The MPs of the Treasury select committee – specialists in difficult questions – need to turn their famous scrutinising powers upon themselves.
Their latest victim is a certain Paul Smee, director general of Aifa. Smee joins numerous insurance company chiefs, split-capital providers and clearing bank chief executives, most notably Barclays Bank chief Matt Barrett, in the committee’ rogues gallery.
Hauling over the coals, keel hauling, turning the thumbscrews, hanging, drawing and quartering – simply name the medieval cruel and unusual punishment and appearing before John McFall’ committee can be compared with it.
But to what end? Well, the latest end is a bid to find the answer to “restoring confidence in long-term savings”, as the current inquiry is titled.
Hear, hear, comes the cry from the industry, savers and investors, consumer groups, media pundits and politicians. Who could disagree with the aim? And yet by what means?
Last week saw Smee flanked by Charcol Holden Meehan’ Amanda Davidson – hardly a candidate for financial services’ answer to Lady MacBeth – and Roger Saunders – no highway robber, he.
Smee was asked questions about Berkeley Berry Birch in detail which he was not really qualified to answer and was challenged about those nasty precipice bonds. Again, the committee had the wrong man from the wrong organisation to hold to account.
A probable conflict of interest was identified where providers – notably insurers – provide a massive proportion of funding for Aifa. An excellent means of undermining the witness but to what end?
A few nasty headlines resulted from Smee’ reluctance to answer on some of the more sensitive subjects. He will recover as, no doubt, he has a pretty tough hide. But who should have been there? Perhaps someone from BBB. Its management might be a good place to look. Or Towry Law’ old chiefs. The BBB chief executive, whether you agree with his thinking or not, has already made his case in this paper.
As for precipice bonds, perhaps some of the providers and distributors would be appropriate. We can think of a clearing bank and at least two defunct IFAs. What about some of those fellows from the murky world of consultancy who advised on the construction of the products and their marketing?
As for funding, would it be better to have no trade body representing IFAs? We doubt that would have much of a hearing in the Treasury itself, from where much of the impetus for a united IFA body came in the first place. In a perfect world, there would be no conflicts of interest. In a perfect world, MPs would face the same pension dilemmas as their constituents instead of having membership of one of the UK’ most generous schemes – a cheap point that adds nothing to the debate but there have been at lot of cheap point made in recent weeks.
Of course, the committee often gets things right. On split-capital investment trusts, for example, the people involved clearly deserved to be put on the spot about what happened to their investors’ money.
Sometimes chief executives need to be shaken out of their complacency. But while pay and pensions may be excessive, does it really help the committee achieve its objective of finding a solution to restoring savings confidence by barracking them on remuneration?
Much of the evidence the committee sees is in writing, so it does receive a lot of valuable information and its reports are often well measured. It is also clearly understaffed and underfunded compared with its US counterparts, given that its remit is as huge as the area of the Treasury’ responsibility.
IFAs may remember that several years ago it was this committee which suggested that the pension review should not be unfairly retrospective when all the shrill noises were coming from Treasury ministers.
Yet if all the select committee does is leave blood on the carpet, it may damage its own credibility as a serious centre of inquiry. Last week saw a committee with the wrong people in front of it in danger of veering off course. If that tone is reflected in the rest of the inquiry, short of razing the whole industry to the ground and starting again, no one will have any idea how to restore confidence in long-term savings. Wasn’ that the point?
John Lappin is editor of Money Marketing