Politics, Ice Cream and the mystery of inappropriate regulation

Politically I’m a mixed bag.

I’m massively for aspiration and wealth generation. I believe in the power of enterprise. I understand the benefits of free and open markets. I also don’t  like the idea of  big government and wastage.

However I’m also believe in providing support to those who need it, the importance of the NHS and am, being bought up in a community where my friends parents hailed from all over the world, a bit confused about the  “immigrants flooding our shores” argument when for years immigration has been so important to the development of so many communities.

I myself am a product of immigration although only on my dad’s side and a few generations back now, although I suppose you could see that as an argument for and against more restrictive border controls!

Regardless of these conflicting opinions I believe it’s important to vote.

Therefore I always do, however I was so on a knife edge that whilst at the ballot box in the last general election my thoughts we so balanced that in the end I voted for the candidate who, whilst canvassing down the street at the same time as an ice cream van pulling up, bought me a Ninety Nine.

Due to the fact that this may be perceived as vote rigging and get the individual in question a lot of trouble I obviously can’t disclose the individual or the party he represents. However if you feel inclined, feel free to buy me a Cornetto and I might tell you (I’m not easily swayed, but ice cream has a massive impact to how easily swayed I am!)

However there’s a question which I’ve been thinking about recently which I’m pretty conflicted about and would love to hear your thoughts on the subject….

Does financial regulation protect the rich and ignore the poor?

Consider this…

Financial Advice, Making an investment, investing in financial products or even spread betting, all usually ‘stuff’ which individuals with greater levels of wealth engage with are all regulated by the financial conduct authority.

Most of us would accept that regulation for these products and services, and even though there are numerous opinions around the specifics, should be controlled to protect the public from shysters.

However if I wanted to get cash fast by using the Wonga app, calling Quick Quid or pop into one of the nearly 1500 payday loan shops which have popped up in our towns and cities in recent years.

Then, with the massively expensive but incredibly convenient cash I’ve acquired popping into the bookies, or using an online casino or at 1am in the morning whilst watching my telly box losing it within a matter of minutes.

So, if I did this what protection would I have under current regulation (including the Gambling Act 2005)?

The simple answer is very little.

Alternatively, If I invested that ten thousand pound (an amount which could be gambled pretty quickly) in an investment the transaction will be regulated by the FCA, there would be a number of actions you could take (including look at compensation via the firm or FOS) and if the individual had gotten advice this would need to be fully  documented and potentially open for challenge in the future

The protection taking this route for the consumer looks pretty good.

I get the argument that says that payday lending is different to taking out a mortgage and gambling is fundamentally different to investing.

I’d agree these facts are true.

However to label payday loans just as a “short term stop gap” and gambling as a “bit of fun” ignores the havoc these industries reek mainly in the pockets of the individuals who can deal with it the least.

Also if you look at the motivation behind both, to attempt to receive more money than originally contributed, the underlying reason for doing both isn’t particularly different.

Although I’m simplifying my argument the base aspiration of a gambler or someone using a payday loan is to get access to more money than they had previously

The base aspiration of an investor is usually the same.

Also whilst both the gambling and financial services environment are regulated the more direct and clearest indication on how these professions are dealt with are shown by the number of staff each respective regulator employs…

The Gambling commission has around 215 staff.

The FCA last year had an estimated workforce of just under 4000.

This is where my quandary lies…

One part of me says that people should do what they want with their money.

This includes banging it mindlessly into a slot with a hope of getting a proportion of it back, watching an ‘tv casino’ channel debit card in hand or using online betting sites.

However part of me thinks that if  ‘investor’ are protected far more than ‘gamblers’ and payday loan ‘customers’ is it fair that the lack of regulation in these areas means that the people who least afford these losses are impacted.

So, I’m interested in your thoughts…

Should regulation be tighter on gambling and payday loans?

Does the answer lie in regulation? or does it lie in an alternative route? if so, what?

Do we regulate to protect the wealthy in the society but not the poorest?

and

If you were prime minister for the day how would you change regulation to ensure that it protected as many as possible?

I’m looking forward to hearing from you.

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11 thoughts on “Politics, Ice Cream and the mystery of inappropriate regulation

  • That sounds like an awfully ” moral ” take on other peoples choices.

    There isn’t a lot of evidence that regulation prevents wrong doing and most often it simply tries to clear up after events have disappeared into the rear view mirror.

    Why not be true to whatever makes you happy and enjoy the wonderful range of ways in which life can be lived by others.

    Human nature isn’t going to change to suit politicians whims whoever they are.

    Reply
    • I’m not taking a moral take on other peoples choices Phil.

      However what I’m trying to wrestle with in my own mind is the disconnect between how we regulate financial services and how we regulate issues which impact the wealth of our society but are not regulated in the same way (is 4000 staff compared to 215 fair and balanced?)

      I agree that more regulation might not be the answer…but what is?

      I agree with your point about happiness (and as I’m a bit strange part of my happiness is asking challenging questions of myself like this!).

      I also agree that many people’s lives are wonderful in a bunch of diverse ways.

      However I’d also suggest that payday loans and gambling has a detrimental impact on many peoples lives and as a society I wonder whether we should ignore it?

      As I said, I am wrestling with these issues myself so I’m not pretending I’ve got all the answers or being moralistic on the subject!

      Thanks for your input on it….as always it’s massively useful.

      Reply
    • You may have grown up in a poor part of Liverpool, Phil, but I suspect your father didn’t gamble away the rent money, the food money and the money borrowed from loan sharks, causing your family to have to cower in silence behind closed curtains whenever there was a knock on the door, then to be evicted and forced to live in a hostel. This is one of the wonderful range of ways in which life can be lived by others. I have heard many such stories, as my church supports a charity, Christians Against Poverty, which helps people get out of debt. The charity does a fantastic job, but has a 6-month waiting list of people who need help. More support for charities like this one, so they can help more people, would probably make more difference than more regulation.

      Reply
      • Hi Charlotte,

        I agree with your sentiment. A lot of the stories you hear about would never be described as “wonderful” and the debt spiral is incredibly tough to get out of (when someone has got to the stage where loan sharks are knocking on the door you know it’s a pretty desperate situation).

        I also applaud the charities which get involved to try and help out. I just wonder whether it’s enough….

        The fact that the charity has a 6 month waiting list is indicative of a broader issue.

        I’m not suggesting that regulation is the answer and charity intervention maybe should play a greater part.

        I’m just wondering whether a charities scope and remit could be wide enough to do the job.

        The reason I wrote this article is I wasn’t sure what the answer is…I’m still not but I’m sure you’d agree it’s a subject worth talking about.

        Reply
      • Hi Charlotte,

        forgot to mention in my last comment. Thanks so much for providing a different perspective.

        It’s massively useful!

        Reply
  • HI Chris,

    I am not a gambler – even on the Grand National – but it does give a lot of people pleasure and I would not like to see the majority restricted for the few who lose control.

    Equally I have no need for payday loans but I well remember their ancestors as I grew up in a very poor part of Liverpool and again although they impact badly on some for many they help bridge gaps. Easy to say they should learn to manage but on some incomes this is a lot easier said than done.

    Reply
    • Hi Phil,

      I only have a punt on the grand national, only a quid and out of tradition more than any desire to win and the odd visit to the greyhounds where I might bet a small amount on each race but I get the excitement and enjoyment of gambling.

      However surely there’s a middle ground where the enjoyment is retained but the problems are identified and dealt with.

      What is it? Your guess is as good as mine…

      I get where you’re coming from on Payday Loans Phil. I wouldn’t be surprised if your part of Liverpool was relatively similar to my part of East London.

      We also went through times, especially when my dad was on strike from the dock, we had to rob Peter to pay Paul.

      However we avoided the spiral of debt many payday loan ‘customers’ get into…so whilst these loans might be necessary to solve an immediate problem when you’re in ‘the spiral’ the problem is than made worse by the perceived solution.

      As I said I’m not sure what the answer is (more education, more regulation, as Charlotte discussed more charity)

      However I don’t know how I feel with the suggestion that payday loan dependency and gambling addiction are just prices we have to pay when regulation is so tight when individuals need to invest doesn’t sit with me particularly well.

      Thanks again for your comment Phil. Much appreciated.

      Reply
  • Leaving aside payday loans for the moment, investing via an IFA is regulated. As an IFA I am morally bound to act in my client’s best interest. However, if the client invests directly then there is some similarity to gambling – with about the same level of protection! There are no intermediaries advising clients where to gamble and if there were they would have to be regulated because the world is like that now. A client is entitled to rely on the advice from a professional IFA whereas to gamble is a personal choice involving enjoyment and hope (I don’t gamble so I assume this is true!)

    Payday loans are another thing. Some people rely on them to get by or to bridge a gap for the unexpected outgoing. Whilst the rates are ridiculous, the lender is taking a risk. Payday loans give a lifeline to the less well off – but this should not give the lender the chance to exploit someone.

    It is a sort of “chicken and egg” problem I guess. Payday lenders would argue that they offer a service (and a profitable one) but at the same time they fuel desire and easy access to money.

    Our regulator controls us, but has little to say on what we charge our clients (and some IFAs make payday loans look cheap!). Presumably, your argument is that paydays loans are expensive rather than totally immoral?

    I think people have the same problems, just with different numbers of noughts on the figures. Most of my clients are wealthy and protected by my regulator from my advice or mistakes. They choose to take my advice because they think they will be better off by doing so!

    Finally, gambling, drinking, smoking and seeking financial advice are choices. People who need a payday loan probably don’t have that choice.

    Reply
    • Thanks Ken,

      You raise some interesting points…

      Let’s start with the easy one – payday loans.

      I’m all for businesses making a profit for bringing a much needed service to the market.

      I believe it drives everything a modern democratic capitalist society does.

      Where I think the line is crossed and things are morally murky is where firms in any profession or sector move from profiting to profiteering.

      Where’s the line. I don’t know. I think it’s currently grey.

      But I’d suggest that popping up on the telly and talking about “money in 15 minutes” and relying on our basest desires without giving much credence to the risks knowing that thousands will use their service and hundreds will get in trouble could mean that they are crossing it.

      I agree that it is a “Chicken and Egg” situation. Would these firms exist if there wasn’t a market demand? probably not! However it does it make what they do ethical? I’m not so sure.

      My other point is that even if there’s a market demand for a lot of stuff but that doesn’t mean that there’s a demand we should supply it!

      I agree that gambling is a choice, and one should be given. However if I can spend thousands of pounds with just one click surely the potential damage to my wealth needs to be considered.

      I’d never advocate heavily regulating any industry however we also shouldn’t ignore the challenge of the people who get into trouble with both loans and gambling.

      How do we do this best…I truly haven’t got a clue (hence this blog)

      Thanks so much for your comment….I’m glad you took your time to provide such an intelligent perspective.

      Reply
  • Hi Charlotte,

    I did – no may have about it -grow up in a very poor part of Liverpool and I have clear memories of many dreadful social ills and of a few good people helping out wherever possible.

    Regulation would have no impact whatsoever on these problems as they simply come from human nature and no doubt will always be with us in one form or another.

    Ordinary people are still immeasurably better off than when the only option was the workhouse or similar.

    And just as an aside I really do remember cowering behind the door pretending we were all out when someone was calling for money we just didn’t have to give.

    All a long time ago but still fresh in my memory.

    Reply
    • Hi Phil,

      I’m with you on your final point. In general most of us are far better off than previous generations.

      However let’s be under no illusions that there are still people in today’s society who still cower behind the door when someone knocks behind the door or ignores the letters until the bailiff comes knocking.

      I think Charlotte’s got a really valid point about charity and how it might be able to help. I’m just not convinced it solves the issue.

      To be completely frank, and the more I think about it, I’m not sure it’s even possible to solve the issue of debt dependence and gambling addiction entirely.

      However whether it’s via charity, regulation, education or a combination of these things surely it’s worth a try?

      Reply

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