Letwin says Tories would bring about 'regime change' at FSA

The Conservative Party would radically prune the remit of the Financial Services Authority if it were elected, on the back of a groundswell of criticism of the City regulator among UK companies.

The Conservative Party would radically prune the remit of the Financial Services Authority if it were elected, on the back of a groundswell of criticism of the City regulator among UK companies.

Oliver Letwin, the shadow Chancellor, said at the weekend the Conservatives would bring about a "change of regime" at the City watchdog, to deal with mounting criticism that companies are drowning under a sea of demands from the regulator.

The attack comes as the FSA is set to hold its annual general meeting in London on Thursday. In a rare move to respond to criticism of itself, the body said: "The FSA's remit is a matter for government. We don't comment on the policies of political parties."

Internal Conservative documents show the party believes the FSA is "not a democratic body". As a result, the document says, "businesses are manifestly cautious of 'putting their head above the parapet' to criticise FSA behaviour or aspects of regulatory policy for fear of retaliatory, regulatory initiatives".

The opposition party also suspects the "FSA has become increasingly the tool of the Treasury", the Government department under which the Financial Services and Markets Act was established.

The Conservatives are basing their policy on a survey of 200 British companies and trade bodies which was compiled by the Centre for Policy Studies, a think-tank. The results of the survey will be published in October.

Responses leaked in a Sunday newspaper amounted to a damning critique of the "excessive" amount of regulation carried out by the FSA, the lack of specialist knowledge among its staff and their high rate of turnover.

The Conservatives plan to make deep cuts in some processes, such as the FSA's heavy demands for checks and balances by companies to guard against money laundering.

However, supporters of the FSA believe it can do little to counter charges about over-regulation because it is carrying out its remit to implement directives both from the UK government and from the European Union - with 70 per cent of requirements it passes on to companies coming from Brussels.

Turnover of staff at the FSA is 8 per cent a year - less than the average in the financial services industry. The body also invests considerable amounts in training staff to have cutting-edge knowledge about the markets it regulates.

There is a view within the FSA that companies' complaints are based on the fact that, in many areas, regulation used to be much lighter than it should have been under the law.

Separately, Mr Letwin said he was also considering making the Office of National Statistics independent, giving it a similar status to the Bank of England.