This he did with some success last week, telling a lobby group for financial
advisers, the IFA defence union, that the finance Industry was ‘overregulated
and badly regulated, particularly the former’.
Though his party would keep the Financial Services Authority, he would make
the rules less complex and have a system where individuals could waive their
right to compensation in return for getting advice on High risk products. ‘The
caveat emptor principle has a lot to recommend it, ’he said.
Indeed it does, though the problem with applying it in retail finance is the
asymmetry of information– the person doing the selling or advising always knows
so much more than the person doing the buying. Indeed, Redwood recognised this
point in 1991, when he was the minister with specific responsibility for
regulation in the City.
No one still active in front line Conservative politics did more than Redwood
to shape the regulatory system we have today–for though Labour merged various
bodies into the FSA, those bodies were initially created by the Conservatives.
The difficulty in taking seriously what Redwood now says is that it is so
much at odds with his actions as a minister.
The particular scandal of his day were Home Income Plans. The Hansard debates
at the time remind us how Redwood’s response was to lead the demand for
compensation from the insurance companies behind the plans–whether or not they
had been responsible for the advice or the selling. Caveat emptor did not come
in to it.
Anthony Hilton is financial editor of the Evening Standard