Despite penning this piece ahead of this week’s Budget, I have no nervousness about predicting the future because, in all probability, we are in for an emperor’s budget, long on cosmetics and soundbites but dreadfully short on content.
Sadly, we could now be entering a period of British politics and thereby financial supervision which may come to feel like sucking porridge through a straw. For any organisation to operate efficiently requires a sovereignty over the critical issues on its agenda. Firm leadership and decisiveness are needed but we may be left with a succession of compromises.
A hung Parliament would clearly be the most sterile outcome from the election and would have far reaching and primarily negative consequences for mortgage brokers.
If weekend reports are true and the Treasury are already cosying up to Vince Cable, can you imagine how much longer it will be before the UK embarks on the spending cuts which so urgently need to be applied to a bloated public sector. Even now, the regulator is employing new staff at a rate of knots, with apparently 460 more supervisors requisitioned.
What makes this very unpalatable for brokers is that even though transaction levels have dropped by nigh on 70 per cent , the costs of regulation keep rising . Adjacent to this is the matter of the revised funding model for the FSCS and the need to right several injustices that exist within the present version. This brings me to phoenixing.
The practice of phoenixing a business is not illegal. It has been occurring in all walks of commercial life for many years.
Sometimes it is no bad thing if a speedy reincarnation can protect jobs and livelihoods and a new management team have a fresh strategy which can restore a business to good health.
But that is not always the case and the past year has seen an increase in occurrences where the FSCS is left to absorb the costs and pay for the mistakes of the previous owner.
It is amazing this can still happen at a time when regulation has never been so vigilant.
Furthermore, under the MMR, there is likely to be the adoption of individual registration for brokers and a tightening of protocols over areas such as corporate governance and oversight.
Regardless of whether the practice of phoenixing is legal or not, there surely has to be a fuller examination of the deep moral hazard that lies at the heart of the matter. If treating people fairly is the regulator’s mantra, then it must begin to turn its eye to what is an often amoral and unfair set of events.
Alas, for the reasons expressed at the top of this article, I do not see any reasons why anything will change soon.
Thousands of conscientious brokers, many of them directly authorised, will soldier on trying to earn a living in a compliant fashion. But when some of their illustrious and bigger peers run their businesses on to the rocks, it will be those brokers that will be expected to pick up the tab. As the election slogan goes – this can’t go on. Yet it probably will.
Kevin Duffy is managing director of Mortgageforce