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December 15, 2009updated 12 Apr 2017 11:57am

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Hundreds of years ago, we were subjects of a hereditary monarch in whose name lots of things were done, of which we probably would not have approved if we had known about them but we had no right to know so it was not our problem

By Peter Cooke

Do you remember those pleasant days, now steeped in history, when we could do almost  anything we wanted to as long as we did not commit murder or frighten the horses? Peter Cooke looks at the ways governance is changing how people do business

Hundreds of years ago, we were subjects of a hereditary monarch in whose name lots of things were done, of which we probably would not have approved if we had known about them – but we had no right to know so it was not our problem. To keep them in line, once in a while we chopped off a monarch’s head or expelled him; nothing too serious in the scheme of things.

However, that imagined universal liberty of doing pretty well what we liked has been taken away in the pursuit of good governance. No longer do we have obligations, we have rights – but to protect those rights we have to conform.

Government is really obsessed with our rights and their protection so they are trying to re-engineer society and protect us by making us conform.

For example, we didn’t need a referendum over the Lisbon Treaty in case we made the wrong decision. To protect our rights and good governance we have to complete lots of forms and have lots of checks to be sure we are alright.

We need to fill in forms and have checks before we light a bonfire. After all, Guy Fawkes didn’t have the right paperwork and look where it got him. To be good citizens we must be approved, licensed, checked, granted permission by the state – but it is to protect us from ourselves.

But we should be happy to have pieces of paper – eventually we will all be on a great big government computer so we will not have to tick boxes because the computer will know what we are allowed to do.

Some people might say the financial services industry has moved forward to embrace this exciting idea of liberty. To protect us from our greed it won’t grant us credit any more.

Creditworthiness and protecting our shareholders (you, through your taxes) and eventually allowing those institutions to pay dividends to their shareholders (your pension funds, so they can pay your pension if you can make the necessary age) is all part of protecting your rights as a citizen.

Where does motor finance fit in?

Do we as an industry blindly conform to these current norms – or do we try to break out of the braces, think outside the box, and offer state-of-the-thought ideas and concepts to move the industry forward?

Wearing our hats as individual organisations, as OEM captive finance houses, as retail banks, as finance houses or as dealers, just how much effort do we devote to putting together not only attractive finance packages – to us – but also interesting deals which are accessible to every user who can satisfy our new lending criteria and fulfil their debt obligations?

Or do we follow conventional wisdom and play it safe?

Pre-credit crunch, so much cheap credit was made available that many felt it impolite to refuse, and almost mandatory to take up such generous offers; as a result, the credit crunch has forced the finance industries towards an environment similar to the loss of freedom highlighted previously.

The challenge now is a simple one. How might the motor finance industry be rescued from the wider credit desert to get the industry up and moving again – and almost coincidentally rescue the motor trade?

Far more knowledgeable analysts than the present writer have examined the deeper reasons for the credit crunch and have written extensively about it. However, the real challenge is how to rescue the finance industry.

Government, through its squadrons of regulators, would appear to have introduced a range of protocols and procedures and best practices as well as simple frighteners to regulate, and, some would claim, over-regulate lending. At the same time, prudent lending is to be encouraged, we are told. Which is right – and what is the balance?

While management is judgement of shades of grey, as the saying goes, as a finance industry is one in a situation akin to the ‘personal liberty’ described earlier in this essay? Everything is there to protect us, but are we being overprotected from ourselves?

While balance sheets certainly have to be rebuilt for future business prudence, are we reaching a situation where prudence could take one out of the very markets we created and leave a great big vacuum for new competitors like, for example, Chinese and Indian credit providers to fill?

The car parc is ageing; scrappage may have been politically astute short-term but is not a sustainable business decision.

Given an improving economy, is the motor finance industry really doing sufficient to rebuild and recover sustainably – or has it become so protective, in practice or perception, that it almost needs permission to be here?

Is this another case of giving away our civil liberties in the name of good citizenship?

Happy New Year.

Professor Peter NC Cooke, KPMG Professor of Automotive Management, University of Buckingham

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