THE FINANCIAL SERVICES FORUM Analysis ALL CHANGE AT NUMBER10 Now Gordon Brown is Prime Minister, and Alistair Darling is the new Chancellor, what changes in policy and emphasis can the financial services industry expect from the new team? Westminster watcher Iain Anderson makes a considered assessment of future policy changes. It seems like a very long time we have been waiting for Brown, as the new Economic Secretary with Gordo. But the arrival of the new Prime Minister and his responsibility for financial services. Ussher, for me, is Cabinet is already proving interesting for Westminster one to watch as she bears a striking political watchers like me. resemblance to her predecessor in the role from 2001 There is certainly a new tone to government and – to 2004 Ruth Kelly – and she ended up in the Cabinet. inevitably – a quicker pace towards proceedings. In the One of Darlings’ first tasks will be to ratify the dying days of any administration, both the political class appointment of the new chief executive of the Financial and Whitehall apparatchiks tend to start to go into Services Authority. This will be a key test for continuity or purdah and prepare for a new administration. change. Brown has already announced one change – in Of course this time round, without a General Election or even a contested election for the leadership of the Labour Party, the Whitehall and Westminster The series of announcements on Brown’s community has been able to plan ahead for the new Premier and his team. Cabinet brought some expected changes, The series of announcements on Brown’s Cabinet notably Alistair Darling’s appointment as brought some expected changes, notably Alistair Darling’s appointment as Chancellor. And at the Treasury Chancellor – and at the Treasury there will there will clearly be a very different tone – a department now with a close relationship with Number 10, but having clearly be that very different tone – a little in terms of autonomy. department now with a close relationship Alistair Darling, recently said: “You may get a lot of stick for being dull and boring, but stick to it, make the changes with Number 10 – but having little in that people want, let the improvements speak for terms of autonomy. themselves.” This wise and workmanlike approach will serve him well at the Treasury. It’s unlikely there will be much room there for flashes of inspiration anyway, given the tight spending limits he has inherited from Brown. Further Treasury appointments include Angela Eagle – future years the new FSA chairman and the new chief the combative former member of the Treasury Select executive as well as appointments to the Bank of Committee as Exchequer Secretary, and Kitty Ussher, a England Monetary Policy Committee will be subject to Blairite who has rapidly received preferment under US style Congressional hearings by the Treasury Select www.thefsforum.co.uk Argent Volume 6 Issue 3 53 ARGENT The Government stance on the RDR in particular will be key test of Treasury opinion early under Darling’s tenure at No11 – and will of course have significant implications for the retail market. Committee to ratify these appointments. This is bound On the European policy front – there is growing to impact directly the nature of the appointments and disquiet in both Brussels and Whitehall about MiFID, set therefore the direction of regulatory policy. It is also a to be implemented from November this year. So far further move to make the Treasury Select Committee only three states, the UK, Ireland and Romania, have even more ‘all powerful’. fully transposed the legislation. As the regulator continues to consult on the all In late June, EU Internal Market Commissioner Charlie important Retail Distribution Review as well as the ICOB McCreevy announced the Commission had written to Review it is likely that Government will want to get firmly the remaining 24 EU states to insist that they comply. It involved in the consultation process over the autumn. is somewhat worrying to see big names like France, The Government stance on the RDR in particular will be Germany, Spain and Italy still in this situation. key test of Treasury opinion early under Darling’s tenure I believe the UK Treasury is likely to have MiFID at No11 – and will of course have significant implications implementation high on its agenda into the autumn to for the retail market. ensure the EU Commission will take infringement action. We may even be starting to look at serious slippage in the final implementation timescale – a nuclear option This is a reflection of the importance of the which I don’t think any UK fund business now wants to go down given levels of investment already into making skills agenda to Brown. He is convinced, MiFID happen in the UK. and rightly so, that increased skill levels will Finally at the Treasury, the review into the use of debt as equity, which has set the private equity debate alight, be central to Britain’s future competitiveness is set to report at the time of the Pre-Budget announcement in late November/December. This has and economic success. been a classic case of political campaigning leading towards a formal review. While Gordon Brown has made one of private equity’s chief critics Angela Eagle a The review of mortgage regulation – MCOB, which is Treasury minister, it seems the new Chancellor is set to get underway in 2008 – will also be an area where unlikely to want to do anything which drives a dynamic Westminster, Whitehall and the FSA will intertwine private equity industry out of the UK. heavily. There is much disquiet among policymakers in Away from the Treasury there have also been key an upward interest rate environment. MPs see more promotions for Brownite lieutenants Ed Balls and Yvette cases of hardship in these periods in their constituency Cooper – the Government’s dynamic married duo. surgeries. The whole subject of responsible lending will Cooper takes a seat at Cabinet as the minister in charge be very much driven in coming months. of Housing – demonstrating a key Brownite priority. The Thoresen Review on generic advice is of course Watch out for new thinking on eco homes/mortgages being led from the Treasury which is now trumpeting a and, perhaps, a chance to unlock the equity release public/private partnership approach towards the design market to allow it to become more mainstream. and build of a new advice network. The design of the There have been changes to the machinery of generic advice model is clearly being driven by the government as well as changes in personnel. The Government’s desire to have a national scheme in place Department for Education and Skills has been for the launch of personal accounts in 2012. disbanded with the creation of two new Departments – 54 Volume 6 Issue 3 Argent www.thefsforum.co.uk THE FINANCIAL SERVICES FORUM Labour MPs are likely to look for an early commitment on the promised re-indexing of pensions to earnings – a commitment which may come under scrutiny in terms of its future fundability. one focused on children, young people and pre-19 responsibility for the setting up of the scheme should education (under Ed Balls) and the other on universities, have passed from Parliament to the planned Personal skills and innovation (under John Denham, who returns Accounts Delivery Authority. A new regulatory oversight to government after resigning over the Iraq war in dynamic will emerge between DWP officials and 2003). This is a reflection of the importance of the skills ministers and the Authority. Many will hope this agenda to Brown. He is convinced, and rightly so, that relationship runs smoothly. Of course, others will not! increased skill levels will be central to Britain’s future But that is the stuff of lobbying. competitiveness and economic success. Having been one of the two key figures who have For financial services – and in particular the Financial dominated and reshaped British politics over the past Services Skills Council, which is looking to build on the decade, Brown is now striking out on his own and is approach of the Leitch Report – the coming months are determined to leave his mark on British politics. The important time to ensure that with the new Department face of the Government has been changed. The structure everything remains ‘joined up’. implications for policy are as yet unclear, but it will be Brown has made some bold decisions: the fascinating to watch these developments unfold over appointment of the relatively youthful David Miliband to coming months. the Foreign Office and Jacqui Smith’s big promotion to the Home Office. After a strong track record in Iain Anderson, Director and Chief Corporate Counsel, government and having narrowly missed out on winning Cicero Consulting the Labour Deputy Leadership election, Alan Johnson moves from Education to Health, a key post as this field will form a vital political battleground in the run-up to the Also available online ... next election. Labour has lost its historic poll lead over Visit www.thefsforum.co.uk/knowledge the Tories in health, despite high levels of investment for the following articles: and reduced waiting lists, and will need to quickly and decisively win back the initiative. Personal view All is not well in the world of regulation. Vincent Cable calls Peter Hain has a solid ministerial record, but his the FSA to account – and proposes two initiatives to restore appointment to the Department for Work and Pensions, investor confidence. where he replaces John Hutton (who moves to the new Department for Business and Enterprise) will come as a Sandler and Pickering – our members’ response There is no doubt that the Sandler and Pickering Reports will surprise to many.