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The UK Treasury has launched a review of the Financial Ombudsman Service to tackle concerns that it behaves like a “quasi-regulator”, as part of a wide-ranging plan to cut the burden of red tape on business unveiled on Monday.
The review by City minister Emma Reynolds underlines how the usually low-key body, which deals with consumer complaints against the financial sector, has been thrust into the limelight because of its role in the multibillion pound car finance scandal.
The Treasury said the review of the ombudsman was “expected to conclude by the summer and the government stands ready to legislate in order to ensure that we have a dispute resolution system in the UK which is fit for a modern economy”.
Reynolds would examine concerns about whether the FOS is “acting, at times, as a quasi-regulator” by “applying today’s standards to actions that have taken place in the past”, the finance ministry said.
The review would also scrutinise “practices that have grown up over time on compensation”, it added. The FOS did not immediately respond to a request for comment.
The move is part of a wider “radical action plan” to curb regulation and boost economic growth. It follows the government’s decisions to axe the UK payments watchdog last week and to oust the chair of the competition regulator in January.
Chancellor Rachel Reeves — who summoned leading watchdogs to Downing Street on Monday — has called on ministers to suggest more of the 130 or so regulators that could be scrapped and promised to speed up bureaucratic processes and cut 25 per cent of the estimated £70bn in annual administrative costs from regulation.
The FOS is unlikely to be abolished. But finance bosses have called for its powers to investigate unresolved consumer complaints and award compensation from companies to be curbed.
Scrutiny of the body has intensified owing to its recent rulings in favour of UK consumers complaining about alleged mis-selling of car finance. It is expected to become one of the country’s biggest financial scandals, costing lenders as much as £44bn in redress.
The Financial Conduct Authority, the main financial regulator, is already carrying out a review of the redress system with the FOS, adding to the sense of turmoil at the ombudsman after its chief executive abruptly resigned last month and its chair said she would leave in August.
As part of the wider action plan, the government said it would strengthen efforts to overhaul environmental guidance for planners as it seeks to prevent delays to infrastructure schemes.
The government said a single “lead environmental regulator” would be appointed for all major projects to make decisions on behalf of multiple bodies.
The new model, designed to reduce layers of regulation and create a single “front door” for big schemes, would be initially tested with projects including the Lower Thames Crossing in east London.
More than £1.2bn has so far been spent on the crossing even though construction has not started on the £10bn road tunnel project, in a sign of the costs of the UK’s sclerotic planning system.
The government will also consult on exempting the need for environmental permits from certain “low-risk activities”.
Ministers will open a consultation within weeks to assess the impact of removing some statutory consultees for projects, while making clear that councils need to consult these organisations only “where really necessary”.
Natural England, a government agency, will revise its standing advice to local planning authorities on dealing with bats after fierce criticism of the £100mn-plus construction of a “bat tunnel” by High Speed 2 to protect the flying mammals from fast trains.
Other areas earmarked for streamlining include the delivery of large water projects, such as the Abingdon Reservoir near Oxford and the Fens Reservoir near Cambridge.
Ministers have made the revival of the Oxford-Cambridge Arc central to their economic growth mission, but concerns over water shortages have led to delays in developments by the Environment Agency, the pollution watchdog in England.
The Treasury said a change in approach using the model that delivered the Thames Tideway project, which led some licence and environmental requirements to be eased, would allow “major water projects to be delivered more quickly and with better value”.
In other areas, the government pledged to reduce the cost of regulation for business, including the environment department reducing the fees of registering chemicals on the UK Reach safety database.
The database was introduced after Brexit when the UK was no longer able to participate in the EU Reach scheme, which enabled companies to pay for a single registration for chemicals to be used across 27 EU markets.
More than 90 per cent of companies would benefit from savings of “an estimated £40mn in total over the next six years”, the government said, a fraction of the original £2bn estimated cost of creating UK Reach.
