Parliamentary Connections: April 2009 Archives

Main

April 2009 Archives

April 1, 2009

Myners isn't the Goodwin fall guy

The Tories seem intent on pursuing Lord Myners, the City minister, out of office over what he did or didn't know about Sir Fred Goodwin's pension arrangements. They are wrong and do themselves no credit.
As I have said before, it is a really tough call to expect government ministers over that cataclysmic weekend of 12-13 October to have set aside time to scrutinise the details of the severance package offered to Goodwin. Had they done so and spotted that the RBS board was pulling a fast one by enhancing his severance package (I'll return to that point later) but allowed the crisis gripping the banking system to spread even further we would have had genuine cause for complaint.
If I was Lord Myners I would now be wondering what some of my Treasury officials were up not to flag up some serious concerns over the Goodwin deal and perhaps I might have wondered at the time why it was being dressed up as early retirement for someone only in his early 50s. The fact that he was alerted to the possible size of the pensions pot is not really that important as there would have been so many multi-million and multi-billion pound numbers being thrown around that weekend you can understand why this one didn't make an impression. It would be nice to think that Lord Myners would have had a moment to pause to reflect on the RBS board's proposal and say to them that it should wait a couple of days as it needed further thought but we do not live in an ideal world.
I think the Tories have been duped by the RBS and Sir Tom McKillop's letter yesterday into thinking that they now have an easy target in Lord Myners. The real target remains the RBS board and its remuneration committee. It is at the very least disingenuous to claim that there was no enhancement to the deal offered to Goodwin. They didn't have to offer him early retirement: indeed, there is no real reason why it should have been viewed as any sort of retirement. Goodwin's incompetence at the helm of RBS had steered it to disaster. Most chief executives in that situation get offered a paid up contract, possibly with a little boost to their pension fund alongside and often this appears too generous a reward for failure. That should have been the starting point for getting rid of Goodwin and why it wasn't should be the question politicians should pursue.
We have a culture of rewarding senior executives for failure in this country and we need to challenge that if we are to re-build industry and the financial services sector out of the havoc of the current economic storms. Sadly, it seems that the Tories, who now view themselves increasingly as a government-in-waiting, have no appetite for doing that.

Posted by DavidWorsfold on April 1, 2009 8:14 AM | | Comments (0)

April 2, 2009

ABI pitch for London-based regulator is a canny move as G20 meets

Well, they have arrived at Excel and within a few hours we will find out was has been agreed and what has not been agreed. It will no doubt take a forensic scrutiny of every word in the statements published by the G20 leaders to work out what has really happened. It will also trigger months of debate and negotiation over the detail of how to deliver what was agreed.
In this context, the comments the other day by Stephen Haddrill, the director general of the Association of British Insurers, making a pitch for any new pan-European regulator to be based in London seem rather shrewd. I am sure he has sensed the direction the debate about future regulation is taking accurately as we do seem to be heading towards an European regulator in the wake of the Larosiere Report and the strength of the Franco-German alliance on the need for tougher regulation yesterday gave further impetus to that move.
So, Mr Haddrill's approach of acknowledging the inevitability of a European regulator but then making a case for it to be based in London seems quite smart. What he is saying is that by basing in London we could ensure that it absorbs more of the UK approach of prudential regulation and avoids a lurch back to the pre-1992 system of product-based regulation  that was widespread on the continent and which has its strong supporters in Brussells, Paris and Berlin.
It is an interesting contribution to the debate.

Posted by DavidWorsfold on April 2, 2009 8:57 AM | | Comments (0)

April 3, 2009

G20 points to a new era of regulation - but by whom?

There will be hundreds of thousands of words written over the next few days analysing the outcome of yesterday's G20 Summit in London and I will be looking hard for an answer to this question: who is in charge of the new, tougher, regulation that has been promised?
The communique from the summit says that the Financial Stability Forum will be revamped into a Financial Stability Board and given new powers to oversee  (note, not regulate) banks and international markets. However, it also says that the International Monetary Fund should take a stronger role in supervising the world financial system. Are the seeds of conflict being sown here?
The communique from the summit certainly sets out a tough sounding manifesto for regulation and supervision but is too quiet on how that should be delivered. This probably leaves the door wide open for the European Union, with the strong backing of France and Germany, to pursue the agenda it has already set out in the Larosiere Report. This could create further conflict with the newly emboldened FSB and IMF.
Of course, another key point of interest to many of us will be how this will play out in the battlefield of domestic politics. Gordon Brown has won alot of praise for getting a consensus on so many points out of the summit, although he did fail on the major fiscal stimulus he was hoping for. This throws the focus back onto the Budget later this month. Without the extra help he was hoping for from the rest of the world and UK government spending already seriously over-committed, he has limited room for manoeuvre with time running out. The potential medium to long term benefits of the summit deal will not be enough to revive Labour's political fortunes. They need something that is going to make a major impact in the next 12 months if the Prime Minister's success on the international stage is to help him towards electoral success next year.

Posted by DavidWorsfold on April 3, 2009 9:14 AM | | Comments (1)

April 6, 2009

Insurers win key battle on equality

The debate over how insurance premium rates and policy conditions will be covered by the Equality Bill as it starts its Parliamentary passage in earnest shortly took a useful turn in the insurance industry's favour at the end of the last week.
Similar proposals for wide-ranging anti-discrimination laws have been working their way through the European legislative system and reached the European Parliament last week where they were passed with some important exemptions for banking and insurance included. The ABI was rightly quick to welcome these exemptions which would allow insurers to continue to charge different rates and impose different terms for age, gender or disability so long as the information used in assessing the risks is accurate and relevant. MEPs went out of their way to stress the need for precision.
The UK's Equality Bill is looking to legislate on similar areas and MPs and Peers have already made it clear that there are cross-party concerns about the potential for age discrimination in travel insurance. They will see this demand for precision and accuracy as a way of putting further pressure on the industry to justify the current range of age limits on most travel insurance policies. So, the ABI will have to focus on this area if the positive effect of the European wide approach is not to be frittered away when the same issues are debated in the UK.
As the ABI turns its attention to lobbying on this in the UK it might want to make sure its gets the name of the bill right: it is the Equality Bill, not the Equalities Bill.

Posted by DavidWorsfold on April 6, 2009 11:34 AM | | Comments (0)

April 9, 2009

Is breaking up the RBS and Lloyds a good idea?

I am totally unconvinced by the new Conservative policy of breaking up the partially state-owned banks as their ownership is returned to the private sector. Shadow Chancellor George Osborne's speech advocating this earlier this week was full of glib phrases - "too big to fail but potentially too big to bail" - but desperately short on substance and an understanding of the consequences of pursing such a policy.
We need a banking sector that is fit for the modern world, one that will be increasingly global despite the current retrenchment by some multi-national corporations. I say "we" and I really mean Britain here. If British banks are too small to serve the needs of global corporations then they simply won't get the business and huge amounts of capital will flow out of the City of London and the UK economy. That will cause untold economic damage.
Mr Osborne also failed to say what he would do with the banks that remain wholly in private hands. Is he expecting the Financial Services Authority and the Bank of England to break them up? If they aren't broken up, how will he stop Barclays, HSBC, Santander and others outside the UK regulatory net buying up the nicely parceled-up mini-banks he will create with his privatisation programme?
Where he could have a point that would have been worth making - because the government is very quiet on this - is how do you return such huge state holdings to the private sector without de-stabilising the stock market and the banking sector? Timing will be one part of the answer but selling stakes off in digestible chunks will very likely be another. This lack of an properly thought out exit strategy is one area where the opposition should be scoring a few hits on the government.

Posted by DavidWorsfold on April 9, 2009 1:22 PM | | Comments (0)

April 20, 2009

Treasury Committee picks off its targets one-by-one

The Treasury Select Committee looks to be pursuing an interesting strategy when it comes to reporting on its in-depth inquiry into the causes of the banking crisis.
Usually Select Committees publish single reports at the end of such inquiries with recommendations for legislative action if appropriate. What the Treasury Select Committee is doing is publishing a series of reports focussing on specific issues. The first of these came out earlier this month and called for compensation for charities that lost money when the Icelandic banks collapsed but dismissed calls for local authorities to be similarly compensated. Why this piecemeal approach?
There seem to be two obvious answers to that question. The first is that the committee disagrees over some of the fundamental issues thrown up by the inquiry and has no hope of reaching an consensus on an all embracing overall report. The alternative explanation is that the members feel they will make more impact if they pick off the key areas of concern one-by-one. It seems this latter explanation is the more likely.
The tone of the committee's many public hearings on the banking crisis did not suggest that there were too many areas of fundamental party political disagreement over the key issues, certainly not enough to derail a report, although the huge challenge of getting agreement over all the topics that a wide-ranging report would cover shouldn't be under-estimated.I think the members have taken the view that they can make more impact and move faster by homing in on issues where they believe they can make a difference to the public and political debates.
I shall be looking out especially for the committee's response to the proposal that regulators should be able to impose restrictions on the press at times of financial crisis. I submitted a hard-hitting response to this proposal in behalf of Incisive Media which can be found on p141 of the published evidence: this should be read in conjunction with the evidence from the Periodical Publishers' Association which is on p178 as they were written to complement each other.

Posted by DavidWorsfold on April 20, 2009 12:38 PM | | Comments (0)

Why have the Equitable Life policyholders gone for a judicial review now?

The news last week that the Equitable Members Action Group has applied for a judicial review over the government's decision to reject the Parliamentary Ombudsman's call for proper compensation for policyholders caught me by surprise. I can't help querying their timing.
The ombudsman, Ann Abrahams, has already indicated her determination to push this further by exercising some of the little used powers her office has to take the government to task over its response and she is due to present her case this week or early next week. I would have thought it would have made more sense for EMAG to wait until after that before deciding to spend its members' money launching a judicial review.
By appearing to pre-judge the government's further rejection of the very powerful case for compensation made by the ombudsman, EMAG might precipitate it. The Treasury could well decide that as it is going to have to go to court to defend itself later next week it might as well put the whole issue in the hands of the High Court and not waste time on arguing in Parliament anymore.

Posted by DavidWorsfold on April 20, 2009 3:28 PM | | Comments (0)

April 21, 2009

The Budget: who will come out on top?

One of the most fascinating aspects of tomorrow's Budget Statement is going to be who will come out on top - Alistair Darling, George Osborne or Vince Cable?
The Chancellor is obviously under huge pressure to deliver a package of measures that is seen to be an imaginative and stabilising influence in the current economic crisis and which helps Labour recover the political initiative. It won't be easy and the leaks over the weekend show just how limited his scope is going to be tomorrow.
His Tory counterpart, George Osborne, will be under almost as much pressure to perform and deliver because there is a growing band of Tory MPs who do not think he is the right person for the job. One of his key problems, and one that he will have to deal with again tomorrow, is that he has been eclipsed by the Liberal Democrat Treasury spokesman Vince Cable at every stage of the unfolding financial and economic crisis. Many Tories were disappointed when Kenneth Clarke wasn't brought back into the Shadow Cabinet as Shadow Chancellor rather than Shadow Business Secretary at the beginning of the year. With the entry of the UK into the Euro nowhere to be seen on the political horizon at the moment, the one issue that divided Mr Clarke from the majority of Tories has disappeared and he is seen by many as the ideal running mate for David Cameron in an election that will be dominated by economic issues.
Mr Cable, on the other hand, will be under the least pressure tomorrow. Sure, expectations that he will exploit any weaknesses in the Chancellor's proposals will be high but he is not under any threat himself. However, if he does succeed in scoring some serious political points then expect talk of a coalition government with Vince Cable as Chancellor to start up again.

Posted by DavidWorsfold on April 21, 2009 2:26 PM | | Comments (1)

April 22, 2009

Darling shows he has run out of ideas

The initial reaction to Darling's Budget speech has to be that he has demonstrated that the government has now run out of ideas on the economy. He will score with left of centre voters for his attacks on high earners with the cap on pensions tax relief and the 50% rate of tax but he will get widely criticised for being too timid on the public sector deficit and for the tax increase on booze and fuel. Unfortunately for him, Labour needs to do alot more than appeal to its core supporters.
His argument for not acting with greater vigour to cut public spending seems to rely on his optimistic forecast that we will start to see a recovery by the end of this year with growth in 2010. This seems so far out of line with almost every other forecast that it is scarcely believable. I didn't even get the impression that the Chancellor really believed it either so downbeat was his presentation of that section of his speech. Indeed, overall, he seemed to lack conviction, perhaps demonstrating that he feels totally hemmed in by the economic and fiscal circumstances.
Cameron's response has been all bluster and even less substance, although I have always thought that it must be one of the most difficult speeches to make. As I said yesterday, the real test for the opposition will come later in the Budget debate when Osborne and Cable get their chance to launch more considered critiques of the Budget.

Posted by DavidWorsfold on April 22, 2009 1:29 PM | | Comments (0)

April 23, 2009

The Budget points towards a decade of gloom and conflict

I've been trying to pick my way through the detail of yesterday's Budget statement to find some good news and have been getting ever more depressed as I do so. I have come to the conclusion that we are heading for a decade of economic gloom against a background of political and, perhaps, increasing industrial conflict.
It looks like a re-run of the 1970s.
At the end of the 60s - a decade of hope, growth and change - the UK economy hit the buffers. Inflation was the emerging problem then while public debt is the millstone we have round our necks now. In 1970 the Labour government of Harold Wilson was voted out and Ted Heath's Tories came in with promises of radical economic reform. These promises were not delivered as the harsh economic realities the Conservatives inherited knocked them off course time and time again. By the end of 1973 we had descended into industrial chaos with most people working a three day week. An early election in 1974 on a "Who governs the country" theme saw the poisoned chalice handed back to Harold Wilson who passed it on to James Callaghan after two years. He sent us cap in hand to the International Monetary Fund, presided over massive cuts in public spending and led us into the Winter of Discontent when I remember walking past Leicester Square everyday where the bin bags were piled ten feet high and covered the whole square - it stunk. At the end of the decade the country was so disillusioned with Labour that they were prepared to take a risk on the ultra-radical Margaret Thatcher.
We are at the turn of a decade again, face a General Election next year and have dismal economic prospects. It seems depressingly familiar territory. The 1970s was also an era of highly polarised politics and the Budget seems to be taking us back in that direction too.
Much of my gloom has been made worse by the fantasy forecasts the Chancellor, Alistair Darling, deployed yesterday: there isn't a single economic expert that shares his optimism that we will start to see a recovery later this year and reach the dizzy heights of 1.25% growth next year. Unless he is right and everyone else is wrong this means that next year's Budget will see further significant tax increases and cuts in public spending as the Treasury struggles to close a widening gap between revenues and spending. If this is the scenario then we might even see a slightly early election so that Labour doesn't have to administer the medicine because for Mr Darling to have to present a Budget admitting the forecasts he made yesterday were wrong would cause catastrophic political damage to Labour.
This doesn't mean that David Cameron is set fair to sail into Downing Street, although his rather blustering speech yesterday got a good press this morning so he probably feels quietly confident at the moment. He will have to be pretty honest about the medicine he intends to administer and convince the country that the Tories have the courage to administer it. This is where Ted Heath's government failed: it wasn't honest enough, tough enough or sufficiently long term in its thinking. Its first Budget was willfully misconceived because it ignored all the warning signs about inflation. I suppose one difference this time is that there is no way anyone can be unaware of the huge public sector deficit that is encircling us. 


Posted by DavidWorsfold on April 23, 2009 9:35 AM | | Comments (2)

April 24, 2009

I'm not the only one who sees the 1970s looming on the horizon

Despite one commentator's optimism in response to my predictions that we are heading for a decade of economic misery and industrial conflict on a par with the 1970s, there is plenty of expert opinion this morning lining up on my side. Alot of what the IFS says in terms of the approach that needs to be taken to public spending reflects the thought-provoking Reform report published on Monday.
It is, however, all very well for academics and think tanks to urge people to "think the unthinkable" when it comes to facing up to the need to haul down public expenditure in the next decade but it has to be done with a degree of political coherence and in a way that at least has a chance of winning public support. If we are forced into the sort of IMF dictated cuts that we had in the 1970s, we will head straight for the sort of industrial conflict and social unrest that marred much of that decade.
Are any of the main political parties offering the sort of leadership that can steer us through the fraught years ahead?


Posted by DavidWorsfold on April 24, 2009 9:29 AM | | Comments (0)

April 27, 2009

Trade credit row could turn nasty for insurers

The trouble with the sort of help the government announced in the Budget to help ease the pressures in the domestic trade credit market is that it suddenly alters people's expectations. With many businesses, especially in the retail sector, going under in the first few months of this year, stories about the problems some firms have faced in getting adequate had a "so what do you expect?" feel about them. Now, the tone has changed.
People are looking at the £5bn top-up scheme announced by Alistair Darling and thinking that this sort of subsidy should be making the problems go away. At the very least, they will say, it should be helping soften the tough stance trade credit insurers have been taking. When this doesn't happen, things can turn nasty.
The Association of British Insurers was long on fine words in the run-up to the Budget; now people will expect action to deliver the promises it suggests in its code of practice but, as we know, it has no powers, beyond persuasion, over its members. It will take a concerted effort on the part of the ABI to make sure that political and public opinion doesn't turn against the insurance industry on this issue. So far, the insurance market has managed to avoid attracting the opprobrium directed at the banking sector. Now it has been offered a public subsidy there is a danger that many people will see it as fair game.

Posted by DavidWorsfold on April 27, 2009 9:22 AM | | Comments (3)

Insurers have little to fear from the Equality Bill

I expect a huge amount of heat - and probably very little light - to be generated around the Equality Bill in the coming weeks. Despite the all too predictable complaints about burdens on business at a difficult time from the Institute of Directors and the British Chambers of Commerce I would imagine the more spectacular - and ill-informed - criticisms will come from private clubs when the (male) members get together over a gin and tonic tonight. Golf clubs especially are targeted for critcism in the ministerial notes accompanying the Bill.
As to the IoD and BCC, I am very disappointed at the pedestrian nature of their responses. If that is the best they can muster then they might as well not bother. There are actually relatively few immediate new 'burdens on business' as most of the more onerous requirements will kick in when we are well on our way to economic recovery even according to the more pessimistic forecasts.
Insurers are clearly winning their arguments and have their critics on the back foot. The notes published with the Bill specifically mention motor and travel insurance but the impact assessment does not make a very strong case for action against the industry. The figures produced by the industry's critics are almost laughable - they have estimated that the annual consumer detriment to older people of age discrimination in the provision of motor and travel insurance is in the range of £131m to £1180m. Such a huge range proves absolutely nothing and they would have done better to have spared themselves the embarrassment of publishing such poor research.
The industry is not totally off the hook, however. As I have said before the one area the industry will have to look at is the availability of travel insurance for the over-75s and this comes up again in the Bill and its supporting evidence. A Fairer Future, the report published alongside the Bill, says that in a survey conducted in Northern Ireland it was impossible to find annual travel cover for the over-75s. This is the industry's key vulnerability and the area that the ABI must work on with its members before the Bill reaches the House of Commons and, more particularly, the more elderly House of Lords where I know there are several peers of all parties waiting to raise this issue.

Posted by DavidWorsfold on April 27, 2009 3:51 PM | | Comments (3)

April 29, 2009

All Party Group tackles trade credit insurance

The All Party Parliamentary Group on Insurance & Financial Services will be looking into the issues in the UK trade credit insurance market on Tuesday 19 May (11.30am, Committee Room 17, House of Commons) when the Association of British Insurers and the British Retail Consortium will be presenting their views.
This should be an interesting session as the government's intervention in this market will change the dynamics and will also alter the tone of the public debate about the impact of the higher claims volumes caused by the recession.

Posted by DavidWorsfold on April 29, 2009 5:30 PM | | Comments (1)

Search


About April 2009

This page contains an archive of all entries posted to Parliamentary Connections in the April 2009 category. They are listed from oldest to newest.

« March 2009 is the previous category.

« May 2009 is the next category.

Many more can be found on the main index page or by looking through the archives.

Subscribe to this blog's feed
[What is this?]
Creative Commons License
This weblog is licensed under a Creative Commons License.
Powered by
Movable Type Enterprise 4.25