We all moan about the FCA, the Financial Ombudsman Service and the Financial Services Compensation Scheme. But in reality the problems of regulation, high costs and all, are symptoms. The root causes are economics, the law of the land and politics.
I have always been grateful for the fact that, as a teenager, I could afford to live dangerously. In 1981, aged 17, I bought my first motorcycle – a Honda H100A – for £406, brand new. Fully comprehensive insurance cost £89 and road tax £6.
I was earning £2,900 a year as a quotations clerk at the old Hill Samuel Life Assurance and the bike was bought from the money I had saved in my first year of working. Biking made me hard-headed, self-reliant and entrepreneurial. I rode solo or with girlfriends all over Europe and soon had friends across the world.
The total on-the-road cost of my bike was £501 – less than 18 per cent of my gross annual salary. It was affordable. Then economics, law and politics intervened.
Margaret Thatcher’s Youth Opportunities Programme crushed wage levels for young adults. Its replacement, the Youth Training Scheme, afforded school leavers the wonderful opportunity of becoming Young Trainee Slaves on £23.50 a week.
The law also changed. Biking had to be made “safe”. We were no longer allowed to live dangerously. Ever more stringent licensing was introduced.
The effect was dramatic. Throughout the 1970s, sales of motorcycles were consistently over 200,000 a year. By 1990 the industry was struggling to sell 50,000.
On the one hand, Thatcher had impoverished the younger generations; on the other, “safety” had made motorcycling massively more expensive. Was it necessary? Certainly, more training was needed before kids were let loose on the road, but it was overdone, with layer upon layer of new regulations.
Fewer of us die with our boots on now than 35 years ago, but there are vastly fewer bikers to die. The overcomplicated licensing system has increased the cost of entry. Generations that would have come into motorcycling have not because the “teen dream” of a bike is now just that: unaffordable and unrealisable.
And therein lies a parallel. As the imperative of removing risk has shrunk the motorcycling community, the same has happened in financial services. The problem, however, is that while legislators cannot abolish risk, neither can they accept that fact, so they make activities ever less affordable.
That is why when politicians pontificate about making financial services more affordable for the mass market I completely switch off. An unending quest for a risk-free environment can only ever make the product and service more expensive.
Two and two will always make four and five beans will always make five, however creative the accountants. Regulatory costs in any industry will always end up being paid by the customer. That is the simple economics.
Neil Liversidge is managing director of West Riding Personal Financial Solutions