Neil Bennett | City A.M. Notebook


The Notebook: The Tories’ parting gift to the City? A puffed up FCA they failed to control


The Tories’ parting gift to the City? A puffed up FCA they failed to control

It is a truth, universally acknowledged, that until the General Election was called yesterday relations between the government and the Financial Conduct Authority (FCA) had fallen to an all-time low. The ‘regulatti in Canary Wharf will be breathing a sigh of relief this morning, that Jeremy Hunt will no longer be breathing down their necks.

There has been something rather sad about watching Bim Afolami, the outgoing City minister, exploding with anger and frustration that the FCA simply would not do what he wanted, frantically pulling the levers of state but finding that nothing is happening.

Let’s not forget that it was the Conservatives that actually created the FCA 12 years ago, in the wake of the global financial crisis. Back then they wanted a powerful regulator who, in the words of its first CEO, would ‘shoot first, ask questions later’. Why are they now so surprised that they got what they wanted?

As it is, the FCA has been on the rampage, demanding new powers and continuing to tighten the screws on conduct wherever it can. Meanwhile, the PRA presides over some of the most onerous banking capital requirements in the world, restraining lending and squashing economic growth and productivity.

Seeing all this, both Afolami and his boss Jeremy Hunt have belatedly realised the damage that the FCA is doing to Britain’s financial services sector and the City in particular. The trouble is that it was all too late – the output of a tired government in its final months that did not have the time to tear up the regulatory framework it created.

They tried to force the FCA to take on a new responsibility to promote growth in the Edinburgh Reforms. But the FCA is a hard-wired regulator and wholly unsuited to presiding over any growth mandate. The clue is in the name, it is not an economic development agency.

The question for the City now is – what next? The outlook is not promising.

Labour is… Labour

If City firms think that a new Labour government will sort all this out however, they are dreaming. It may surprise some people, but if the next government is Labour… it will be a Labour government. It will always champion the consumer over the corporate, people over capital, and administration and bureaucracy over free markets.

I suspect that Rachel Reeves as incoming Chancellor will be far more amenable to granting the FCA more powers, including the ‘name and shame’ powers it is seeking, and its responsibility to promote growth will be quietly forgotten about.

The brainwave solution of Tulip Siddiq, the shadow City minister to the current standoff between Westminster and the regulators does not inspire anyone with confidence. It is to create even more bureaucracy, in the form of a new Office for Regulatory Innovation. I hear the faint sound of sobbing from EC4.


Musk’s billion dollar question

Another showdown scheduled for June is the Tesla shareholders meeting where the owners of the business have the chance to vote once more on Elon Musk’s $56bn pay package. In an earlier column I said it was wrong for the courts to decide on this, but up to the shareholders. Now they have the chance.

Until now the US has seemed the land of unlimited executive compensation. But Musk likes to test limits –  in space, land or in the boardroom. Now it seems he has found another – the chances of the vote being passed are diminishing. The question then is what happens next? Will he storm out in a huff? Or decide that he can rub along with a mere $10bn or $20bn after all.

Quote of the week

2023: “I am incredibly proud of everything that the team at Cazoo has achieved,” Alex Chesterman, founder of Cazoo

2024: Cazoo falls into administration with loss of 700 jobs

A recommendation

Love Supreme Festival, Glynde, Sussex July 5th-7th July

I’ve said it before, but you can keep Glastonbury. Love Supreme is THE music festival of the summer and this year it has an even better line up, with Chaka Khan, Dionne Warwick, Joss Stone, Kool & The Gang and many others making the trip down to the South Downs to hang with the Cats. Day tickets are only £70 too. Don’t hold back.