Davy: Put a small levy on all products
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Davy: ’Infinitesimal’
SimplyBiz chairman Ken Davy says a levy on all financial services products would be a simple, fair and cost-effective way of funding the Financial Services Compensation Scheme.
He says adding “a fraction of a penny” to the cost for every £1 that is invested would cover future compensation bills but would be small enough not to have an impact on the consumer.
Davy says: “The present system is fundamentally flawed because it requires the people who have not contributed to the problem to pick up the liabilities. The simple, fair and equitable sol- ution is a product levy.”
Some industry comment- ators have suggested a product levy which would separate products depending on their risk, with higher-risk products charged more.
But Davy says the levy should be applied across all products in order to build up a sufficient compensation pot.
He says: “The whole point about the FSCS is that it covers all products and therefore there is no danger of any product being stigmatised over another.
“The fundamental principle of taxation is to have as wide a base as possible so that the cost for any one individual is small. If you are collecting it from every pound of premium, it really is an infinitesimal amount.”
Davy argues that a levy would be fair to consumers, who ultimately benefit from compen- sation and should be making a contribution to the cost of that protection.
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Readers' comments (2)
Mike Stafford | 10 Feb 2011 9:50 am
How would the levy be calculated and collected if there was no product involved? e.g."Don't join your employer's FS pension scheme".
I think we should not lose sight of the fact that the FSCS compensates for not just for misselling products, but also any incorrect advice that leads to loss.
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Ken Davy | 10 Feb 2011 5:14 pm
Hello Mike, very fair point to raise. My view is that the Product Levy is the only equitable way to fund, indeed pre-fund, the FSCS.
Should a claim on the FSCS emerge from a non product specific area such as your example it would still be met from the FSCS in the same way as any other liability.
A slight unfairness one might argue but compared to the present system positivley angelic!!
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