Tuesday, 26 April 2011

Bank charges to rise to pay for higher regulation costs?

The story started with a snippet in tonight's Standard that the Bank is looking to spend £20m to fit out new offices for the Prudential Regulation Authority, successor to the FSA. The offices are estimated to be 10,000m2. OK I thought, fair enough. £2k/m2 isn't silly money. Building systems - lighting, H&V, IT and the rest - have a reasonably short economic life.

But hang on, what's happening to the FSA's old offices? And from there it starts to get murky. The FSA is in effect being split up, with around a third of staff moving to become the PRA and the rest forming a new body called the FCA which will, er, continue doing the sort of thing the FSA did. From the FSA's Annual Report, it emerges that existing costs are around £310m a year on staff, £46m on accommodation, £26m on IT, and other costs making £415m a year in total. But don't worry - this is charged to the banks and financial institutions that are regulated, or overcharged in fact. To the tune of £435m a year - £20m more than the FSA's costs. Clever, huh? So we pay via bank charges rather than directly through tax. What a clever wheeze!

But where it gets really creative is in HMT's cost-benefit analysis of the changes (p117 onwards). Splitting the FSA into two is actually going to cost quite a bit, it seems. Firstly there are two or three years of 'transitional costs' estimated at an additional £240m in total - including no doubt the £20m office fit-out. Then there are additional costs of £25m a year for a further few years, coming all together to some £400m. But don't worry; the banks are paying £20m a year extra already, so they'll hardly notice the extra extra. And anyway they can recharge the punters, can't they?

The most breathtakingly audacious part of this cosy spend-fest is the financial benefit that HMT claims will produce a positive NPV of £1.4bn by "a reduction in frequency of severe financial crises in the UK". Really. You couldn't make it up.  

And the boys and girls at the FSA not only all continue in their old jobs but in spanking smart new offices - trebles all round, I think!  


Anonymous said...

Someone run this by me again.....why do we need the FSA?

Other than, to give a bunch of dullard "equalised" civil servants a job?

BrianSJ said...

After the foot and mouth disaster, the culprits at MAFF moved to DEFRA and got a pay rise.

Weekend Yachtsman said...

So, to summarise, you abolish a useless quango, and you end up with it still there, with an additional equally useless new one too.

Is that right?

C. Northcote Parkinson was a genius, wasn't he!

Andy Baxter said...

as a practicing IFA running my own business for over 10 years I have first hand experience of the FSA and its predecessors over the last 20 years and to be frank I can find no words suitably apt within the English (French and Spansih) languages (either) to describe the utter futility waste and wanton deliberate stupidity of these self serving 'retrospective divine right' Completely Useless Numpty TumptyS

but what galls me the most are the direct fees my business has to pay, combined with 'interim levys' to fund other numpty's incompetence that just pop out of nowhere from time to time...so it aint just taxpayers (and I'm a high paying one of them too) it's wealth generating businesses too that have to fund all this nonsense too...taxed on what I earn taxed on my profits and taxed in fees.......

thanks for allowing the whinge, I'll shut up now and get back to work now to help pay for all this new nonsense....