Charges back on the political agenda

Price caps have been put back firmly on the political agenda by shadow financial secretary to the Treasury Chris Leslie.

He wants the Financial Conduct Authority (FCA), which is set to take over consumer product regulation from the FSA at the end of the year, to have the power to review prices and recommend caps though with any intervention ultimately decided by a minister.

Talking about the regulator last week, Mr Leslie said: “To be that consumer champion, the FCA has to have the ability to review and recommend changes to fee structures, cap pricing or anything else it considers necessary, but the final sign-off should rest with a minister. The regulator should not have a free hand over the industry.”

Price cap regulation was founded in the 1980s as a method of limiting the fees charged by utility companies, to protect the public from unaffordable water bills and the like.

Mr Leslie seems to be suggesting that the FCA would take this approach to regulating financial products and services under a future Labour government. Could this approach eventually be applied to financial adviser fee structures?

Of course, there is nothing to worry about immediately. Arguably not enough voters view Labour as an alternative government yet. But a scenario that brings them to power is not exactly unimaginable – summed up by the phrase ‘National Health Service reform’. The success or failure could have a huge bearing on the fortunes of the coalition and thus the Labour opposition.

Even in the next few years, this could still prove an issue. It is safe to assume that the coalition, especially the blue three quarters of it, is not ideologically inclined to support price interventions. But that doesn’t mean such views won’t have a bearing on their thinking.

Some politically embattled Liberal Democrats may seize on anything that makes their party sound a bit less centre right, including pensions minister Steve Webb. Mr Webb has made similar, albeit more circumspect, remarks about interventions in pension prices if the new National Employment Savings Trust doesn’t have the required impact and charges remain high.

It is unlikely that any of Mr Leslie’s provisions will make it into the Financial Services Bill currently being debated in Parliament, though we now know what Labour means when it says it wants the new regulator to be more pro-consumer. It could easily make it into their manifesto.

In addition, it doesn’t stop legislation being introduced at another time.

Certainly at least a year and a half of grim headlines about price aimed variously at fund management and pension fund management groups has created the conditions in which Labour can make such pronouncements.