Vince Cables last words

8 June 2010

Three sentences on page 10 of Capitalism 4.0 capture what I mean perfectly: “Once the self-healing nature of the capitalist system is recognised, the charge of ‘passing on our problems to our grandchildren’whether made about budget deficits by conservatives or about global warming by liberals –becomes morally unconvincing.

“Our grandchildren will almost certainly be much richer than we are and will have much more powerful technologies at their disposal. It is far from obvious, therefore, why we should make economic sacrifices on their behalf.”

Of course it is one thing to pen words of wisdom in a book or in a weekly column in The Times and quite another to run the country, particularly when overleveraged economies rather than over leveraged banks have become a major global issue and even the future of the euro is being threatened.

So the pragmatism of Sir Alan Budd and his new Office for Budget Responsibility is likely to prevail and cuts rather than fiscal stimuli are likely to be the order of the day, though not at the Financial Services Authority whose annual funding requirement for 2010/11 is £454.7m –up an inflation beating (yes, even at current rates) 9.9% from £413.8 in 2009/10.

The FSA, of course, is funded by the industry, not the taxpayer, though ultimately it is the consumer who foots the bill. This prompts two questions:  who ensures that the long suffering homebuyer or investor is getting value for money in such a blatantly opaque funding arrangement and what metrics should be applied to measure the FSA’s effectiveness?

Obviously there are committees and safeguards in place but the FSA tends to measure itself in terms of inputs rather than outcomes and it is difficult for the industry to be too critical of its regulator because, let’s face it, it holds all the cards when it comes to determining the future of individual firms.

It is probably for this reason that Cherryfind, a forum for independent financial advisers, rather than an authorised firm, has followed David Cameron’s initiative of publishing the salaries of high earning civil servants by using the Freedom of information Act to draw attention to the top earners at the FSA.

This shows that there are 198 employees at the FSA currently earning between £100,000-£299,000 per annum, that there are 11 earning between £200,000 and £299,000, and four earning more than £300,000.

Averaging out the figures, Cherryfind calculates that the mean salary for the 3,300 staff at the FSA is £92,848. Obviously if you pay peanuts you get monkeys but the converse is not necessarily guaranteed as the post mortem on Northern Rock clearly illustrated.

But it is the £33m in bonuses that the FSA awarded itself last year that really gets Cheryfind’s goat and citing business minister Vince Cable’s words on the subject as shadow chancellor, it has called on the government to put an end to the bonus system.

“This is utterly ridiculous”, said Cable, “The bonus culture is completely out of control. If anyone needs to be setting an example in relation to bonus payments, it is government departments and the FSA.”