The Daily Telegraph - Saturday - Money
Personal Account
We are not asking the City watchdog to prevent every scam, but the least it could do is not make the same obvious mistake twice
It is unfair for consumers to expect that all financial crime is prevented by the authorities. It is a sad fact but criminal masterminds will always be one step ahead of regulators, finding new ways to break, bend and manipulate the rules for their own gain. This is true of financial crime and any other.
The one thing we should expect is for law enforcers, even while playing their everlasting game of catch-up, to not make the same mistake twice. That is what is so jarring about the ineptitude shown by the City watchdog as reported on page one. The Financial Conduct Authority, then led by current Bank of England Governor Andrew Bailey, was handed information on a platter that could have saved innocent investors from financial ruin.
The Blackmore case, and how easily it could have been avoided, is evidence that the regulator’s processes are not fit for purpose. Numerous emails were sent to the FCA flagging Blackmore’s issue two years before its inevitable collapse. It then failed to act after savers suffered at the hands of London Capital & Finance.
The Blackmore case had so many similarities to the LCF scandal that, really, the FCA should have been on the front foot without even being handed pertinent information by whistleblowers.
Mr Bailey himself has questions to answer. He was contacted directly, as was his man in charge of preventing such scandals, Mark Steward, the latter even saying the Blackmore case would be looked into, only for the firm to later collapse, costing investors a combined £47m.
Of course, the FCA cannot stop everything and protect everyone. Holding it to this standard would be unfair. But it needs to hold up its hands when it is crystal clear it got something wrong. Its inability to protect investors in LCF has been flagged and investigated, culminating in a damning report by former judge Dame Elizabeth Gloster. This found repeated issues at the FCA and failure to act on clear signs and signals of a brewing scandal that would lead to more than £300m in lost savings. Mr Bailey has told MPs that he took respsonsibility for what happened at the FCA. But Dame Gloster wrote in the report that Mr Bailey had tried to have his name removed. He has denied this, but MPs were this week still demanding the he clarify remarks on the matter.
The regulator had everything it needed when it came to stopping the Blackmore scandal: knowledge, experience and forewarning. The fact that it failed is down to its own inadequacies.
The FCA has claimed that, as Blackmore was not regulated, it falls outside its remit. But this is a misnomer as the watchdog has the power to intervene wherever it sees consumers at risk of financial harm.
MPs of all stripes are calling for an independent investigation into the FCA’s handling of Blackmore, and we at Telegraph Money of course support this. It is imperative to ensure the watchdog cannot simply make the same mistakes repeatedly and be let off the hook.
FCA rules mean senior managers in finance firms are responsible for the actions of an organisation. It’s about time the regulator applied that to itself.
The regulator had everything it needed when it came to stopping the Blackmore scandal
Ayear on from the first lockdown, half of all freelancers plan to quit self-employment for good, Telegraph Money can reveal. And the introduction of new tax policies next month will be the final nail in the coffin of many people’s dream of being their own boss, a trade body has warned.
A quarter of those planning to quit will seek work abroad, and a sixth intend to return to the security of fulltime employment, according to research from the freelance trade body IPSE. It found more than one in 10 had plans to stop working altogether, while 11pc said they would retire within the year, or were considering all options.
Hundreds of thousands have already given up since the pandemic started. The number of self-employed workers has dropped to fewer than 4.3 million from more than five million a year ago, reversing a decade-long upward trend.
It threatens to do enormous damage to the £300bn that freelancers were thought to contribute to the economy every year before the crisis. It also puts more strain on traditional family units, many of whom balance working for themselves with bringing up children.
Andrew Chamberlain of IPSE said the downward spiral was depressing but unsurprising given the devastating effect the pandemic had had on the livelihoods of many self-employed people, who now face incoming “IR35” tax rule changes that are already putting further pressure on incomes.
“The pandemic has done disproportionate financial damage to the self-employed sector: after this, it simply cannot take the added hit of the changes to IR35,” he said.
Freelancers’ average earnings are still 30pc lower than they were before the crisis. Self- employed people were five times more likely to report being out of work at the end of last year, compared with employees. They were also more likely to borrow in excess of £1,000 to get by, according to the Office for National Statistics.
Polling showed the pandemic was the main driver of hardship, but new tax rules that make companies liable for assessing the tax status of contractors for the first time, effective from April, are also to blame.
The rules are designed to stop “disguised remuneration”, where temporary contractors end up working at the same firm for years and pay less tax than an employee. The change has already distorted behaviour.
Close to one in 10 contractors have reported having contracts cancelled, as businesses do not want to deal with
‘I love the freedom of being my own boss, but it has become too much hassle’
the new regime, IPSE found. Many have been told they can only get work if they become de facto payroll employees, which means taking a pay cut and paying more taxes, while still not benefiting from the rights employees enjoy, such as sick pay or company pension schemes.
Dawn Morton-Young, 41, from Hertfordshire, was forced back into employment last year, after the firms she usually worked with said they would not be taking on freelancers anymore.
She became self- employed to have more control over childcare for her daughter, after a divorce. There are around 600,000 self-employed mothers in Britain, most of whom work part-time. She said she wanted to keep her HR business alive, but her plan to hire two young helpers via the Government’s Kickstart scheme was on hold as the economic recovery remained uncertain.
Liz Pusey, 37, from Hampshire, went self- employed two years ago, also for childcare reasons, but was forced back into employment last year after a contract was cancelled halfway through.
“In March, my income fell off a cliff and I was forced to pay off around £ 6,000 in tax debts with my credit card,” she said.
Alistair MacQueen, 41, from London, is looking for a full-time job after 15 years of being his own boss. The selfemployed writer and editor said he had burnt through his savings, “was massively overdrawn” and only got work in dribs and drabs to cover his bills. “I love the freedom of being my own boss, but it has become too much hassle,” he said.
He was one of the 1.6 million freelancers ineligible for state support during the crisis – such as those new to selfemployment, company directors, those
who earned more from employed work in recent years and people with average annual profits of more than £50,000.
Charlie Bladon, 49, a company director from Dorset, was another. He became a coronavirus tester, and worked for the Post Office over Christmas, to pay the bills, after the pandemic forced him to mothball his European cycling holiday business.
There could be more pain to come, as Chancellor Rishi Sunak has hinted at bigger tax bills for freelancers. The Treasury is due to publish a host of tax consultations on March 23.