Parliamentary Connections

One of the earliest and most persistent champions of statutory regulation of insurance brokers, former Tory MP Sir John Page, died on Friday, aged 89.
Jack Page, as he was known, was MP for Harrow West from 1960 to 1987 and although he never held ministerial office, he did achieve a series of legislative success as one of the more effective backbenchers. One of those opened the way for the modern era of intermediary regulation.
When he won a place high up the ballot for Private Members' Bills in 1976, Jack Page chose to adopt a bill being promoted by some of the insurance intermediary trade associations to introduce a system of broker registration. Actively supported by another Conservative MP, the late Sir Robert McCrindle, he secured government backing for it and, despite some determined opposition from other Conservative MPs congenitally opposed to any form of regulation, guided it to the statute book as the Insurance Brokers (Registration) Act 1977. This led to the creation of the Insurance Brokers Registration Council.
It marked the first steps down the road towards the full blown statutory regulation we have today under the Financial Services Act but the fundamental flaw of the 1977 Act was that it only regulated the title – insurance broker - and not the function, thus enabling firms that didn't want to submit to the rigors of regulation to carry trading as insurance consultants, intermediaries and so on. The passing of the Act also proved the catalyst for the four main broker trade associations that competed (and sometimes co-operated) in the mid-70s to sink their differences and merge to promote the new regulation. Thus, the British Insurance Brokers' Association was born. Jack Page served as a vice-president of BIBA for many years.
It is a cruel irony that Jack Page should die at the end of a month that started with a further fragmentation of BIBA.

Parliament is in severe danger of missing the chance to reassert its authority as the advocate of the people it purports to represent as the credit crunch drags on. In the last week it has blown two golden opportunities to put itself at the forefront of holding government, regulators and financial institutions to account.
First, last Monday, the Treasury Select Committee decided to turn itself into a glorified phone-in programme when it had Alistair Darling, Mervyn King and Lord Turner (New FSA chairman) in front of it. Instead of probing deeply into some of the governmental and regulatory shortcomings - failures wouldn't be too strong a description - that led to the cliff edge rescue of the banking system, it decided to put questions emailed in by the public to the three people who could shed most light on what has gone wrong. Predictably, these questions ranged from the pathetically obvious to the inanely trite and did nothing to disturb the three well prepared men. It was a huge missed opportunity and shows how poorly advised and resourced the select committees are.
Then, yesterday, the economic crisis was debated on the floor of the House of Commons at length for the first time since Parliament returned over a month ago - that delay itself is an abdication of its duty. You may wonder why this debate hasn't been more widely reported today. This is because it was the Liberal Democrats who initiated the debate and so frightened are the government of being exposed to any scrutiny over our economic woes they - with the limp connivance of the Conservatives - fielded a reserve team to face Vince Cable, who seems to conduct the political discussion about the crisis on a different level to every body else.
So, once Mr Cable had set out a very eloquent analysis of the situtaion and some of the remedies that needed to be applied, we heard from Angela Eagle, the newly elevated Exchequer Secretary to the Treasury (with a miss-mash of responsibilities including "better regulation") who spent 20 minutes trying hard to avoid answering any of the questions put to her by Mr Cable. She was followed by the even lower profile Tory spokesman Phil Hammond, who added absolutely nothing.
I suppose the insult to Mr Cable was to be expected given the political vacuum that Westminster occupies but the failure to appreciate that he has become the most widely respected elected politician in this country when it comes to commenting on the banking crisis and articulating the concerns of many ordinary people shows just how far removed Parliament has become from the people who put it there - and it wonders why politicians continue to fall in the public's regard and fail to engage people. As Barack Obama has just emphatically shown - to engage people you have to start thinking like them and stop playing political games they don't understand and, indeed, hold in contempt.

A decade is a long time in the worlds of politics and personal finance as was amply demonstrated yesterday when Andrea Rozario, chief executive of Safe Home Income Plans, the body the represents the equity release market, addressed the All Party Group.
SHIP was born out of the scandals in the equity release market that tarnished its reputation so badly in the late 1980s and early 1990s and has obviously done an extremely good job in turning round opinion. The last time the All Party Group tackled this subject was on the back of those scandals – concentrated around the mis-selling of a couple of Midlands building societies – and there were alot of extremely angry constituency MPs who wanted the market regulated out of existence. Eventually, some common sense prevailed and a compensation deal was brokered that gave the market breathing space to sort out the mess it was in. To its credit, it has made great strides in doing just that and has clearly won the confidence of politicians along the way.
Yesterday's meeting with SHIP was well-attended by the standards of all party group meetings and was attentive and positive, with MPs and peers of both main parties wanting to know what more they could do to help the market, especially in its difficult interface with the benefits system.
SHIP's introduction of a code of practice and requirements for training have clearly raised standards in the market, although I was disappointed that we didn't hear more about what happens when one of its members falls short of those standards: some figures on complaints and the processes for dealing with them would have been useful too beyond the referral of individual complaints to the FSA that its.. It was interesting to hear SHIP distancing itself from the emerging problems in the sale and rent back market which it clearly sees as having the potential to drag the whole equity release market back into the mire. It does offer some robust advice to consumers on this fraught topic, however, so it isn't sticking its head in the sand.
Ms Rozario was full of praise for politicians and regulators for understanding what the market had done to clean up its act but mildly critical of the media for not given it so much credit. The media is notoriously cynical about trade associations born out of market scandals, and rightly so given the track record of many, and it also has long memories. SHIP will have to be patient if it expects ringing endorsement on the personal finance pages as a decade is not always such a long time in the media.

Is the Equitable Life saga finally staggering to a conclusion? We have had the report of the Parliamentary Ombudsman and are now waiting for the government’s response to that. Back in July when the report came out this was promised for the “autumn” so time is running out. All the signs are that we will get the key decisions before Christmas, however.
In the meantime, both the Equitable Life board and the Equitable Members Action Group have been busy inside Parliament. They have both appeared before the Public Administration Select Committee PASC) and the All Party Parliamentary Group on Insurance & Financial Services and next Tuesday the Liberal Democrat MP Jo Swinson has secured a Westminster Hall debate on the topic.
The two All Party Group meetings have attracted over 30 Parliamentarians and have been surprising in both their tone and content.
The meeting with Vanni Treves (chairman) and Charles Thomson (chief executive) was a rather chaotic affair as the members of the House of Commons present had to leap out to vote three times during the hour long session (on the rather obscure issue of regional select committees). It did, however, give Equitable a very fair hearing and welcomed its four square support of the Ombudsman’s key recommendations of a full apology for the maladministration by the Department of Trade & Industry, Government Actuary’s Department and the Financial Services Authority and the creation of a compensation scheme. The Equitable board also made re-assuring noises about having got the society into a stable position, admitting this had taken far longer than they expected.
The one thing they would not be drawn on was the size of the compensation package, restricting themselves to observing that it could range from “very little to billions” depending on how far the government believes maladministration was the problem and how far the society contributed to its own downfall.
The Equitable Members Action Group, on the other hand, didn’t get as sympathetic a hearing as might have been anticipated. In particular, backbench Labour MPs do not seem to take too kindly to them, one criticising the tone of their lobbying as akin to “the language of an angry 19th century landlord”.
Not surprisingly, EMAG also agreed with the Ombudsman that there had been maladministration a-plenty and that compensation from public funds would be necessary to rectify this wrong. Unlike the Equitable board, however, they were prepared to put a figure on it: £4.6bn.
EMAG surprised some MPs by accepting that the proposed Compensation Commission would take around two years to settle all the cases, rejecting the notion that some fast-track route to early closure of the issue should be put in place. A fast-track option appeals to some MPs but I got the impression that EMAG feels this could lead them down a road towards being forced to accept lower levels of compensation. Where there was some agreement was in the need to avoid a claims process that relies on policyholders submitting detailed claims to a commission. EMAG doesn’t like this idea because it feels that many of the now elderly policyholders would be intimidated by the prospect of filling in lengthy and complex claims forms. At the previous weeks’ meeting with the board, several MPs made clear their unease at a claims-led process because of the scope for this being hijacked by ambulance chasing law firms. The Equitable board seemed content with the prospect of being asked to provide detailed information about the circumstances of its policyholders so that a compensation commission could determine the right settlement figures without people having to submit claims. A degree of consensus there then.
It all comes down to how much money the government will put up and then what process it will put in place for distributing it. There isn’t much consensus on these points.
Some MPs, and I got the feeling the Equitable board, would be happy for the government to short-cut a long-winded compensation process by creating an “assistance” as opposed to a “compensation” scheme with a fixed amount of money that the compensation commission would be told to distribute as fairly as possible. This would avoid the government having to admit liability on behalf of any of the public bodies named in the Ombudsman’s report and skip the potentially lengthy detailed assessment of all the claims from Equitable policyholders.
It would also have the supreme attraction to the government of being able to keep tight – if not total – control over the amount it pays out, eliminating the potential for upward drift if it allows a compensation commission to work through hundreds of thousands of individual cases. The big question is: how much?
Clearly, anything less than £4.6bn isn’t going to satisfy EMAG, the main policyholders’ representative body, although others have suggested as much as £6bn is need to adequately compensate everybody. The Equitable board gently dismissed these figures as being off the scale, but wouldn’t be drawn on one of their own.
My guess is that we won’t see much more than a billion offered and that it will not be billed as a compensation scheme.
As to timing, I can’t see how the government can pronounce on this until the PASC has reported. This is promised by Christmas so pencil in 17 or 18 December for an announcement – and a barrage of follow-up arguments in the new year.

Having criticised Parliament for not devoting enough time to debate the economic and financial crises we find ourselves in, I have to praise it for moving quickly in the wake of yesterday's Pre-Budget report. The Speaker has agreed that there should be a three hour debate tomorrow (Wednesday) afternoon but only after intense pressure from the opposition.
It does seem extraordinary that such a major statement on the overwhelmingly dominant issue of the day shouldn't have been automatically followed by an extended debate as, indeed, the Budget itself is. Alistair Darling's speech yesterday was hugely significant in so many ways that it deserves to be debated properly. It marks an end to 30 years of tax cuts, the opening up of a yawning chasm between the two main parties on economic and fiscal policy for the first time since the early 1990s and a massive gamble on short term spending heading off a deep recession. We might as well have closed Parliament down if it couldn't hold a debate on that lot.

I have feared right from the start of the current financial crisis that we would face calls for the press to be regulated and gagged. Those fears have been realised with the publication of the Treasury Select Committee’s terms of reference for its inquiry into the banking crisis.
One huge irony of this is that the extension of the inquiry to cover the role of the media was demanded by former Tory leader Michael Howard and the terms of reference were published the day before frontbench Tory spokesman Damian Green was arrested for putting information into the public domain that the authorities would rather have kept to themselves. Presumably, Michael Howard will not be lining up with his successor as leader of the Conservative Party to condemn the arrest of Mr Green as “Stalinist” as he clearly believes government and regulators have the right to resort to draconian measures to restrict the flow of important information to the public.
The Treasury Select Committee says that it will look at “The role of the media in financial stability and whether financial journalists should operate under any form of reporting restrictions during banking crises”. The ludicrous suggestion behind the extension of the inquiry to cover this is that the BBC’s Robert Peston somehow caused or contributed to the crisis through his excellent reporting, initially, about the problems facing Bradford & Bingley, and subsequently about the wider behind-the-scenes discussions between the banks and the Treasury. It is, in essence, about blaming the messenger.
Regulators and the financial institutions they are meant to regulate will be very supportive of any proposal to regulate the press. They have a vested interest in covering up their collective and individual incompetence which is the real reason why western economies are facing the worst crisis since the Great Crash of 1929. It is hard to understand the lack of comprehension of communication and public expectations in the 21st century that this threat to gag the media represents.
You first of all have to consider who would be exposed to such regulation and control. It would, inevitably, be mainstream broadcasters and publishers that, on the whole, tend to act responsibly and have an well developed sense of public duty, a duty that cuts both ways: when to publish and when not to publish. Beyond the reach of any regulator will be the sprawling, global network of bloggers and their message boards and forums where all manner of irresponsible rumours and misinformation can gain wide coverage very quickly. Who would they rather became the trusted source of information on a crisis Robert Peston or whizzyboy36 writing on a blog hosted on a web server in Uzbekistan?
The second key issue is what right do regulators and financial institutions have to withhold information about people’s savings, mortgages, pensions and so on? Throughout this crisis there has been an almost callous lack of awareness among senior figures in the financial world of the damage they have done to ordinary people, people who trusted them with their financial well being. More than ever, ordinary people will not countenance any move that appears to deny them information about what is happening to their money. For them the BBC has been a far more reliable source than any government minister, regulator or institution.
My firm, Incisive Media, already has first hand experience of how regulators will use any new powers they are given to gag the media and prevent it from publishing information that should clearly be in the public domain and it is an example that serves as a stark warning to anyone who believes financial regulators should have any say over the media.
During the summer one of our specialist weekly magazines, Professional Pensions, published a story about The Pensions Regulator and the action it was about to take against a firm of pensions trustees. The story was checked and double-checked and was 100% accurate – the facts have never been disputed. It was a model of responsible journalism.
The reaction of The Pensions Regulator was to threaten our reporter with prison, demand to know our sources and require every document we had in relation to the story. It believed that it had the absolute right to control information about such matters and that it had the powers in the Pensions Act 2004 to enforce that right. Indeed, the Act does give it extensive powers and contains no reference at all to the public interest.
Who would benefit from allowing this regulator to wield such power?
Not the market. Rumours had been flying around that the regulator was concerned about a firm of trustees and that it was going to take some drastic enforcement action against them but no-one knew which firm was in its sights. Consequently, the whole market had a dark shadow cast across it with reputable firms being asked if they were in trouble. Our story cleared that up by naming the firm concerned.
Not people in pension schemes over which this firm wielded influence. In the 21st century it is just absurd to think that people do not have a right to know that a firm that has been appointed in guardianship over their pensions has fallen considerably short of what is expected of them, as it turned out to the extent of now being investigated by the Serious Fraud Office.
It would have been the case, as it nearly always is, that the only people who benefit from greater secrecy are the incompetent and the criminal. We resisted every demand made by the regulator and are now actively promoting an amendment to the legislation to ensure that the public interest has to be considered before it can invoke the draconian powers it has been given.
The Treasury select Committee would be very unwise to listen to the likes of Michael Howard. It should concentrate on looking for the real causes of the crisis and two targets at the top of its list, auditors and ratings agencies, seem a pretty good starting point to me, not to mention the banks themselves.