Parliamentary Connections

There now seems very little chance of a General Election taking place in 2008 such has been the huge shift in the political landscape over the last few months.
Gordon Brown's premiership is, at the very least, in dangerous waters even if it hasn't quite hit the rocks yet. Crisis after crisis has battered him since taking over from Tony Blair, leaving the public with the feeling that this is a government lacking the competence to manage the country. That gnaws away at public support and, unless Mr Brown can counter that soon, his government could be doomed.
The parallels with when Labour last changed leader while in government are becoming more numerous by the day. Thirty years ago, Harold Wilson stood down and was succeeded by Jim Callaghan. The Tories had a new leader in Margaret Thatcher, slowly finding her feet after succeeding the defeated Ted Heath. As for the Liberals, they were forced to replace their leader, Jeremy Thorpe when he became embroilled in allegations of bribery, homosexuality and attempted murder. He was succeeded by David Steel who, like the recently elected Nick Clegg came from the right of his party.
Three new leaders, economic crisis, government not in control of events, delayed General Election – the parallels are there. When the election did eventually come in 1979 Labour was swept from power for 18 long years. One significant difference is that in 1977-79 Labour had to hang on in Parliament by its fingertips, eventually relying on a pact with the Liberals to secure majorities in key votes. This time. it has the cushion of a comfortable majority so shouldn't be forced to the country because it loses a vote of confidence in Parliament as happened thirty years ago.
Labour may have a mountain to climb to recover over the next 18 months but we should all remember that they are still the government and could still be the government after the next General Election. The financial services sector musn't make the mistake of thinking that change is just around the corner and therefore spend all its time getting close to the Tories: they need to be taken seriously and this is a good time to influence their policy formation but they are not making any decisions. We probably have two budgets and one hell of alot of legislation to go before the election and any prospect of a change in government.

The first tentative steps in the government's long trek to recover its credibility were announced this morning when the Chancellor, the beleaguered Alistair Darling, announced plans about plans for tackling the next banking crisis. The trouble is they haven't solved the last one yet.
Northern Rock still looks like one huge financial black hole with billions of public money being poured into it but no plan in place to recover it. The attempts to engineer a private sector sale seem to be running into the sand because of opposition from shareholders. It still looks to me as if the only sensible option is to nationalise it, strip it down to its components and then sell off those that are viable, using the proceeds to repay the huge sums that have been required to prop up this lame duck.
Why the reluctance to do this? Shareholder power seems the common excuse. But are these the most important people? I would argue no. First and foremost are the savers whose money is with the bank and these, at least, now look safe. Then, there is a careful juggling act between the needs to look after the staff and repay the loans. Only after that should shareholders get a look in.
Is this harsh? Investing in the stockmarket is a risky investment with potentially high rewards - but investors have no right to expect all the upside and then be sheltered from the downside. Northern Rock shares were a hot buy a year ago as its "too good to be true" story seduced people, many of whom should have known better.
It will be interesting to see the detail of the government's plans when they come out next month but unless they stop pussyfooting around the problem of what to do about shareholders they won't solve the current crisis let alone create a viable plan for dealing with the next one.

The need for the insurance industry to be constantly vigilant on the fall out from last summer's floods was amply demonstrated in the House of Commons on Monday evening when the MP for Tewkesbury, Laurence Robertson, held an adjournment debate on the continuing problems and outstanding issues.
His main focus was the need to plan for the future with better flood defences and co-ordination among the various authorities with responsibilities in this area but he also reminded MPs and ministers that there are several hundred households still not back in their homes. While he was mild in his criticism of the insurance industry for this, it was clearly on his radar screen. He also raised concerns about the cost and availability of insurance in the future.
The industry has done remarkably well on all fronts since last summer's floods. On the ground, its response has won widespread praise and in the corridors of power it is winning the arguments about higher spending on flood defences and better co-ordination. It has also obviously done a very good job in keeping people well informed about progress on repairs and managing their expectations as there has been very little criticism of the industry from the estimated 1250 households in Gloucestershire alone who are not fully back in their homes.
The message to the industry - especially the Association of British Insurers - has to be keep it up, don't ever think this is last year's issue because MPs with constituents still living in caravans certainly won't.

The report from the All Party Parliamentary Group on Insurance & Financial Services on the future of the Financial Ombudsman Service makes several interesting recommendations. It comes out with some clear recommendations on the binding limit and the need for a much clearer appeals process. It is worth reading.
Having sat through the presentations from the Ombudsman, industry and consumer representatives, I can vouch for it being a very even-handed review. There is something in it for everyone and somethings that will not be to their liking as well.
For instance, the Ombudsman will not be happy about the suggestion that an independent appeals process should be introduced as it has opposed this in the past. Industry representatives pressed for a refundable fee to be introduced but this was rejected.
Most of the recommendations now go to the Hunt Review and it will be up to Lord Hunt to sift through the many differing views he will receive. Some of the group's recommendations about banking regulation and law, however, fall way outside the scope of the FOS review and will be taken up separately with the Financial Services Authority and the Law Commission. These may prove the more controversial in the long run.

It seems that the All Party Group's report on the Financial Ombudsman Service has caused abit of a stir.
Saturday's Money Box on Radio 4 featured a debate between Chris Cummings of the Association of Independent Financial Advisers and the group's chairman, John Greenway.
AIFA's response to the Hunt Review included a call for a fee to be levied on consumers to deter vexatious and frivolous complaints and, when pressed by Paul Lewis on the programme, Chris Cummings put a figure of £400 on the sort of fee that should be applied. This is substantially higher than any of the organisations that came to the group to put this point suggested and I think further underlines that the group was right to reject the idea, saying "The group is not in favour of introducing fees whereby the consumer pays to get access to FOS (even where such fee is refunded where a case is upheld), as it is felt that this might deter some consumers with genuine grievances. The group understands the industry’s concerns about mischievous complaints but considers the danger that even one genuine complaint might not be submitted because of the imposition of a fee to be too much of a risk".
John Greenway also warned that imposing a fee – even a refundable one – would risk driving complainants into the hands of ambulance chasing lawyers and even direct to the courts, all of which would be far more damaging to the small advisers AIFA is trying to protect.
As Mr Greenway pointed out, the Hunt Review is meant to be about improving accessibility of the Financial Ombudsman Service and talk of fees is hardly going to achieve that.