Not an election goes by without one political party or another promising some kind of tax cut to whet the appetite of the voting populous, promising to give money back to the over-burdened worker, while probably just diverting that penny in the pound onto something else. Tax cuts are a great way to curry political favour and the Conservative Party has recently gone all out to deliver a whopper. Its intended aim? To make £14 billion worth of savings, cut red tape and enhance the UK’s global competitiveness.
Yet, the policy report from the Conservative Party’s Economic Competitiveness Group has raised a few eyebrows with some of its suggestions – not least the de-regulation of mortgages. Among its 211 pages, the report simply states: ‘Mortgage regulation: We see no need to continue to regulate the provision of mortgage finance, as it is the lending institutions rather than the client taking the risk.’
This is not its only suggestion for the housing market, with the abolition of Home Information Packs (HIPs), inheritance tax and, potentially, Stamp Duty – all hot topics of debate for the industry – added to the list.
Of course, the Labour Party has joyfully attacked the report as a major swing to the right for the Tories, though when you consider the group was lead by former Tory Thatcher-era cabinet member, John Redwood MP, this might not be so surprising.
Yet, regardless of political postrung, this is still just a policy group’s recommendation and it is up to the Shadow Cabinet to decide what will actually form part of the Tories manifesto.
A backward step
Unsurprisingly, this move by the Tories has not been met with much favour by the industry. What the Financial Services Authority thinks cannot be said, as it does not feel it can comment when it takes its scope – and budget – from the Treasury, which is obviously currently controlled by Labour.
Bill Warren, director of associate members of the Regulated Alliance of Mortgage Packagers, does not believe many people in the industry will support the policy paper’s suggestion to end regulation. He says: “While I would support a reduction in regulation, to deregulate now would be a backward step and disadvantage the consumer. It would make them unsure what to expect from whom. We need something that keeps it simple for everyone.”
Yet, Warren does feel the Conservatives are playing a clever game. He says: “I suspect they don’t think they can do away totally with regulation, but it’s a debating point that they can come back from, that achieves a middle ground. They want to stimulate debate.
“The Conservatives are saying that, if they get into government, lenders have to really take responsibility, rather than drifting along with a free reign. It’s not a bad statement. No government is going to expose consumers; they just expect lenders to be responsible.”
Stripping it down
Yet, Matthew Wyles, group development director at Portman Building Society, remains unconvinced that consumers have gained any real value from regulation, with the resulting costs to lenders being passed on to the consumer and the lack of flexibility it affords. He adds: “I would be strongly in favour of stripped-down regulation, so we get all the benefits of regulation without the bureaucracy. The whole industry is more aware of fairness, transparency and clarity and that’s got to be a good thing, but it’s also created layers and layers of overhead and bureaucracy.”
However, Wyles is deeply ambivalent of the move to principles-based regulation, and explains: “If we’re going to re-engineer regulation, we need to do it in an explicit way, so that there is no doubt in the minds of lenders and brokers of what their duties are. There is merit in policies that provide limited, targeted regulation, rather than assuming wholesale regulation is better.”
The streamlining of taxation is also backed by Martin Wade, director at Mortgage Options, who adds: “We’re not over-regulated and the industry is held in high esteem because we are professionals and we maintain high standards. But, I’m all for slimming down taxation.”
A professional image
Andy Frankish, managing director of Mortgage Talk, certainly believes the enhancement of the industry’s reputation as a professional body cannot be discounted. He explains: “No doubt, there are problems with red tape, but to scrap it altogether would be wrong. The positives of regulation have been very positive and most reputable brokers think it is a good thing. You can probably argue that regulation is paid for by the consumer through increases in product prices and margins being cut, but there are huge benefits in now being viewed as fully professional people.”
Of course, this could all be a moot point, with the policies yet to be fully taken on by the Conservatives, let alone the party getting into power. But the message from the industry is clear: to lose regulation would be a retrograde step, but a reduction in bureaucracy would be favoured. Perhaps this is something the current government should take on board while it has the chance.
