Treasury select committee chairman Andrew Tyrie says he is confident that the FSA take account of the recent Parliamentary RDR debate and evidence sessions in the forthcoming select committee consultation on the RDR.
In an interview with Money Marketing, Tyrie says he also hopes that the FSA will listen to any recommendations the committee makes.
Tyrie, who is Conservative MP for Chichester, says: “I am confident the FSA will listen to what was said in the Parliamentary debate and to what we receive in our consultation. I would be very hopeful too that it will pay attention should we make any recommendations.”
The TSC called for written evidence from the industry on the RDR last month and will decide whether to take its consultation further on the basis of the evidence received.
Tyrie says: “It is clear to many people, including IFAs and wealth managers, that there is a problem. It is not clear to everybody what the solution is. The FSA has a proposal which has generated quite a bit of criticism, one of which is it is a onesize-fits-all approach that may cause consumer detriment. We need to examine that carefully.”
Tyrie spent six years on the board of Rensburg Sheppards, which he says taught him about the wealth management industry from the standpoint of IFAs as well as a wealth management business.
He says too many changes to the tax and regulatory treatment of savings in the past have hit public confidence in saving and have affected IFAs.
Tyrie says he is concerned about the savings ratio. In June, the Office of Budget Responsibility predicted the ratio would rise from 7 per cent in 2009 to 7.3 per cent in 2014. By November, it had revised that to fall from 6.3 per cent in 2009 to 3.4 per cent in 2014.
The OBR put the change down to a drop in unearned income such as company dividends and says the ratio is “volatile and liable to revision”.
Tyrie says: “There were not many big changes in the OBR’s fiscal forecast on the basis of what they put out in June but one key area which was radically altered was their forecast for the savings ratio which was broadly halved. It is clear at a time when the savings ratio is falling well below its long-run average and after a period when many individuals and businesses overborrowed, we need to ent-rench the savings culture.”
With the regulatory structure in flux, Tyrie says it is not surprising that we are yet to see proposals from the Government in terms of savings but he says these are “issues for next year and beyond”.
He says it is important that the regulatory changes do not lead to a system which appears to insulate the FSA and its successors from the risk of regulatory failure and, as a byproduct, has the effect of driving business out of the mass market.
He says: “It is the mass savings culture above all that we need to foster.”
In 2000, Tyrie co-wrote Levia-than at Large, a book looking at regulatory issues, including accountability, which offered 29 proposals for improving the FSA. The first was for competition and competitiveness to be statutory objectives. Both are issues the committee has heard evidence on during its inquiry into the Treasury’s proposed changes to the regulatory structure.
Tyrie says: “Competition and competitiveness were not listed as one of four statutory objectives but only a principle to which they FSA would have regard.
“We heard evidence in public sessions and have been told repeatedly the so-called ’have regard to’ principles are of little or no practical value.
“Accountability is an issue that is constantly being raised by people in the business. There is always a risk that when a powerful quango independent of the Government is created, they can become accountable to nobody but there has been a measure of accountbility to Parliament with regard to the FSA.”
He adds that the committee has not yet reached a formal view on either subject.
Later this month, the committee will take evidence from the European Commission int-ernal market and services commissioner Michel Barnier to address the fit between UK and EU regulatory architecture.
Tyrie says: “The UK, by a long way, has the biggest chunk of most European markets in fin-ancial services and Europe’s glo-bal competitiveness in this area depends in large measure on us continuing to get it right here. I expect and hope that point is not lost on EU regulators.”
While everyone is focusing on the mop-up of the financial crisis, he says it is important to remember the opportunities presented by change.