Prime Minister David Cameron, Deputy PM Nick Clegg and Chancellor George Osborne have been challenged on financial discrimination by crowdfunding groups who say the FCA’s unthinking rush to regulate threatens the burgeoning growth of an innovative multi-billion pound industry and the integrity of the UK.Barry James, director of The Social Foundation and founder of UK Crowdfunding Day has warned the government the proposed regulations are a significant threat to jobs, opportunity and financial equality, and has called on them to set aside the FCA’s faulty consultation into proposed regulation of the crowdfunding industry in favour of a more open one.
His views echo those of Andy Haldane, director for financial stability at the Bank of England, who has repeatedly insisted that this re-laying of the financial landscape should be nurtured and given time. Time to gain real experience and to collect proper evidence.
In an Open Letter to the government, Barry James says: “The current, rushed, consultation should be set aside and a new one begun in the New Year – this time to include the people and communities most affected and liable to be excluded – not to mention the entrepreneurs that you and this government are depending upon to power our economy in the years to come.
“We believe that your answer to this question – how you handle this issue – is crucial for us all, the whole UK.”
A copy of the Open Letter is below.
Please do get in touch if you’d like to discuss the letter or need further information.
Director, Collaboration and Communication
The Crowdfunding Centre
Financial Discrimination: A Tale of Two Countries?
Mind The, Widening, Gap
This is an open letter on behalf of the entire UK and from the other country you govern – sometimes called ‘the provinces’. All those places beyond the M25 and the London bubble who are not currently considering UDI.
Some of us are genuinely unsure whether you’re aware of this or not but this may as well be a different country. We certainly have a different economy. The one you live in, and are cushioned by, has little austerity and no recession. So much so it’s able to overwhelm the figures for the rest of the UK and put us, taken together, in positive territory. With our head in the oven of a southern property boom and our feet in the freezers of the food banks, on average things are pretty balmy.
It can hardly have escaped your attention that it’s in this other country that the vast majority of the nine million families suffering a debt crisis of their own are living – including more than 40% of the populations of Hull, Liverpool and Nottingham. Meanwhile the banks continue to graze on the whole herd and the energy companies show signs of joining them. (The exception being RBS and others which, if the Tomlinson report turns out to be even half true, have moved up a notch or two to predating on their own crowd – consuming their consumers. Shouldn’t there be a law against that?).
But we write principally about a new threat. It’s a threat to jobs, to opportunity and to equality – not exclusively but principally to those in this other country who need change, and opportunity, more than anyone. A threat to snuff out hope and re-establish social and economic exclusion. A threat to the possibility – identified by both Lord Young and Andrew Tyrie’s Banking Standards committee – of the possibility of creating alternatives serving the crowd rather than farming or predating on us.
The FCA want ‘business as usual’ – to exclude ordinary people. Financial exclusion so stark it’s tantamount to discrimination. Their consultation on equity crowdfunding, now nearing its conclusion, explicitly allows anyone to participate – provided they’re already in the in-crowd who run a portfolio (and as long as they don’t do more than dabble a bit – 10%). This is doublespeak at its best and most refined. Some are more equal than others.
It also completely and – as far as one can tell, wilfully – misses the point. This being that crowdfunding – at its root, which this would uproot – is about communities coming together to empower their entrepreneurs to get something worthwhile done. Rather than waiting for the state or the corporate sector to – as a by-product – fulfil their needs. The biggest need most often being for a decent job – or any job.
It’s often been noted that crowdfunding has the potential to remove the gatekeepers and democratise finance. It’s now clear that it can also democratise job creation – allowing people throughout the UK to create their own jobs as an alternative to employment, poverty – or both, given the quality of the job supply in ‘the provinces’. Crowdfunding allows people to come together to help create real, sustainable, jobs in their communities. Without government subsidies or a cost to the taxpayer.
We’re certain that this will be the subject of much debate in the months to come – and of policies in the manifestos of all three parties. But for this change – or lack of it – the time is now.
Having looked at the proposals and the emerging evidence available on this new phenomenon in great detail (both ourselves, with our own experts, help from the authors of the recent World Bank Report on this subject and comment from the nascent industry body UKCFA) there are no challenges which cannot easily be met without any need for re-enforcing such crippling and needless exclusion.
The FCA like the SEC prefer to re-assert the status quo – to meet innovation with a brick wall across the road to a better economy. Is that their decision and their role – when the consequences are so clear?
So far any real consultation has been limited to back-room closed-door sessions involving only those most interested in attracting city, institutional, money. This consultation has, at their behest, been tacked on late to another on peer-to-peer finance, several more years in the making.
As Andy Haldane, director for financial stability at the Bank of England has repeatedly said this re-laying of the financial landscape should be nurtured and given time. Time to gain real experience and to collect proper evidence. Not a rush-to-regulate for the convenience and tidy-minds of those at the FCA and in the city.
The current, rushed, consultation must be set aside and a new one begun in the New Year – this time to include all the people and communities most affected and liable to be excluded – not to mention the entrepreneurs that you and this government are depending upon to power our economy in the years to come.
We believe that your answer to this question – how you handle this issue – is crucial for us all, the whole UK. Not just because of its effect on innovation, opportunity and economic exclusion – not to mention jobs. But because it will be a telling tale – not of two cities but of what starts to look like two countries. Having the best of times and the worst of times – and whether this government can bring us together to share them together as one, United Kingdom.
Barry E James
For and on Behalf of The Social Foundation