Separating the Wheatley from the chaff

Martin Wheatley is to head the FCA.

On Wednesday Martin Wheatley, who will head up the FCA (the new incarnation of the FSA), made a stirring speech championing the consumer.  At last there appears to be someone with the guts to challenge the "weeds" that have propagated at the FSA.  The biblical reference "to separate the wheat from the chaff" from Matthew 3, means to separate things of value from things of no value; and the serial failings of the FSA has proven they have no value when it comes to consumer protection.

But let us not rejoice just yet, for while Mr Wheatley's speech is excellent news, the FCA will be judged on its actions, not just its words. We have now seen years of procrastination and dithering from various regulators, including the IMA and the FSA and we urgently need statutory guidelines to ensure full transparency that will lead to vastly improved investor and saver outcomes.

Whilst his comments suggest he intends to show strong leadership and tackle hidden charges and fund fund fees at the FCA, Martin Wheatley is not going to have an easy job and is going to be heavily interventionist if he is to succeed. The industry is only just beginning to step reluctantly in the direction of giving greater transparency.  There are very mixed messages still circulating in the industry, causing yet more confusion for savers and investors. The most recent example being the IMA’s Annual Asset Management Report, issued this month, which stated that “investment clients are paying fund fees of a fraction over 0.3 per cent across the board”. This completely ludicrous claim puts efforts to regain consumer trust in financial products and the financial services sector back several years.

In my view, strong, clear leadership, a single industry standard on transparency of fees and charging, and a standardised method of reporting all costs and fees via one single total cost of investing number are essential steps to ensure consumers know the full price they will pay for investment products prior to purchase. 

However we also need to address other anti-consumer practices (which we have been highlighted by the True and Fair Campaign) including the failure to give full disclosure to consumers on where their money is invested; closet index tracking by active funds; fund mislabelling and mis-classification and conflicts of interest in stock lending.

There is much to do to improve the shockingly low standards of investor and saver protection in the UK.  Change is long overdue and must come soon, otherwise we risk further alienating savers and investors and damaging the financial services industry, and the UK economy. Martin Wheatley’s comments are extremely welcomed but we urge stakeholders to keep a watchful eye out for early action from the FCA to honour this pledge to give genuine transparency.

Gina Miller is the founding partner of SCM Private LLP and spearhead of the True and Fair Campaign. www.trueandfaircampaign.com

 

Martin Wheatley. Photograph: Getty Images

Gina Miller is the founding partner of SCM Direct and spearhead of the True and Fair Campaign. www.trueandfaircampaign.com

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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