Instead, it has led to an unseemly deal behind closed doors.The PM’s speech was made in London at the start of the summer to an audience that included many financial services professionals and was hosted by arguably the most influential thinktank, the Institute for Public Policy Research. Tony Blair said: “Something is seriously awry when the FSA that was established to provide clear guidelines and rules for the financial services sector and to protect the consumer against the fraudulent is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone; when pension protection inflates dramatically the cost of selling pensions to middle income people; where health and safety rules across a range of areas is taken to extremes.” These strong words were enough to leave the regulator reeling. Love him or loathe him, Tony Blair is to date the most successful British politician of his generation and not one prone to gaffes or unthinking unscripted outbursts. The PM had laid into the FSA – no journalist would have bothered to twist his words – they didn’t need to. The comments on pensions could just possibly have concerned the pension protection fund, as some commentators suggested, but it mentioned selling pensions, not the provision of protection to those in failing occupational schemes. It appeared to concern the potential customers and clients of advisers and providers – the sort of unpensioned consumers whose interests the regulator is supposed to serve. It must be safe to assume the Prime Minister and his advisers knew full well the audience and the likely impact of any statement. The architect of New Labour had just criticised one of its most significant creations – one of the most powerful financial regulators in the world. No one expected the matter to rest there, particularly not with the combative Callum McCarthy temporarily in full control at the FSA. But here the public debate ends. Or at least the “public” debate. It is as if the industry found itself overhearing the first raised voice in a domestic argument, only for the rest of the heated exchange to continue behind closed doors except in a domestic dispute it might well be nobody else’s business but in this case it most definitely is. McCarthy’s response was intriguing. Instead of publicly answering the Prime Minister’s concerns, he wrote in private. No copy of the letter was made available to Money Marketing or to any other newspaper. Indeed, the FSA turned down a freedom of information request. But the Post Office appears to have let chairman McCarthy down. Despite the FSA’s desire for privacy, the contents of the letter reached not just Downing Street but also the offices of several national newspapers. The newspapers reported that in his letter McCarthy says of the PM’s speech: “It is damaging to our influence and our abilities to support the principals of better regulation to be described in the way that has occurred, hence our anxiety to establish whether there is any evidence to support the claim, which appears to be unfounded.” Strong words – once again, if true. Downing Street and the Treasury now claim the original speech was misinterpreted. The PM was apparently referring to the impression that businesses have of the FSA. Yet any rereading of his remarks would suggest that if that was the impression he wanted to convey, then the PM or his speechwriter is guilty of some very poor phrasing rather than anyone else of misinterpretation. And given his reported riposte, it did not appear to be McCarthy’s interpretation either. In what no doubt the FSA hopes will be the final chapter, Downing Street and Canary Wharf came to terms, or so we have to believe in blind faith. At the annual FSA conference last month, McCarthy said he had received a response from the Prime Minister, and pronounced the whole thing a storm in a teacup. Given what might have happened, the regulator scored a PR win – great news for just about nobody except perhaps the FSA press office. None of the industry’s concerns was addressed, there was no public debate and the regulator returned snug and smug to its ivory tower. If the Prime Minister was correct – in his public speech not in his private correspondence – then the FSA will continue to put legitimate businesses out of business because of over-regulation and pensions will remain too expensive to sell because of over-regulation. If the Prime Minister was wrong or if the FSA has adjusted its practices as a result of the speech, then the industry which the FSA regulates and consumers which the FSA is charged with protecting have a right to know what happened. If the FSA tries to keep the whole thing quiet, it is letting down the people it is meant to protect. It makes a sham of its accountability. At the very least a brave practitioner panel should say something because almost all the other channels for criticising the FSA, whether Parliament, media or consumer groups will fight shy of criticising FSA action if to do so runs contrary to their particular definition of the consumer interest. It also makes a complete nonsense of FSA claims to be open, something it is demanding of IFAs. When they are in the firing line, the FSA management’s first instinct appears to be to cover their backs. If they cannot take criticism, it will only lead the regulator, the regulated and consumers into more trouble. Rather than a storm in a teacup, McCarthy should have faced a storm of protest for his defensiveness and complacency.