Three weeks on from the election, the coalition government already feels like part of the furniture
Concerns about the stability of the new government have dissipated – for the time being at least – by the united joint front on public spending cuts presented this week by chancellor of the Exchequer George Osborne and his Liberal Democrat chief secretary David Laws.
The FSA was an unexpected beneficiary from the post-election compromising as the Tories’ proposal to scrap the financial services regulator was placed on the back-burner. The sheer volume of the legislation needed to carry out the reform, coupled with Lib Dem opposition to the proposal, seems to have put paid to the Tory plan.
But the reprieve could be merely a stay of execution. The Financial Reform Bill, announced in the Queen’s speech, implements the coalition government’s pledge to hand over the FSA’s regulation of macro-prudential affairs to the Bank of England.
Beyond that, it sheds little light on the government’s plans for the FSA. However, buried in the text of the full coalition agreement (see page 13), there is a pledge to transfer the part of the FSA that deals with serious financial crime to a new unit, merging with the elements of the Serious Fraud Office and Office of Fair Trading that deal with similar issues. This is a sensible move, tackling the inevitable overlaps between the three organisations’ activities, but it represents another contraction of the FSA’s remit.
The appointment of former Treasury civil servant and banker Sir James Sassoon is significant too. As the author of the review of financial services regulation carried out for the Tories when in opposition, Sassoon is perfectly placed to drive forward further moves to clip the watchdog’s wings.
Meanwhile, the continuing uncertainty hanging over the FSA is further compounded
by the imminent departure of the regulator’s chief executive Hector Sants. Perhaps, rather than the wholesale abolition promised by the Tories, the FSA faces death by a thousand cuts. IT