Katie Evans, Head of Policy and Research, Money and Mental Health
What the FCA Mission means for the next government
The announcement of a general election, understandably, dominates today’s headlines. Charities and think tanks will hurry to publish their own ‘manifestos’ – setting out what they want to see addressed by the next government. And in a (coincidentally) well-timed move, the Financial Conduct Authority (FCA) today set out their own plan for the coming years, along with a challenge to the next government, in their new Mission.
As a regulator, the FCA has a set of objectives, laid out in law, which they try to meet. This Mission document details their approach to meeting these objectives – what they plan to prioritise, and why. So it’s not so much a manifesto as a roadmap – where they’re going, and how they plan to get there.
However, changes in technology and society are creating new public policy challenges that will shape that roadmap, affecting everything from how we use financial products to how we choose them. The ability to access and share our financial transactions data, for example, will allow some consumers to get a better deal – but could also leave the five million adults who have never used the internet worse off. As a regulator, the FCA doesn’t have the right to decide how they should respond to these social policy challenges, which inevitably involve winners and losers. Weighing up these kinds of moral or ethical factors is a job for the government, as the FCA point out in today’s Mission.
Intriguingly, this is the second time in a few weeks that a report by a regulatory body has challenged the government to clarify its consumer policy and set more detailed objectives for regulators. The National Audit Office (NAO) made a similar request in its review of how regulated industries treat vulnerable consumers, published in late March.
And it’s an important challenge. UK consumers spend £136 billion on the main regulated industries – water, energy, telecommunications and financial services – each year. These are services that all of us need, every single day – to keep our homes warm, to feed ourselves and keep ourselves clean, to keep in touch with our families, and to keep our money safe and pay our bills.
Very few of us actively enjoy shopping around for these services, important as they are. But for some people with mental health problems, rather than just being a chore, managing these bills can be a source of intense misery and serious financial difficulty. Some people find that depression makes it nearly impossible to find the motivation to shop around, when getting out of bed is too much to face. Other people may find that their mental health makes problem-solving, comparing different products or telephoning providers to resolve problems incredibly difficult.
The FCA can be said to lead the pack when it comes to understanding how experiencing health problems or serious life events affect our ability to access essential services and manage the bills we pay for them. But despite these efforts, two big holes remain in our ability to make good public policy for all consumers, especially people experiencing mental health problems.
1. It isn’t clear how regulators should strike a balance on measures to protect vulnerable consumers that might also cost other consumers more. If, for example, energy tariffs are regulated so that the very high prices paid by consumers who never shop around are reduced, the very competitive tariffs available to people who do switch providers might also disappear. These active consumers then end up paying more – but vulnerable consumers who might be unable to shop around could pay significantly less. How do you decide what is fair? This isn’t a decision for regulators, but something the Government needs to give a steer on.
2. Both regulators and policy makers lack a detailed understanding of how difficult circumstances, especially mental health problems, affect our ability to navigate these regulated markets. Too much consumer legislation is based on the notion of an ‘average’ or ‘typical’ consumer, not taking into account how our personal circumstances, health and experience change our ability to engage with service providers, to understand contracts or to compare offers. We need far more research on how consumers, with and without mental health conditions, of all ages, genders, in different living situations and with different experiences, navigate consumer markets, to understand where things are going wrong and work out how to put it right.
The next government has a real opportunity to make decisive steps on both of these problems, and to respond to the challenge set by both the FCA and the NAO. New technology offers exciting ways to change the way consumers interact with these vital markets. This could make all our lives easier, but would particularly improve the lot of those consumers who lose out most at present – including people experiencing mental health problems. Money and Mental Health has already called for a major study of consumer data, to understand the causes of financial difficulty and what we can do about it. Armed with this understanding, the new government could make bold steps in consumer policy, setting braver ambitions and clearer direction to make sure regulators can protect and empower vulnerable consumers, making markets fairer and millions of Britons better off.
Read our full response to the FCA’s consultation