Parliamentary Connections

Having said only last week that the Tories were mounting an increasingly impressive charm offensive in the City and wider business community, their leader, David Cameron goes and pulls the carpet from underneath his hardworking team by snubbing the CBI's prestigious annual conference today.

His decision to fly to Iraq for a few pictures with "our boys at the front" is an error of judgement. He has put short term headline grabbing before longer term bridge building. The Tories need big business to swing behind them in the run-up to the next General Election, having lost alot of ground with what should be a natural supporter base for them. Dropping out of the CBI conference at the last minute will not help their cause. After all, can you recall Tony Blair, pre- or post-1997, making the same mistake?

The failure of John Greenway to win selection for the new Thirsk & Malton seat (for electoral enthusiasts it is actually a famous old seat recreated) seems to have taken alot of people by surprise, not least John himself and many in the Conservative Party.

So, what went wrong from his point of view?

From talking to John, reading the local press and listening to other MPs, it seems that he failed to get sufficient control over various factions in his local constituency party, some who had never been his biggest fans despite his apparent popularity as a constituency MP. When John won Ryedale in 1987 it was a Liberal held seat, Liz Shields having snatched it from the Conservatives in a by-election the previous year. This wasn't a flash in the pan for the Liberals in Ryedale as they had been picking off Tory Council seats for a few years previously. John was among those unimpressed by the old guard's attempts to keep the Liberals at bay and when the by-election was lost he seized his chance to oust the unsuccessful Tory candidate and was selected to fight the 1987 General Election.

The Liberal/SDP Alliance (as it was then) was widely predicted to hold the seat. John proved the pundits wrong, won by a substantial margin and has made it a safe Tory seat ever since. However, some old wounds never healed. The faction around the ousted canadidate from 20 years ago has never embraced John as one of their own and their manoeuvring, coupled with the expected influx of Anne McIntosh supporters from the Vale of York seems to have caught John out.

A few local issues are meant to have weighed in as well, such as John's "failure" to get a by-pass built, coupled with the suggestion that a shadow minister might have more clout (McInstosh was recently made a shadow eduction minister) also cost John some votes. Such thoughts are born out of a spectacular naivety about Westminster politics that can only be down to the remoteness of the Yorkshire Moors from the hustle and bustle of London politics. Junior shadow ministers rarely have any clout, and certainly no more than respected, well informed backbench MPs like John.

Still, it is all water under the bridge now. John lost. He is not going to look for another seat and so will stand dwon from parliament at the next election. In the meantime, he has made it clear that he will be throwing himself into Westminster life, including chairing the All Party Group, with renewed vigour.

Private equity has burst on the national consciousness with a vengeance in the past couple of months. The sector has made an art form out of keeping its head down and when it was forced above the parapet it has been found sadly wanting.
Appearances before a hostile Treasury Select Committee were certainly not part of the plan and the leaders of the sector seem to have been ill-prepared for the political onslaught that has confronted them in recent weeks. The lack of political nous has already cost Peter Linthwaite the boss of the trade association – the British Venture Capital Association – his job and the sharp differences of opinion between the heads of the major private equity firms have played into the hands of those who believe that a harsher fiscal regime needs to be imposed on this sector.
Most of the rest of the financial services sector is quietly sitting on the sidelines thinking that this doesn’t have much to do with them and that the worse that can happen as the political debate heads towards its conclusion is that a few private equity fats cats get walloped with a big tax bill they can easily afford to pay. This could be a trifle naïve.
The nature of these political bandwagons is that they tend to roll; or, to mix metaphors and put it more starkly, once the Treasury Select Committee tastes blood it is not going to be inclined to let up the hunt. The question then becomes, what next?
The most immediate implication of any new tax regime will be that the complex market forces that surround the private equity sector will be realigned and the nature of such realignments is usually that there are some unexpected and unintended consequences. These will keep analysts and commentators very well employed over the next few months and will make high profile private equity deals just a little bit thinner on the ground – this could mean that inviting headlines about making the likes of Peter Cullum multi-billionaires won’t be top of the sector’s priorities. More interestingly for the rest of us is the thought of what next for those now reinvigorated in their hunt for “unjustified” tax breaks.
Where will their attention turn? Tax havens and tax exiles – whether corporate or individual – have never been popular with the left and many aspects of offshore domicile could easily come under harsh political scrutiny. This could have huge consequences for many insurance firms and fund management groups. It will certainly make it harder to argue for a generous approach to the problems caused by rapidly rising property prices and the need to review the scope of Inheritance Tax and Capital Gains Tax. The private equity row has decisively changed the political climate so that attempts to lift large numbers of people out of tax regimes they should never have been in will be closely scrutinised to see what extra advantages the so called super rich might also enjoy as a result.
So, as we watch the Treasury Select Committee's investigation unfold and smugly think that it has little to do with the rest of us, we might wan to think again.

In the interests of transparency I ought to point out that Incisive Media currently has private equity owners (Apax) and publishes for the private equity sector.

Re-organising government departments is obviously flavour of the month.
No sooner have we had the rushed – and hopefully not botched – splitting of the Home Office than the Treasury is back in the sights of would be reformers. I say back in the sights because it never seems to be out of them for very long.
As the Labour leadership election gets underway in earnest the Whitehall rumour mill is speculating hard that Gordon Brown will want to slim down the Treasury so that he can have more power centred on Downing Street. After all, he knows better than almost anyone just how powerful the Treasury can be, having ensured that it asserted the major influence over domestic policy over the last ten years. The suggestion is that a new Department of Economic Affairs could be created, picking up a range of responsibilities from the Treasury and from the dismembered Department of Trade and Industry. This would leave the Treasury looking more like a constitutional style Ministry of Finance, still influential but not all powerful.
Recent newspaper reports have suggested that Lord Birt put a similar proposal to Tony Blair before the last election as a way of curbing Gordon Brown’s growing hold over domestic policy from his powerbase at the Treasury. Rather ironic really.
The big problem is that it has all been tried before and failed dismally.
When Labour snatched the 1964 General Election after 13 years out of office the new Prime Minister, Harold Wilson, was so concerned that the Treasury would block many of his sweeping economic reforms – laced with a generous helping of then fashionable socialist economic planning – that he immediately set up a new ministry and put George Brown in charge of it while Jim Callaghan went to the Treasury. The new ministry’s name – the Department of Economic Affairs. Brown was actually the more powerful figure at this time as he was deputy Prime Minister.
It was a disaster and the running battle between the DEA and the Treasury was one of the reasons why the early years of Wilson’s government were blighted by paralysis over economic policy. The DEA only really lasted two year’s as a serious entity, although it wasn’t finally would up until 1969.
It is a pity that some of the people who write policy papers for the current government don’t have a better grasp of political history: if they did, then the notion of recreating one of Labour’s biggest disasters would never see the light of day.

One of the refreshing features of the early years of the Blair governments was the determination to make Parliament operate abit more like the rest of us. This reforming zeal led to many changes, one of the most welcome of which was that key events such as the Budget and the Queen's Speech were announced months in advance so that everybody could plan for them.
I remember for years trying to plan issues of Post Magazine around the uncertainty of when the Budget would be. Frequently, the date was announced only a couple of weeks in advance, meaning that I often had to shift great chunks of editorial from one issue to another at short notice. There never seemed to be a good reason why the Treasury felt it had to play this game of cat and mouse so it was refreshing to find that you could come back after Christmas with the date of the Budget (sometime in March) already firmly in the diary.
All of that has gone out of the window and we are right back at square one. Here we are on 22 February and the Treasury still hasn't announced the date of the Budget. The top bets are on Wednesday 21 March, only because that is virtually the last day it could be if the Finance Bill is to be published before Easter. With 30-40 pages of the bill predicted to deal with specific measures relating to the taxation of insurance it will be a busy Easter for the industry's tax experts.
But why are they left guessing on how to plan their time to deal with that? It doesn't seem very professional.

Lord Sheikh, best known as the boss of Camberford Law but now to be found on the Conservative benches in the House of Lords, is beginning to find his feet in his new surroundings.
He has been chipping in quite frequently since Parliament returned, making a plea for more cleaning shifts in government buildings during normal office hours (citing his experience as a broker to several cleaning businesses) and making a forceful case for the insurance industry during a debate on economic competiveness last Thursday.
He focussed on the barriers placed in the way of UK insurers wanting to expand overseas, citing restrictive ownership rules in India, the lack of transparency on the part of Chinese regulators and the continuing problems with reinsurance collateral in the United States. This latter issue has been taken up on several occasions by the All Party Parliamentary Group, both with the Treasury and US regulators.
He seems to have caught the minister, Lord Davies of Oldham, on the hop as he was obviously well briefed to reply on every point raised in the debate except those on the insurance industry: the minister promised to write to Lord Sheikh with answers on his concerns.
It is refreshing to see that someone who has such deep roots in the insurance market wants to develop those in the political arena. It doesn't always happen. Take Sandy Leitch, former boss of Zurich in the UK. He became a Tory peer in 2004 but has hardly uttered a word on the insurance industry since.

The news that Lord Hunt of Kings Heath – certainly not to be confused with Lord (David) Hunt of Wirral – has returned as a minister at the Department of Health is good news for all those with an interest in promoting rehabilitation in personal injury cases.
Before he resigned in protest at Tony Blair's decision to join the war aganist Iraq, he was the only government minister to show any interest in the insurance industry's drive to embrace rehabilitation, showing a ready understanding of the need to provide better linkage between the NHS and the private sector rehabilitation services. He was prepared to meet people from the industry, trying to understand their frustrations at the number of people who should receive prompt rehabilitation but didn't because of the poor information coming from the NHS and the lack of understanding of the likely availability of private funding for rehabilitation where the accident occurred at work or in a morot accident.
Hopefully, he can pick up the threads of this debate very quickly as many of the same issues remain to be addressed three and a half years after he resigned.

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.

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.

I want to leave the global banking crisis to one side and turn to the rather more parochial matter of the breakaway of the London Market Brokers Committee from the British Insurance Brokers’ Association to form the London International Insurance Brokers Association (LIIBA). I find this almost unfathomable in the context of the current state of the financial markets and regulation. Clearly no-one has applied the “How do others see us test?” to this.
The last thing insurance intermediaries need at the moment is further fragmentation of their representation. Just how do these London market brokers think news of yet another trade association to deal with is going to be greeted in the Treasury and at the Financial Services Authority with everything they have to deal with at the moment? A groan or two would seem to be the mildest reaction. More likely, they will be cursing, that is when they even have time to notice a new acronym appearing on the outer fringes of their radar screens.
It does seem that unity in the world of intermediary representation is an elusive goal. Just as BIBA and the Institute of Insurance Brokers start moving closer together so the London market brokers fall off the other end. And if you consider the independent financial advisers also have their own trade bodies, it looks as if there will be four (or more) organisations pushing the intermediary case with government and regulators.
This really does seem a step back into the past. Thirty years ago there were four intermediary bodies that briefly came together to form BIBA, a rare moment of unity before regulation started to change the world and the new breed of IFAs emerged as the general and life markets drifted apart. Now we have a potential return to that ludicrous multiplicity of trade bodies.
Intermediaries and brokers often complain they get a bad deal from government and regulators: do they really wonder why? Are there really people out there who believe that by having more organisations representing what most of the rest of the world sees as one market they will get a better deal? It is a spectacular piece of self-deluding naivety if they genuinely think that.
While the Treasury and the FSA will be groaning at the prospect, other market bodies that brokers might find themselves at loggerheads with will be quietly relishing the prospect of being able to play the broker trade associations off against each other. The skilled and experienced lobbyists among the really powerful trade associations like the Association of British Travel Agents and the Association of British Insurers will be quietly very content at the disunity in the world of insurance broking.