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Bad practice is endemic

I was going to have a go at explaining to you why the Money Advice Service can never actually achieve what it wants to when the world suddenly focused on the latest revelations of staggering banking dishonesty.

And, as is the nature of mega-commerce, one bank will not have been alone in this. Traders and administrators move between the big banks with such regularity that practice, good or bad, inevitably becomes endemic. No one blew the whistle and yet to the other Libor rate setters, it must all have looked very rum. So like the slow exit of Greece and the collapse of the wider euro, I expect this one to run and run.

It does seem to me that the underlying problem regulation has consistently failed to cope with is that modern financial services, both macro and retail, are so fast-moving and complicated, and of such huge scale, scope and technological sophistication, that government in any form is simply unable to maintain financial law and order.

When the world was simpler, the Bank of England could hold the line. It understood all the available instruments, it could monitor the trades and know the people.

The problem is no one can do that nowadays and if they did seek to do so, the rule of law would be so restrictive that those ruled would simply leave and set up in Singapore, not overnight but steadily, as is already happening among the smaller, more flexible and law-abiding firms.

In the retail world, intrusive regulation is just reaching its apotheosis with the RDR and yet its main achievement these past 25 years could be summarised as having utterly destroyed the UK’s savings culture. Officious regulation and the labelling of profitable selling as criminal over-charging failed to control the explosion of personal debt and then slammed the regulatory doors shut just after the credit crunch had dried up the flow of money to lend.

The thing is too big, you see. By the time you have spotted the problem, it is too late, whether it is PPI, the lack of pension savings or the amassing of vast debt.

And even if you spot it, you can be sure other regulators will not have and whomever does fail to will saddle all of us with whatever problem it is they missed, be it American homeloans, non-taxpaying Greeks and daydreaming Brussels empire builders.

So, what is the answer? It is that no matter what the Government thinks it can do, the only rules that work are the old ones and prime among these is caveat emptor – buyer beware.

Do not put your faith in those who try to protect you from risk and con, or big brands that sell you things you do not understand. Rather, accept that it is up to you to manage your personal world of risk as best you can.

This truth makes the ongoing failure of the Money Advice Service all the more tragic. Poor financial decision-making is now so engrained in the culture that it is too late to offer advice to the studious. The only mass defence that might work is education. Educated consumers do not get ripped off so easily and they know to save as much as they can and not to borrow too much.

But these kind of people are a rare species and the Government would be better off spending all its energies, and the MAS all its millions, on growing that tribe rather than trying to police the whole world and build websites for the occasionally curious.

Tom Baigrie is chief executive of Lifesearch

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