for its services, will act as the principal legal adviser on some projects, while it will share the workload with the Treasury’s legal team on others.
The Treasury and Hogan Lovells declined to comment.