In an episode of the 1980’s TV series “Minder, Arthur Daly is seen trying to sell the landlord of the Winchester Club, Dave Harris, a watch. Arthur says, “At that price it’s a steal”, to which Dave replies, “That’s what worries me Arthur”.
In January, we expressed grave concern that the Treasury is treating fines levied upon the banks and the financial services industry as another form of tax raising, to be spent in ways various, or not at all, with the public expected to believe the spin that it is ALL to be spent on good causes.
The Treasury trumpet, being loudly blown by the Prime Minister and the Chancellor, was sounding some really caring, sharing notes about how the banking fines will be used, for example to help wounded troops recover by way of various military charities.
It makes a great pre-election sound bite, and after all, who would cast the first stone at that most laudable of causes, even though the terrible state of our wounded and often cast aside veterans is not, at all, the fault of the banks or indeed the financial services industry.
But is all as it seems, are the fines being freely donated by HM Treasury toward those good causes as stated? How much has been spent and more importantly, how much has not been spent only to disappear into the general taxation pot or simply reducing the national debt left by the previous Labour government?
We issued an FOI request to the Treasury in January and the reply received has sadly confirmed that all that money is a long way from being spent in the ways it was suggested and is looking increasingly unlikely within the life of the current parliament, as was pledged.
Fines are no longer used to reduce the regulatory cost on firms who had ‘done the right thing’ so they could enable that reduction to be passed back their customers by way of lower charges. Regulatory fines are no longer about putting things right surrounding the bad behaviour of the banks toward their customers. Bank fines are simply a form of taxation, windfalls.
I think as an industry, we should be frankly appalled. The fines are a “craftily legislated taxation ‘skim’, a political opportunity steal of gargantuan proportions. And that is what worries me.
So how did this happen?
Because of a statute, ‘laid before Parliament’ in February 2013, that went into force on 1st April 2013 that made sure that those vast fines would be legally ‘skimmed off’ to benefit the Treasury, who perhaps with some sense of cynicism could have been privy to some ‘inside knowledge’ on how big those fines were going to be or actually set those huge fine levels.
Banking fines for 2014 were £1,462bn To put some contextual scale to this massive amount, the total revenues raised for alcohol and tobacco in 2014 was £197bn- that equates to 4% of total UK taxation revenues according to HMRC figures.
The FCA was obliged by statute to pay away £1.370bn of the fines the Treasury, the equivalent of 70% of alcohol and tobacco levies for 2014.
How has that money been spent? According to our FOI request reply:
£35,000,000 to the Armed Forces
£10,000,000 to Armed Forces covenant
£40,000,000 toward veterans’ accommodation
£20,000,000 to Childcare, but exactly what is not known
£10,000,000 to medical training, again, exactly what is not known
£10,000,000 to Blue Light charities, exactly which is not known
£10,000,000 to Youth United
£5,000,000 to the Imperial War Museum/ WW1 gallery refurbishments
£ 1,100,000 an approximate VAT rebate for the Tower of London poppies sale to allow more money raised to go to charity. This is not a government donation. It is a fine redistribution and a very cynical play upon public sentiment and the war dead of WW1.
This gives a grand total so far of £141,000,000 going toward good causes. And some £1.322bn left over.
I have never really had much time for the ‘Walking Opinion” that is Bono, but he had a point when saying “When a nation is over-reliant on one or two commodities like oil or precious minerals, corrupt government ministers and their dodgy associates hoard profits and taxes instead of properly allocating them to schools and hospitals”.
In the UK, the nation’s ‘good causes’ over reliance is on banking fines, and they are being hoarded and certainly not being spent in the manner implied or pledged by HMT.
The question the industry and the nation should be asking, especially as Parliament is expected to be dissolved on 30 March 2015 for the general election on 7 May 2015, is how and when is the remaining £1,322bn going to be spent during the remaining few weeks of the current Parliament….and on what and if not, why not?
A further question to ask is why are the fines so very large?
Is it all down to a translation of politico speak, as with the Arthur Daly inspired headline “what’s French for ‘en-suite’ facilities”?
Is it fines or just tax revenue raising?
Should regulation of the banks be completely removed from the FCA?
With politicians thoughts now very firmly set on the May 2015 General Election do ask any door stepping candidates: “why are you using banking fines to support Treasury spending instead of reducing my fees, as was the pre April 2013 intention, allowing me and others to charge consumers less”?
Also, join the hundreds of your fellow advisers who have already supported our Downing Street petition asking that:
Parliament should reverse SI 2013 No 418 allowing consumers to benefit instead by way of lower product charges and access to lower cost independent financial advice as a result of fines for bad behaviour reducing regulatory costs on MY firm.