FSCS plan is the latest blow for brokers, says Elliot Lane

' Small brokers are having a rough time at the moment. The FSA is sending out mixed messages on how far it will police the perimeter and whether the attack dogs are needed. Chris Harris' recent comments, misread by his audience or otherwise, that there is a bigger problem than first thought in the regions seemed to come from the heart before they left his cuff.

Next, the FSA said it wouldn't launch any further consultation papers this year. But it has now sent hundreds of small brokers an email about the annual fees paid to the Financial Services Compensation Scheme (FSCS). The FSA wants to increase the levy in order to cover management costs.

Under the "consultation proposal", the FSA said that as the FSCS takes on board both mortgage advisers and general insurance brokers, more managers will be needed to deal with increased administration of the fund. The estimated figure? £27,000,030. A quick back-of-the-fag-box calculation on the personnel this hefty sum can buy: at roughly £40,000 pa that equals 675 grey suits. Or a board stuffed with the fattest cats a quango has ever seen.

The FSA believes that mortgage brokers are more prone to go bust under the new regime, thus general insurance brokers should help pay for the bill when they do.

The FSCS is also under great strain due to the Limitation Act, which allows other white-collar professions such as accountants, solicitors and actuaries the six-year cut-off when any creditor can pursue a debt from a firm.

However for the insurance and broking community, where the grey area of pursuing an accident claim is still being discussed, there is no time limit and under the Limitation Act it can be up to 15 years. How can the fund ever have a sustainable risk-based capital under such conditions?

So the brokers, who received the email on 8 March 2005, prepare to respond. Their deadline? 25 February 2005. And the FSA wonders why the regions are so confused. IT