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One year on

How financial services has fared under the coalition’s first year


It began with laughter and back-slapping and moved on to tears and back-stabbing but how well has the coalition fared in office in its first year and what has it done for financial services?

The coalition agreement set out its policies, hopes and commitments in May 2010. In that agreement was a chapter devoted to banking reform. Action has been taken on bonuses but despite Liberal Democrat pressure, the Banking Commission that was set up last year and gave its interim report last month is taking a sensible view on restructuring the sector. And while a lot of noise was made about small businesses, the Merlin agreement has yet to see SMEs dancing in the street.

Elsewhere, there were commitments on mutuality, financial advice, tax and fairness in pensions. In reverse order, the Government confirmed work-place pensions will be a reality from next year, introduced by Nest over the next five years. The life and pensions industry has long been preparing for this and waits with interest to see how the scheme will be marketed and probably awaits with more interest the first review of the scheme.

An aspiration for people to save more and for more employers to contribute is a good thing in a society where saving largely through economic necessity has diminished. Whether this scheme will produce the desired result or flounder under a barrage of small business criticism and non-cooperation, is hard to tell.

On financial advice, consumers will get basic advice through the Money Advice Service but through the retail distribution review, the complete list of consequences for advisers is unclear. The Government’s intent remains the same, although the FSA is still smarting from a mugging by MPs on the Treasury select committee about the need to provide more clarity on what the RDR has in store for IFAs.

The Chancellor’s first Budget this spring was overshadowed by the spectre of the deficit, a mantra the whole Cabinet knew was a perfect riposte to difficult questions on nearly every other subject. The Budget brought nice surprises in corporation tax changes, in the protection market on the realignment of I-E and reforms to VCTs. Rabbits out of hats time brought changes on fuel duty and the introduction of enterprise zones but little else of cheer for the finance sector.

In summary, the Government has not done too badly. The financial services sector has fared reasonably well – though some IFAs may disagree – largely because the aggressive rhetoric of the early weeks has been toned down. So seven out of 10 for effort but could try harder.

Ralph Jackson is a director at Lansons Communications


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