Report 2: Regulation
Cicero | 2015 Election - Possible outcomes
21st century politics in the UK are almost unrecognisable to those of our grandparents when
polls in 1955 showed the Tories and Labour shared almost 96% of the vote. Today, there is
more uncertainty for two main contenders: Labour will take heart that no incumbent has
increased its vote share since 1857 whereas the Conservatives will be encouraged that no
opposition has ever won when trailing in both economic competence and leadership polling.
In the polls, the Conservatives haven’t polled about 37% in over two years, whilst Labour
hasn’t been able to extend a consistent lead beyond three points. The potential decider will
be the UK’s ‘first past the post’ voting system and electoral boundaries. Put simply, Labour
voters live closer together than Tory voters so the former gain more seats as a result of voter
concentration.
To give an example of this advantage, Blair won 9.5 million votes in 2005, giving Labour a
healthy majority with 413 seats; five years later, Cameron received 10.7 million votes but
only won 307 seats, creating a hung parliament. Ultimately, the Conservatives need a 7-9%
lead in the polls to convert votes into a majority.
The Tories still feel confident that they can at least be in a position to offer the Lib Dems
another coalition. However, will the Lib Dems still be there? After the painful Euro and local
elections, the Lib Dems are struggling to poll in double figures and are facing a challenging
campaign in 2015.
Whether the Conservatives or Labour lead the next government, both parties will bring
political uncertainty into government. From the creation of a new regulator to the greatest
overhaul of annuity rules in generations, the financial services sector has faced huge
changes over this parliament and should be wary of the continued threat of political risk.
When the next Government settles in, the financial services sector will be in need of longterm stability. We are still waiting to see how the retirement income sector reacts to the
annuity reforms and the implementation of the MAS/TPAS-provided guidance guarantee will
have its own impact, with Andrea Leadsom, the Treasury Minister, not ruling out a role for
providers in the process.
Labour has stated that if they win in May 2015, they will support the government’s pension
reforms. However, given then the guidance guarantee doesn’t come into force until April, it’s
likely that the next Government will have to adopt a ‘wait and see’ approach to see if the
guidance system works successfully and to see how the retirement income industry reacts
by developing new retirement products.
After talk of the perceived blow of RDR to many IFAs, the annuities reform has presented
unprecedented opportunities to the financial advice sector. However, the regulators are
already wary of cold-callers targeting savers’ pension pots, and the next Government will
have to be swift to clamp down to prevent a mis-selling scandal which the retirement income
industry cannot afford.
When asked who that government will be, many commentators and pollsters are predicting a
small Labour majority. At Cicero, however, our analysis indicates there won’t be clarity on
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Report 2: Regulation
the likely winner for some time and all is still to play for. Ed Miliband may be struggling in the
leadership polls but he is very adept at identifying issues that consumers really care about:
the increased cost of living, energy prices, and bringing the banks to bear.
A Labour government will certainly legislate to act in the consumers’ interest to bring down
the cost of living. However, there are concerns that policies aiming to help the consumer will
be at the expense of sectors which will be hampered by regulation and uncertainty at a time
when they need to be able to compete globally with less-strictly regulated regions. This is
particularly the case for the energy and financial services sectors.
The Conservatives bring their own political uncertainty to the table with their positioning on
Europe. Their pledge to re-negotiate our relationship with Brussels and offer a referendum
by the end of 2017 has baffled voters and concerned businesses. As it stands, too many
questions currently hang over what form the renegotiation process will take, what powers the
UK wants to repatriate, and how the UK would exit the EU in the event of an ‘out’
referendum result.
From a high-level business perspective, the amount of political uncertainty is concerning. A
potential foreign direct investor will look at the UK and see a nation which could both lose
one of its constituent members and leave the EU in the next three years. If the UK is to truly
win the global race, then we have to be clearer on what course we intend to run.
The next government will expect the professional advice sector to both support government
reforms and adapt quickly to the new financial advice regulatory landscape; but in return the
industry needs to ensure that its own concerns also continue to reach policymakers’ ears.
Continuous communications will be key if the next government is to be able to fully consider
the consequences of its policy decisions on both consumers and the industry.
Iain Anderson
Director and Chief Corporate Counsel
Cicero Group
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