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'Dear Chancellor - stop fighting the regulator, or make it stop fighting you!'

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Please click 'post reply' to discuss below.


  • MothballsWalletMothballsWallet Forumite
    15.8K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Martin, are you really surprised about this country having a 2-faced approach to everything?

    I'm not, it's the standard MO of the UK.
  • edited 3 June 2014 at 4:22PM
    pheonix254pheonix254 Forumite
    64 Posts
    Tenth Anniversary Combo Breaker
    edited 3 June 2014 at 4:22PM
    Whilst I've no doubt the conflict exists, I think you have to look at it in terms of the timescales at which these entities work.

    A regulator is going to be around for a long time. It should therefore take a long term view, look at consequences of the actions of government and providers (be they mortgage, energy etc), and propose and enforce codes of practice and conduct which exist to protect Mr & Mrs Taxpayer over the long term.

    The government, as elected, has a 4 year time span to work. Therefore, whilst it has the most power in this group, it is also intrisically short-term baised - it needs to act in a way that benefits people tomorrow, rather than 5 years down the line. Which is why, in my view, it's really stupid that we leave long term decisions like energy policy to the government, rather than a long term entitiy like the regulator and utilities.

    The government is in a position to influence behaviour via short term incentives, together with the providers. However, it also needs to allow the regulator to do its job over the longer term. So whilst the government for instance is offering help to buy, to get people on the property ladder tomorrow, the regulator is crying out "this all happened 6 years ago, and we had a sub-prime mortgage crash in 2008. Stop lending to people who can barely afford repayments at todays ridiculously low interest rate!"

    So whilst help-to-buy is popular with the current taxpayers presently, the government needs to ensure that it's short term goals don't come at the expense of the long term goals. Unfortunately, time and time again, the short-term goals get the priority and completely destroy the long term goals. Which is why we're going to be getting rolling powercuts sometime next year - because short termism won in energy policy, rather than proper long-term planning. And you can't just build a new power station tomorrow. Some would say that's because the govenment, and not Ofgem and the utilities, had the keys to the energy policy box.

    So I believe regulators need to be established, supported (even when their goals are conflicting to the government du jour) and given appropriate powers to ensure that long term goals are met and that they can survive the whims of a government trying to win votes.

    However, they also need to act in a hands-off way supports their long term position - not mandating that certain things get done in a very prescriptive way, for instance, but instead ensuring that overall, the industry is working for the taxpayer and societal benefit. So for an example: a directive saying energy tarriffs must be simplified and easily comparable between companies is appropriate. Mandating a layout of an energy bill and setting a restriction of 4 tarriffs per energy company on the other hand is too far - the regulator needs to set down the most fundamental groundrules by which everyone plays. Not listing the precise specifications of the stitching on the players shoes. For a legal analogy, they should look after the spirit of the law. the letter of the law can be looked after by the short-termists like the government.

    So I feel there is always going to be conflict - the regulator is a check and balance - it should create conflict when long and short term goals are badly misaligned. Whose job it is to sort this out on the other hand is a matter of opinion. Personally, i think it should be the government with the day-to-day power, but the regulator able to over-rule certain practices which are damaging to society in the long term. As it is, the government has all the power, and the regulator either toes the line or gets disbanded as a money-wasting quango. So it is dysfunctional as it stands, but there is a framework there that can work, in my humble opinon.
  • RafterRafter Forumite
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    Part of the Furniture 1,000 Posts Combo Breaker

    Good post - like your ideas around principles based regulation and long termism. The challenge is how to keep the whole system democratic and accountable while maintaining the right tension between regulator, regulated and government to try to ensure the best long term outcome for citizens.

    The challenge of our current situation is that the regulations needed to be tightened in 2003 and not 2009 and since with hindsight.

    The challenge seems to be is that we are not very good as individuals about thinking about the long term. We vote in governments or offer them a second term when we feel a short term benefit, even when with hindsight it was the wrong thing to do. Likewise goverments who take tough decisions and get us back on track usually get punished at the ballot box.

    Smile :), it makes people wonder what you have been up to.
    3 Posts
    My son has a 32 thousand pound deposit for a 250 thousand pound flat in London.He has saved for years. His credit rating is without blemish but he has been turned down by EVERY surveyor - then Banks in the area who say that they are not lending on the flat because only 30 per cent of it is Privately owned, the rest being local council and it is on the 9th floor of a 10 floor block. We are not talking some scummy estate here.. but people have lived here since it was built in the 1960s. The refusals - surveys - have not been rejected due to property but on grounds of "area, location, and Local Authority". . The expression "undesirable area" was even mentioned which will cause a backlash when I inform the residents of SE16 that their area is " undesirable" So what will happen? The flat will be sold to some investor then rented out at 2 grand a month to three families causing cramped overcrowded conditions or, with no concern to whom, as long as they get their rent. I know because it is everywhere in the part of the country I live in.Hard working people, you haven't got a chance of getting on.
    No BIG lenders will lend at present to Local Authority owned BLOCKS in South London anyway and this is official from COLLEYS - - the flat issue is secondary.
    To say for one second, that Banks would not get their money back from a resale, should there ever have to be one, is absurd. With 24 people plus viewing a property in any one showing, their excuses and lies are lame.
  • MobeerMobeer Forumite
    1.9K Posts
    Part of the Furniture 1,000 Posts Academoney Grad Photogenic
    Most of these policies are actually consistent - they consistently aim to be popular with voters. For example:
    - Fund for Lending lets politicians promote themselves as helping business create jobs
    - Increased capital requirements lets politicians promote themselves as forcing banks to be responsible

    It makes sense, when you realise the purpose of the policies is to get re-elected.
  • antrobusantrobus Forumite
    17.4K Posts

    I think Mr Lewis should stick to what he does best; pointing out to consumers where they can get the best deal on washing powder or whatever, and refrain from commenting on subjects on which he clearly knows or understands very little.

    So effectively we have Funding for Lending pumping money to the banks to lend out, but in reality, it’s just gone to help build their capital requirements.

    Err, no. The amount of money that someone (e.g. a government) decides to deposit with (i.e.lend to) a bank has no effect at all on the amount of capital a bank possesses.
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