Few people noticed, but last week – significantly – the UK Treasury announced that Britain’s controversial Financial Services Authority (FSA) would get a going-over from the National Audit Office (NAO).

The FSA is the agency designed to keep banks, insurers and financial advisers in order. But it has grown into a regulatory leviathan. It costs billions to run: staff numbers (average salary: £56,000) have grown 70% in just the last two years. And the firms it regulates spend more billions on compliance – a huge burden on small firms in particular. It is exactly the sort of body that needs the NAO rooting through it, to see if all that money is being well spent.

But the FSA has always argued that it is a private company, because it is not funded from taxation, but from levies that it imposes on the firms it regulates: so should not come under official scrutiny. The government too tried to save it from inspection, saying that this funding scheme – though effectively a tax on all financial-services firms – means it “has no financial relationship with Government or Parliament and is not to be regarded as acting on behalf of the Crown”.

That is unbelievable dissembling. It is amazing what officialdom will do to avoid coming under the beady eye of NAO head Sir John Bourne, whose record in exposing its incompetence and inefficiency is truly legendary. However the FSA is funded, it is a public agency enforcing public laws, and should be subject to public scrutiny.

Eventually, thank goodness, the government has had to back down and let the NAO pore through the FSA’s management, methods and performance. Its report will not be restful reading. From what I know of the FSA, I am sure that Sir John will find it just as bureaucratic, incompetent, and bad value as many of the other arms of government that he is called in to assess. Watch this space.

From Adam Smith Institute

Tags: Libertarian, Politics, Liberty, Freedom