Yesterday, the Chancellor met top regulator bosses in Downing Street to discuss an action plan on regulation. The review aims to cut the administrative cost of regulation, make Britain the best place to do business and drive economic growth.

We applaud the ambition and the speed at which the Government has been moving.

Action plan on regulation

The plan aims to overhaul the regulatory system so that it:

• supports growth. Provide a regulatory system that not only protects consumers and supports competition, but also encourages new investment, innovation, and growth.
• is targeted and proportionate. The government should regulate only where necessary and allow space for discretion and good behaviour.
• is transparent and predictable. To foster the certainty essential for investment, it is vital that the regulatory regime is stable, predictable and consistent.
• adapts to keep pace with innovation. Our approach to regulation must allow the UK to take advantage of new technologies and innovations.

We welcome these aims.

Recently, we wrote about the importance of the smaller non-bank lenders we represent. A big part of their challenge is regulatory.

We have long discussed the need to reduce the regulatory burden on firms, but we are increasingly also discussing the importance of certainty.

Yes, as the Government has identified, compliance costs have increased considerably over recent years. We have long said that regulators’ cost-benefit work can be disappointing. It can lack an understanding of actual costs and seem to be built with banks in mind.

Late last year, we wrote in the media about new proposals from the Financial Conduct Authority to ask lenders to provide detailed information about every transaction they carry out. This follows a vast amount of work to implement the Consumer Duty.

The burden is real and pressing.

Certainty is just as important as the burden.

However, certainty is equally vital. It is key to have confidence that you understand the regulator’s expectations. It allows you to grow and develop without second-guessing everything you do.

Let’s be very clear. This is not about deregulation. In many areas, certainty is about providing more direction, not less.

It has essential knock-on impacts.

Certainty gives firms confidence that they are compliant, but it is also vital in attracting the investment they need for growth.

Certainty also ensures access to credit for individuals who struggle to borrow elsewhere, as firms can continue to offer services to these consumers rather than stepping back out of fear.

The action plan also includes some specific measures for financial services. The Treasury will also explore ways to streamline financial services regulators’ ‘have regards’ to improve predictability and business confidence.

Regulators will now also be subject to performance reviews twice a year. They will be judged against a set of targets agreed with the businesses they affect, such as how quickly they decide on planning applications and new licenses for companies and products.

It would be good to see the FCA supporting new entrants into the alternative credit sector.

Examining the role of the Financial Ombudsman Service.

Interestingly, the Economic Secretary to the Treasury has been given a role in this action plan on regulation.

Emma Reynolds has been asked to examine whether the FOS is delivering a simple, impartial dispute resolution service that quickly and effectively resolves complaints against financial services firms.

There is a big question as to whether it is currently working in concert with our Financial Conduct Authority, which regulates the sector.

From our discussions with the Financial Ombudsman Service, we know that they would point to the difference in mission and approach they were given. While lenders will work to the principles set down by the FCA, there are subtle but significant differences between that and the decisions taken by FOS.

So the Economic Secretary will focus, in particular, on a range of points that have been raised as part of the government’s consultation on the growth and competitiveness strategy.  This will include addressing concerns around:

• The framework in which the FOS operates which has resulted in it acting, at times, as a quasi-regulator.
• Whether the FOS is applying today’s standards to actions that have taken place in the past.
• The practices that have grown up over time on compensation.

Next steps – let’s get this right.

This work is expected to conclude by the summer, and the government has stated that it stands ready to legislate to ensure that the UK has a dispute resolution system fit for a modern economy.

Again, we welcome this Review of the FOS. We certainly need an action plan on regulation.

We have long and regularly asked for the role of FOS to be reviewed. Especially its interpretation of the FCA rulebook and how it interacts with the broader regulatory framework.

Of course, we will keep members updated on progress on key elements, such as the Review of the FOS and broader activity concerning the action plan.