PapersEconomy
The Return of Caveat Emptor
Abolish the FCA and PRA for anything that is not systemic, scrap the Ombudsman, and put “buyer beware” back at the centre of the City.
The argument
Written as a companion to The Wealth of Our Nation, the paper argues that London’s markets were built on risk, ownership and common law, and have been hollowed out by a preventative rulebook. It dates a turning point to Gordon Brown’s 1997 decision to end pension funds’ right to reclaim the tax credit on UK dividends, and to the Financial Services and Markets Act 2000, which created a single statutory regulator.
It says the present apparatus — Bank of England, Treasury, FCA and PRA — costs over £2 billion a year and did not stop Northern Rock, the 2008 bailouts, PPI, LIBOR, London Capital & Finance, Carillion or the Woodford suspension. Arm’s choice of a New York listing is used as the emblem of firms leaving.
The remedy is to repeal large parts of FSMA 2000 and revive an upgraded Financial Services Act 1986: self-regulating organisations, industry expertise, and four short duties. The Financial Ombudsman Service would be abolished. Banking and true systemic risk would return to the Bank of England alone.
What they propose
- 1
Repeal large parts of the Financial Services and Markets Act 2000.
- 2
Replace non-systemic regulation with an upgraded Financial Services Act 1986 model of self-regulating organisations.
- 3
Four duties only: manage conflicts of interest; tell every client they bear the risk and that loss is not proof of wrongdoing; declare whether the firm is principal or agent; identify the client — without a duty to judge their appetite for risk.
- 4
Abolish the Financial Ombudsman Service. Fraud stays illegal; failure is allowed.
- 5
Abolish the FCA and PRA where systemic risk is absent: asset management, corporate finance, trading and broking, investment platforms, insurance markets and non-deposit-taking firms.
- 6
Prudential supervision of banks, and infrastructure where risk is collective, sits with the Bank of England.
- 7
Reporting only where there is systemic or international need. Those bodies would not approve products, judge suitability, or guarantee outcomes.
In the same file
Economy
Student loan interestWipe past and future interest off student loans held by British nationals who live in the UK. The debt itself stays.
Economy
Wealth of our nationCut the state back towards its 1997 size. Bank the savings. Spend them on tax cuts, not on new programmes.
Economy
Inheritance taxScrap inheritance tax entirely. The paper says it raises little, hits family farms, and can be covered by cutting spending it calls ideological.