A breeding ground for cons

Here's the least-astonishing news of the week insurance against identity theft is a complete waste of money. The only surprise is that it's taken this long for regulators to get around to dealing with it.

In November 2007, I wrote a column saying you should save your pennies, as your bank would cover you for any losses. I was rewarded with a rather aggressive email from a claims company, arguing that the piece was irresponsible. (This is how, as a journalist, you know when you're right about something the more defensive the reaction, the less defensible the product.)

I responded by asking them to send me the data on how many ID theft claims were made and actually led to a payout. They must have lost the email, because they never replied. In any case, if you've been mis-sold this insurance, we look at how to get your money back here.

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The news won't do the battered reputations of the banks any good. But there's another lesson from all this, and it's one that bank bosses and staff should pay close attention to. You may not remember, but around about the time ID theft protection was being mis-sold over bank counters across the UK, the then-Labour government was also aggressively mis-selling a national ID card scheme to British voters.

Tony Blair himself wrote an article in The Daily Telegraph in November 2006, which included the statistic that ID fraud cost the UK £1.7bn a year a figure heavily over-exaggerated by a Home Office desperate to make the case for the cards. In short, the government helped create an environment of paranoia in which it was easy to sell a product no one needed it would almost have been remiss not to.

But do you think any civil servants will be fined over this? Or that any of the then-cabinet ministers who were promoting this scheme will be censured? Of course not. It's hardly the first time the political backdrop has created a hot little petri dish in which to breed bad business practices.

The current low-interest-rate environment created by central bankers and applauded by politicians has contributed to soaring demand for all sorts of investments of dubious suitability, from complex structured products to outright boiler-room garbage promoting green' investments in far-away lands. And, of course, to the biggest, most damaging bubble of them all the property bubble.

The government and the Bank of England's determined refusal to acknowledge signs of irrational exuberance returning to the UK property market in the form of low-deposit, interest-only mortgages, for example will only last for as long as times are good. When things go wrong, the Bank will wash its hands of responsibility, just as it did after 2008.

So my message to bank chief executives, sales clerks and middle managers is this: as you're coming up with great ideas to exploit the Help-to-Buy scheme and any other policies the government introduces to ramp house prices higher, ask yourself, when the crash inevitably comes, who's going to be the fall guy? Because if it isn't Mark Carney (it's not), and it isn't George Osborne (it won't be him either), then it might just be you.

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