The decision by Gordon Brown to set up the Financial Services Authority (FSA) very early on in the Labour government raised quite a few eyebrows at the time. `Steady Eddy' (or Sir Edward George as we now have to call him) hit the roof and threatened to resign. This didn't surprise us much, though there was no way Eddy George would have ever carried out his threat. He was just defending the old boy's network of banking regulation and the jobs of his mates at the Bank of England.
The fact is the Bank of England had lamentably failed to regulate the banks and if there was one group Gordon Brown had in his sights, it was them. The Treasury top brass simply failed to recognise that when the Labour opposition said it was going to do something they meant it. They also thought that with Bank of England independence Brown would have enough on his plate. In setting up the FSA there was always a worry, however, that such a large body would one day become too big for its boots.
It seems that some people think that day has arrived.
Just before Christmas the Treasury sneaked out a press release announcing that in future the FSA would regulate the high street insurance brokers, a job previously done by the General Insurance Standards Council (GISC). I seem to remember the Treasury previously saying it was quite happy for self-regulation to continue, so what has changed its mind?
I rang my old mates at the Treasury to find out and what they told me sounded very convincing - that is if you haven't worked for the Treasury yourself. The Treasury press office still has the best team in Whitehall - mainly because Gordon Brown doesn't suffer fools, but also because the best people want to work where the real power lies. I was told this was all in the best interests of the industry because without independent regulation insurers would not be able to compete across Europe due to EU regulations. High street insurance brokers also sell mortgages, I was informed and this was to ensure just one regulatory body. So everyone is happy? I asked. No, the GISC doesn't like it because it will be out of a job, came the reply. So there you have it.
There seems little point in arguing with the Treasury over this one. You could complain to your MP or even hire an expensive lobby firm to put your case, but you would just be wasting your money. No, rather than trying to get the Treasury to change its mind, which it won't, it would be better to do something that may actually succeed in helping the high street insurance trade. The GISC should put its resources into a campaign against the cowboy insurance deals done by the holiday trade and consumer companies, which aren't regulated by the FSA.
How many more cases do we need to read about people being forced to spend a fortune on medical bills because the holiday companies £10 extra for insurance wasn't sufficient cover? It's about time the Treasury did something about that.