Parliamentary Connections

For the first time in a decade there is a realistic prospect of a change of government at the next General Election, now certain to be in the first half of 2010. Regardless of one's personal political persuasion, this has to be good for the country as governments without a serious opposition tend to become arrogant and detached. This is almost always the inevitable fate of governments and Prime Ministers who win three elections in a row: it has happened to Tony Blair and Labour, just as it happened to Margaret Thatcher and the Tories 20 years earlier. Blair went according to his own timetable while Thatcher had to be forced out. The aftermath was remarkably similar, however: Chancellor succeeds to premiership, party suffers divisions and gets caned in the local elections. Then what?
The City, of course, is excited by the prospect of a Conservative government and suddenly Conservative spokesmen are in demand and speaking to large and engaged audiences in the financial services sector. They don't appear to have much of substance to say but they are being listened to and taken seriously. But are you really listening to the next cabinet or will we still have a Labour government well into the next decade?
John Major was in the same position as Gordon Brown in 1990 and 1991 but by the middle of 1992 he was able to fashion a General Election victory in the last ten days of a campaign that had previously looked to have only one winner, and it wasn't the Tories. This proves nothing beyond the huge uncertainty and unpredictability of politics but it should serve as a cautionary reminder to City firms, financial institutions and their lobbyists not to get too excited about the prospect of having their 'friends' in government and certainly not to the extent of forgetting to engage with the current ministers. Labour will be running the country for another two years which is a very, very long time in politics.

The government has declared its legislative hand for the next session months ahead of the usual autumn Queen's Speech. Largely dismissed by commentators as a gimmick to cover up the electoral disasters swirling about its head, the programme has plenty of potential interest for the financial services sector.
Most eyes instantly alighted on the Banking Reform Bill which will attempt to clear up the huge regulatory confusion and scope for buck-passing that dominated the early weeks of the Northern Rock collapse. It will also, controversially, try to put into law the enhanced compensation arrangements for bank customers should another bank go under. These were racked up to 100% for deposits up to £35,000 last October to stop the run on Northern Rock but like most panic measures they are devoid of logic and consistency. There is no reason why bank deposits should be a special case for enhanced compensation: they are no more or less important to people than their pensions, life assurance and other forms of saving. If the banks want special arrangements, they should fund them themselves, something they have been reluctant to do, expecting the public purse to bail out commercial incompetence in their sector. Plenty of rows ahead on that one.
The insurance industry was predictably pleased about the pledge to follow up the recommendations of the Pitt review on the response to last year's serious flooding. Any backsliding on this would have attracted alot of criticism.
The Welfare reform Bill will also be worth keeping any eye on as the government has said this will extend medical assessments and the development of personalised return to work programmes which should give a further boost to the rehabilitation sector.
One of the biggest bust-ups, however, will probably be over something that wasn't mentioned by Gordon Brown: pleural plaques. Since the House of Lords ruled that pleural plaques cannot give rise to a compensation claim, the trade unions and claimant lawyers have been up in arms. Their arguments are very emotional and based on a cynical exploitation of people who have pleural plaques. They stoke up irrational fears about other asbestos related diseases and then try to claim for emotional distress. Expect them to target the Law Reform, Victims and Witnesses Bill for a trade union sponsored amendment to reverse the House of Lords' ruling. The industry needs to be on its guard.

The tough lessons from the floods last year are still being learnt. Environment minister John Healey spent yesterday touring various caravan villages in the north of England to see at first hand how the 1400 people still living in caravans are coping. This visit prompted a wave of sympathetic publicity.
Meanwhile, as Mr Healey was hearing first hand about the problems of cleaning up after such devastating floods, the House of Lords was debating how to deal with the problems in the future.
The two most striking lessons that come out of the ministerial visit and the Lords' debate are both quite tough to take on board.
Several of the people still stuck in caravans complained that they would have been back in their homes by now if initial drying out and repairs had been done properly. This is a realisation of a fear that many in the insurance industry voiced in the immediate aftermath of the floods. Some loss adjusters and insurers were privately very critical of the way local authorities were trying to score points by getting people back into flood affected properties faster than insurers could: they warned that it could, indeed would, backfire and have sadly been proved right. While there is no doubt that a proportion of those 1400 still in caravans were insured and will have stories of delay and incompetence to tell, they will pale into insignificance compared to those who were not insured or were local authority tenants. To be fair to some of the local councils, they have done their best but have been struggling because of the lack of central government support - especially financial - to help them deal with such exceptional circumstances.
In the Lords, the tough lesson was about setting priorities.
This, it seems, is especially true when weighing up the cost of letting agricultural land flood versus letting towns flood. Rural interests were chided by Lord Davies of Oldham, the government minister, for attacking the Environment Agency for not doing enough to protect agricultural land from flooding. As Lord Davies and several other peers pointed out, the flooding of fields is often essential in order to protect towns and that is where the priority lies because of the greater threat to people and property.