Howard Davies, chairman of the FSA, said: "This is the first comprehensive manifestation of the radical new approach we plan to take, including an assessment of the choices we must make in terms of where we concentrate our resources.
"This involves setting a balance between four types of activity - regular supervision of firms and markets, responding to developments in the industry and the external environment, consumer-facing work and the maintenance and renewal of the regulatory regime itself. The balance we propose for the coming year involves some cutback in routine activity, offset by increases in our responsive work, our direct-to-consumer efforts and in work designed to reform and improve the regime. We hope that the overall balance of effort we propose will be seen as a reasonable judgement by the industry and consumers.
"This translates into a budget which, taking into account the new responsibilities which we assumed last December, is only marginally higher in real terms, although we are proposing an additional targeted increase to fund an overhaul of insurance regulation and enhanced regular supervision of insurance companies. This would be met by higher regulatory fees from the insurance sector."
The strategic aims are broadly to help consumers get a fair deal, to set up and run an effective regulatory regime, and help firms meet their regulatory requirements in an efficient and ‘clean’ market.
The FSA’s budget for mainstream regulatory activities during 2002/03 is £180.5 million, which is its largest yet. Paul Boyle, chief operating officer at the FSA, said: "We estimate the full year incremental cost of the additional responsibilities assumed from last December will be about £9m, including associated overheads. The effect on current fee payers will be offset by the fact that we will have a wider base of fee payers from which we can raise fees. Those organisations that came within our scope for the first time from December will meet the costs of the wider responsibilities and their fair share of our other costs.
"Excluding our additional responsibilities and the additional costs for insurance regulation, our budget is 2.9 per cent higher than 2001/02 and only 8.5 per cent higher than the budget for 1998/99 which was the first year in which we started to regulate on behalf of our predecessor bodies. This represents a small reduction in real terms over four years. The vast majority of our costs are employment costs. Salaries in the markets in which we compete for staff have risen by substantially more than inflation in the last four years; we estimate that had our total costs increased in line with salaries then our budget for 2002/03 would be around £20 million more than our proposals."
