Speech by Lord David Lipsey,
Chair, Financial Services Consumer Panel
Good morning, everybody. I think it is traditional on these occasions for Panel Chairs to give an account of what they have been up to over the 12 months covered by the Annual Report, but I am afraid in my case the answer to that is absolutely nothing to do with financial services. I took office only in June of this year having had a long pause for refreshment from this industry since I came off the PIA board when it was wound up. In fact, I spent most of last year running greyhound racing – well, everybody trains in different ways. Indeed, in the financial turmoil of the last few weeks it seems to me that a few quid on the sixth dog at the 8.34 at Romford is probably about the wisest investment that anyone has made recently!
I start then by paying tribute to those who did do the work last year: John Howard the Panel Chairman, Adam Phillips, who filled the gap when John stood down, and indeed all the panel members. They are an outstanding group of people and we are lucky to have them. They are intelligent, they are hardworking, they are determined to make a contribution both inside to the FSA consultation process and outside in the interface between the regulation and the financial services world. The panel has achieved much, it will achieve more in years to come.
May I also echo Hector; my only regret is that I have arrived just as Callum is leaving the Chair, but thank you very much for appointing me before you did leave, Callum. That regret is alleviated only by the fact that my Lords’ colleague Adair Turner is to succeed him – one class act following another.
Why do we have a panel?
Why do we have a panel? As you meet your FSA bills each year you might think this is a bit of expenditure we could well do without. Well, the po-faced answer is you have a panel because Parliament has said we have to have a panel. Sections 8 and 10 of FSMA say that there should be a panel, and not only that, they make it quite a powerful panel, in that the FSA is obliged to respond to every point we make to it. That statutory basis underpins both our importance and also our independence. I noted Callum’s remarks about the tendency of the panels to be critical, but to a certain extent that is part of our function as it was devised by Parliament.
I said you had to pay for it, so I would just like to say a soothing remark or two on that. I wonder how much of the money taken into the FSA you think is spent on the Consumer Panel. Is it 20p in the pound? Not that much surely. 10p in the pound? No. 1p in the pound? No. A halfpenny even? No. It is a farthing in the pound of what you put in goes on the Consumer Panel, so I hope we can deliver good value for money.
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What we do
What do we do for that small sum? We do not decide; that of course is a Board function. We advise the FSA on policy. As you all know, the FSA is not exactly unproductive when it comes to consultative documents and we respond to most of them, though we shall be rather more selective going forward. We advise government on what should be regulated; there are some big issues coming up there. Implicitly, as well as explicitly, we advise both the FSA, government and the political world generally through the media, through contacts with trade associations and companies and through industry conferences as to our views as to where consumer interests lie.
Consumers
The word ‘consumer’ sometimes has a rather dull, if worthy, ring to it. It makes you think of Which? in the 1960s, testing the dozen or so washing powders that were available and saying which one really did wash whitest. However, I think modern consumerism is a good deal more interesting than that. In particular, consumers in general and our panel have learnt that the market economy can be the consumer’s friend, not, as the old consumerists often thought, their enemies. We are not enemies of profit. We are not enemies of innovation.
If I could quote from the Consumer Panel’s newly drafted statement of what it is about – I am told that in the business world these days this is called a mission statement – I quote: ‘We want to bring about an open, fair, competitive and well regulated market in which consumers can make informed choices from a range of products and services, which offer real value to consumers and make those choices with confidence.’
Confidence is the key word, as of course it really is for everybody in the financial services industry in this room. Overall, if consumer confidence in our financial services goes, you would have no businesses, you would have no customers and that explains the actions of the authorities over the past year or so. Even if you take a particular product, confidence can go in the twinkling of an eye and then take an age to return. Just consider home income plans, which went into negative equity in the 1990s. It has taken equity release well over a decade to even start to recover from this reverse and even today, though an equity release product will often be the key to a comfortable old age for many people, consumers remain wary, so confidence is key.
The final point I want to make is a related one really. I do sometimes detect that people think of consumers, particularly in an FSA context, as if we were opposed to the industry and the way that we are set up so that there is an opposing Practitioners Panel and an opposing Smaller Business Panel can reinforce that feeling. It is certainly true that from day-to-day we shall disagree. Disagreement and discussion is a very healthy thing, there is nothing wrong with it at all, but we do have many aims in common.
- Every company in financial services rightly insists that it is in business to serve the consumer; that is what we as a panel want to ensure.
- Every company knows that we must do what we can to reduce systemic risk – that is understood by the Consumer Panel.
- Every company pledges itself to treat customers fairly and we want that too.
- Every company believes that, though of course it seeks to prosper itself, it will only do so in reality if its customers prosper by making the best possible provision in their individual circumstances for their financial futures – this is our mission too.
- Every company wants to see what can be done for the least favoured and least knowledgeable customers, to bring them into the financial services family. That is another aim of the Consumer Panel.
Therefore, we on the panel look forward to working even more effectively in the future with the FSA, with the government, with the financial services industry, through and beyond present hard times to a future where we are all doing our bit for prosperity for all. Thank you.
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