Julian Knight: We're just crying out for a consumer champion
Sunday 06 February 2011
Martin who? You could be tempted to ask when the chief executive of the new CPMA – the replacement for the failed FSA – was announced the other day.
The Government has appointed, in Martin Wheatley, someone completely unfamiliar to British consumers. But Mr Wheatley has an excellent track record as former deputy chief executive of the London Stock Exchange and, most recently, six years as Hong Kong's financial watchdog. As anyone who has spent any time in Hong Kong knows, the former colony lives and breathes financial services, with product sophistication the match of the UK and consumer knowledge much better. By all accounts, his tenure was successful and he will be abundantly familiar with some of the severe capital issues facing the banking system.
However, there is a big "but" for me in Mr Wheatley's appointment. The Consumer Protection and Markets Authority isn't a direct match for the FSA – it's supposed to be a new body dedicated to protecting the consumer. The old FSA was completely dominated by people who had worked in financial services and, until very late in its life, consumers seemed an afterthought. It was a far-too-chummy operation, with regulation all about box-ticking exercises rather than spotting the varied and ever-changing consumer abuses of the financial-services industry.
The CPMA was supposed to be a clear break from that past. The Bank of England would look after the numbers while the new body would be focused solely on consumer protection. The unworkable dichotomy at the heart of the FSA – that it was supposed to protect the interests of consumers and the financial services industry – was to be avoided. But Mr Wheatley's appointment strikes me as very much "old FSA". This appointment was a great opportunity to set a marker down that we were in a different era in which being completely au fait with the City and the characters that populate it was less important than understanding that there is a moral dimension to the provision of financial services. And, that, in future, the industry and every product it offers would be judged from the simple premise of whether it adds to the consumer good, or not.
The old FSA had started to make the right steps in this direction, too late to save its reputation, of course. My fear is that under a Conservative-led government (which is hardly ideologically suited to a regulator that will have to tell powerful institutions at times to, frankly, get stuffed), and with a City-focused head, the CPMA won't fulfil the role we desperately need it to.
We could well be in danger of swapping a poorly focused and rather gutless body with one that is similar but with less power, a much smaller budget and a lower profile. It is too early to judge which way the CPMA will go, and Mr Wheatley is certainly a capable individual, but he needs to appoint well within the new organisation and value an understanding of the consumer over – but not to the complete exclusion of – an understanding of the City. A consumer champion is what we need.
Moral investment compass
Regular readers will know I am an unashamed fan of emerging markets. They have the growth, productivity, huge skill development potential and, crucially, demographics on their side. But for investors, the past couple of weeks in Egypt highlight the all too often ignored fly in the emerging-market ointment – political instability.
For the past couple of years, Egypt has been a slow burner of an investment story – not as stand-out as the Bric countries, or for that matter the other rising Islamic economic star, Turkey, but compared with the rest of the African continent, a potential investment winner. Five per cent economic growth a year is not too shabby any benchmark.
On my visit to Egypt last year, I saw how the infrastructure had been improved and – a sure sign of a burgeoning economy – the cars on the roads were expensive and new, and this is in an economy which doesn't rely one iota on consumer debt. Yet corruption and cronyism are everywhere, as are the secret police. And it's a country with such a specialism in torture that the Bush administration allegedly contracted out to it much of its dirty work.
But a major draw for foreign investors big and small was that it was said to be stable. Yet the very thing that made it so stable – Mubarak's oppressive regime – is what now makes it unstable. Now investors in Egypt face the fact that the banks are closed and, if they want to, it's not going to be easy to get their money out of the country. It goes to show that it's best not to be so blinded by the emerging-market story that you take your eye off your moral compass.
Lies, damned lies and the ONS
Officials at the Office for National Statistics have been rather spiky after suggestions in this newspaper that its horrendous fourth-quarter 2010 figures will almost certainly have to be revised up.
The ONS has form in this area, with its initial pronouncements – which are based on around half of returns and leave out some of the national economy's big hitters – having to be revised upwards, quite considerably, in the past. I don't quite understand why it is that the ONS can't wait to release its figures until it has the overwhelming majority of returns.
Who knows how many real business decisions were made in response to these flawed numbers? To paraphrase the famous wartime saying, careless forecasting costs jobs.
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