Liberal Democrats and some Conservatives will tell you that the economy needs protection from apparently evil corporations bent on world domination. There is a Competition Commission (formerly the Monopolies and Mergers Commission) for that purpose — to protect consumers from a company with no competitive limits on their actions.
The majority of Conservatives, though, remain on the right where we believe that while monopolies should be controlled, most other controls on companies are performed by the market. Regulations, legislation and regulatory bodies are hurdles to truly innovative companies and frighten off foreign investment (and so customer-assisting competition) and new companies.
Education has been the arena for discussion recently, so let’s consider that. In the UK there is a national curriculum. This means, effectively, that the state thinks it knows better what a child should be taught than the child’s own parents. When this applies to state-schools, then I think we can give the government a break.
But in Saudi Arabia there are private schools that educate to a private-school standard for fractions of the cost of private schools in England. The illiberal left have an almost obsessive dislike of the elitist private schools which are the norm here. They are an expression of the class system just as fox hunting is. But private education need not be this way. The lack of for-profit educational institutions must be caused by barriers to innovation and I would suggest that that is OfStEd.
The same can be said of the financial services industry. Two days after Legal & General reports record profits why should there be a complete lack of foreign-owned competitors? The simple reason for this? The FSA.
To sell financial products to adults, you have to treat them as children. The mis-selling scandals are not the fault of companies making false promises, it is the result of successive governments telling people to take no responsibility for the biggest decisions of their life (buying a house or pension) and to trust ‘Independent’ Financial Advisers who are, often, paid on commission. A conflict of interests this grave would be a scandal in any other arena.
The gulf between the major parties is often air-brushed by the ‘impartial’ media. The political compass, which I love so much, has all three major parties in different ideological hemispheres but we are supposed to think they agree on the major issues. A LibDem recently told me that the economic arguments had been won, that the only political battleground was individual freedom. I don’t agree.
Attacks on private car ownership by the environmentalists are ostensibly attacks on selfish people damaging the environment. And yet another look at the situation shows the old combatants assuming new roles: The left-wing is playing planet-saver while the right-wing is playing the freedom-of-choice role. What if the left-wing are not so much attacking car-ownership for its affect on the environment as much as attacking the social inequity produced by non-use of public transport?
There are many, many Conservative recyclers — we care about the environment. But I wonder how many bus-users are also Conservative voters (unless they’re too old to drive)? Have the battle-lines remained while the argument has changed? I have said it before, but I firmly believe the solution to car-use lies in technological solutions — technology is not the enemy of the environment (any more) it is now in a unique position to protect it.
Michael Howard promised to increase the speed limit to 85mph at the last election which makes sense according to my argument — and at the same time, the current government has watched over punitive speed-camera installations, hours of police time wasted on traffic rather than on train-crime and the base misuse of the 1991 Road Traffic Act.
Let us stop pretending that the three parties have reached consensus on these issues and accept that these differentiating lines are healthy for debate and democracy. And please let us hear from the Conservatives and LibDems how important it is that the Legislative and Regulatory Reform Bill is not passed.
At the next election we shall hear an excellent Conservative agenda which, like in 2005, should win if policies are the distinction between parties. That we did not win in 2005 shows how much more influence being cool and headlines has on the electoral result.
So, with Blair out of the way, let’s ask our public representatives to tell us loudly what the policies are and let us make a decision based on those. Let us let people chose between:
- Low-tax, European free-trade, vigorous and innovative economy with genuine individual freedom;
- Low-tax, no EU interference, vigorous economy with low individual freedom;
- Medium-tax, EU-sadlled economy with genuine individual freedom; and
- High-tax, EU saddled, low-individual freedom.
They are, in order, the Conservatives, UKIP, LibDems and Labour.
I can, it appears, get through an entire general political post without mentioning the undeniable injustices of the lack of an English Parliament (damn — failed)!










March 19th, 2006 at 6:25 pm
Gav - there is mis-selling in the financial sector. I should know - I could have been a victim of it! A couple of months back I wanted to invest some money (quite a lot due to the sale of my flat). I went to four high-street names and two independent financial advisors. In two of the six meetings, I could easily have been mis-sold a product, as not only did the financial advisor’s match me to a product that didn’t conform to my clearly explained criteria, both of them even lied to me.
My criteria:
A safe investment (with capital guarantee) that is compatible with my tax position (as an ex-pat I don’t pay any UK tax, so I wanted a fund that I am responsible for declaring to the inland revenue, not the company) but gives me exposure to the stock market (try to get some growth) and has low fees. No exit charges or market value reductions (aka exit charges). The investment period would be 5 years.
Meeting 1: IFA
Advice: Off-shore investment fund (stock market tracker) with no capital guarantee, a 5% up-front fee (half of which went to the IFA) and an annual fee of 2.5% (half of which went to the IFA). I did a calculation that if the fund grew by 9% per year, it would take me almost 3 years to get my original investment back. But - there were exit charges. Year 1: 10% of returned money, year 2: 8%…. etc until after year 5. So in effect, if I wanted to get my money back due to a change of circumstances, I would get back less than I paid in. All of this was in the small print of the 1cm thick bruchure and in the summary the IFA supplied or the cover letter, which clearly stated this produce was the best on the market considering my criteria.
Meeting 2: Halifax
Advice: Guaranteed investment fund (passively managed fund that included shares). There was a capital guarantee, it was over 5 years, the fees were 1,5% per year with no up-front or exit charges. I would receive the money in the bond tax-free. BUT - it was tax free because the tax was already removed at source! The way it works is that the Halifax pay tax (20%) on the profit from the whole investment (of every customer that invested in it) before the profit gets added to the investment. Considering how compound interest works, that is extremely damaging to the final ammount! Not only that, but the financial advisor clearly misled me - I would not be taxed when I cashed in the fund, as it had already happened!
The really amusing thing was that all of the financial advisors, bar one (the other IFA - who I went with) kept telling me that investments can go down as well as up. But I was talking about a guaranteed capital investment, so if the investment lost money, the worst that would happen is I would get the original lump sum back (no fees removed) - which would effectively mean I would not be protected against inflation.
There is a case for regulation, as extremely complex products are completely mis-sold by bafoons (halifax - he didn’t intentionally lie to me, just his complete stupidity led him to make assurances that were not true) and liers (the IFA). Unfortunately, the regulations are not working!
March 19th, 2006 at 6:29 pm
*correction*
Parageaph 3:
All of this was in the small print of the 1cm thick bruchure and not in the summary the IFA supplied or the cover letter, which clearly stated this produce was the best on the market considering my criteria.
March 19th, 2006 at 8:41 pm
I think you have illustrated my point. No IFA can be truly independent because of the financial rewards. Not only that, but IFAs have to sell a reasonable number of products to make a living so they are unlikely to spend as much time researching as you would for yourself.
That you then had to read the literature before finding out the IFA was lying/a fool shows even more how little faith you can safely rest on their shoulders.
How much better would it be if we stopped telling people to trust a complete stranger with a conflict of interests and told them to spend a few hours researching for their own investment?
I accept that this is hard to do because of the complexity of financial products and the near-impossible task of predicting future investment returns, but it has to be better than continual scandals which can fairly be levelled at someone else. Personal responsibility must become a factor (which it isn’t now).
March 20th, 2006 at 8:33 am
I don’t think there is an easy solution - the financial products are extremely complex (the one I finally went for had terms & conditions of 50 A4 pages of 10pt print) and the market is exceptionally diverse. A non specialist has to have advice. If an expert advises you incorrectly on-purpose, they should be held responsible. We do need regulation, but we need it to:
a) work (at the moment it is just a bunch of rules that have to be followed blindly - hence the ‘advice’ that investments can go up and down on a guaranteed fund)
b) be shifted in emphasis, such that personal responsibility plays a greater role.
Perhaps the way forward is to regulate the investment information given to clients - and if the clients don’t read it, then it is their fault. E.g their should be a summary of all the relevent information prepared by the financial advisor (an assessment of risk, any fees/charges, market value reductions etc…). Basically a clear list of features, spreading no more than a couple of A4 pages. With that document their should be a summary of the clients needs as a comparison (to see financial advisor understands what the client wants and it can be used as a direct comparison).
If the summary does not match the product, the financial advisor is libel. If the summary is correct and the client didn’t read it/didn’t understand it, then it’s the client’s fault. If it’s somewhere between the two, then it’s up to the courts to decide. This summary is not currently given - only the document about the clients needs.
The tricky thing is if the financial advisor recommends a product that matches all the client’s criteria, but is blatently obvious it is a bad bet. For example, investing in corporate bonds when the stock market has been doing badly (especially a few months after a huge fall) is a really bad idea. When investors loose confidence in shares, they buy corporate bonds - which inflates the price! When confidence goes back to shares, the bond price falls. What do you do?
My gut feeling is that we cannot regulate stupidity. But incorrect adice, or hiding the important stuff in the small print, has to be regulated.