Regulatory bunfight ends at treasury door

Buying a house and taking out a mortgage, the government is fond of telling us, is the single biggest financial transaction that most people undertake. It is on this principle that the government is taking an increasingly activist role.

During recent weeks there has been the announcement of costs, access and charges - or CAT - standards by the treasury and new devices to make house buying easier from the department of the environment; today trade secretary Stephen Byers is to hold a DTI summit with mortgage lenders to discuss mis-sold mortgage products.

This sudden activity bears the hall marks of departments manoeuvring themselves into position in order to become the leading regulator in the home loan market place.

That there is a need for regulation of mortgage selling is obvious: there can be no justification for the proper regulation of insurance products accompanying mortgage deals while the loans themselves remain unfettered.

This has been fully recognised by the Council of Mortgage Lenders, which represents the quoted mortgage banks such as the Halifax and the bigger mutuals, such as the Nationwide.

But why Stephen Byers and the DTI? Until now it has been broadly accepted that the main supervisor of mortgage lending is the treasury and, one step-removed, the financial services authority headed by Howard Davies.

It was the treasury which outlined the conditions for CAT-marked mortgages earlier his month, with the emphasis on giving approval to products with fair charges, adjusted on a daily or monthly basis, easy access and terms which do not involve heavy redemption penalties.

The FSA has within its orbit the suc cessor to the building societies commission - and it was Patricia Hewitt, who as financial secretary to the treasury, appeared to set mortgages on the road to formal regulation.

The need is manifest to outlaw unfair practices such as NatWest's "incomprehensible" mortgage penalty calculation.

Now the department of trade appears to be determined to get in on the act.

Its device for leverage is the historic consumer credit act and its team of enforcers, the weights and measures inspectorate, which is more used to checking the electronic mechanisms in scales than the intricacies of floating rate and low start mortgages and the plethora of insurance tie-ins and pay-back options.

By all accounts, however, Mr Byers is moving into the political vacuum. Having delivered the CAT standards, the treasury appears to be backing away from formal mortgage regulation.

This could be a matter of expediency. The FSA has enough on its plate trying to make the concept of super-regulator work without taking on extra responsibilities. But it is the right organisation to regulate complex financial products: it has the expertise, the licensing authority and the culture. The treasury should get on with the job.

Stale air tale



Running Great Universal Stores has been curiously complicated for Lord (David) Wolfson, the third member of his family to head the group. He has found that turning the tanker around is a far tougher manoeuvre than rebuilding the Next business after it nearly went bust during John Major's recession.

At first it looked as if Lord Wolfson would bring a breath of fresh air to the enterprise. He untangled a share structure designed to keep the family in charge and introduced shareholder democracy. He had the courage to abandon the GUS mantra that profits had risen in every year since the Wolfsons took control in 1932. He expanded the reach of credit information business Experian, regarded as the jewel in the GUS crown, and bought Argos.

Now he has taken a further step in modernising the governance of the company by plucking Experian chief John Peace from obscurity and making him the group's first chief executive, stepping back as chairman himself.

The difficulty for GUS is that while it has been spending on acquisitions the core business, UK Mail Order, has been sliding fast. It, like much of the retail sector - visible in WH Smith's results - is suffering the consequences of high street price cuts and e-commerce.

Adjusting the prices in a huge catalogue is an enormous task; on the internet it is as simple a keystroke, as Argos has found.

Uncertainty about the mail order business has been the crucial factor behind the slide in GUS's share price, which has fallen 27% in the last year and touched its lowest for six years earlier this month.

But is it really as hopeless as broker Charterhouse Securities recently suggested? Almost certainly not. If the new chief executive does press ahead with the widely touted demerger of Experian, between £3bn and £4bn will be unlocked from a company which has enormous e-commerce credentials.

Then there is Burberry. It has underperformed since Lord Wolfson took it over, brought in the new designers and attempted to update its image. Burberry remains one of those enduring upmarket brands and could be another demerger opportunity.

Finally there is Argos. Broadly, it has been a disappointment since GUS took over and the price paid in a hostile environment has made Lord Wolfson perpetually grumpy.

But there is some evidence that it is turning around. The website is going great guns, the new catalogue produces a few synergies between Argos and other businesses in the group by adding clothes, and sales are improving after a drop in like for like figures of 3% during the first half.

Moreover GUS is one of those established businesses that does offer an e-commerce opportunity. It is already providing the delivery systems for competitor retailers. It is developing a successful site at Argos, and has the credit checking skills at Experian. Perhaps the new chief will put this message across more effectively than Lord Wolfson.