View more on these topics

Pressing matter

The News of the World phone-tapping scandal may well result in statutory regulation of the press. The skulduggery and shame being paraded publicly mean that there will be little resistance to the basic demand of public opinion that “someone sort this out”.

In such situations, that someone must be the Government of the day. As a result, we can no doubt expect a press regulator to emerge. I would expect its powers to be very wide ranging, but initially relatively weak, though crucially it will be able to make and adapt rules within a broad statutory framework that its appointed leaders will be charged with interpreting.

I remember well just such a time in financial services. The 1980s were a period of huge growth in the sector as the City boomed and financial stories moved from the business section to the front pages. Played out against a backdrop of high unemployment and confrontational politics, a succession of what we would now call misselling scandals produced the same mood, albeit one with far fewer juicy bits. Regulation seemed, to me too, a sensible step, particularly the light-touch version that the statutes envisaged, based on the Bank of England’s success in regulating markets as one would membership of a club and all aimed at increasing confidence in the financial system.

But that lasted a matter of months until one particular scandal forced the Government to concede that its new regulator had failed the people. It paid out around £100m and the taxpayer funded compensation made the Treasury demand that the then regulators grow teeth and ensure this could never happen again.

That is how it must go. What starts as a cry for Government to sort foul things out, creates a new body, led initially by those who know the original problem best, but eventually by career civil servants who know how to manage offshoots of Government best. This body faces regular demands to act in order to stop various abuses and politicians refer decisions to it, so as to avoid making them themselves. It accumulates power to do so, but as the regulator does so, human nature makes something else happen that in time makes it fail the people who called for it – every time. Just like the FSA has, most obviously in the banking sector, but really just by costing billions more over the years than it has ever saved.

That thing that happens is that the regulated begin to frame their ethics by the regulator’s rules. That makes the compliance officer the arbiter of what a regulated business does, not the chairman or the shareholders. And while many compliance officers are over-cautious, there are always some that seek the loophole, as AIG so disastrously did in the sub-prime market. The difference is that regulation gives their inventions legitimacy and allows them to become established too fast to be controlled.

Common sense and clumsy policemen, who can easily be got round and who when they act, must stifle many to stop one, cannot cope effectively with this creativity and in the end more and more rules pile up and the industry shrinks, like some Communist bloc state, into a endless life-sapping battle between the police and the policed.

Welcome to your future pressmen. Despite your current crisis, do fight against it tooth and nail now, or one day the great British press will be as toothless as are our financial services.

Tom Baigrie is managing director at Lifesearch

Recommended

22

Aifa opens its doors to restricted advisers

Aifa is opening its membership to restricted advisers and will rebrand to reflect this change as part of a radical restructure. Following a strategic review, which began in December when director general Stephen Gay joined Aifa, advisers offering a limited product range will be allowed to join the trade body which has previously only accepted […]

1

MetLife calls for early access pension plan

MetLife has called on the Treasury to launch a Isa-style pension account which allows savers early access to their pension pot. The provider says the launch of a “mini-pension” to supplement automatic enrolment would improve incentives to save. Savers could contribute up to £5,000 a year into the scheme, with tax relief at 40 per […]

Adviser Fund Index

Fixed-interest weighting in the Adviser Fund Index portfolios have remained buoyant over recent years despite uncertainty surrounding the asset class. Since the May 2007 rebalancing, the overall weighting to fixed interest has increased across all three of the benchmark indices. The changes saw allocations rise six percentage points in both the balanced and cautious portfolios, […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com