JOB OF THE WEEK

The Liberal Democrat’s recent surge in the polls has made this one of the closest elections in nearly 20 years.

If this surge in the polls translates to a surge on voting day, there is a very real chance of a ‘hung parliament’ in Britain.

While this phrase has been bandied around in the media of late, it was very interesting to attend a breakfast meeting this morning on what the actual scenarios are post-May 6, and what they would mean for politics and business.
 
Speaking at the event were Tim Collins, former Director of Communications for the Conservative Party, Neil Stockley, former Director of Policy for the Lib Dems, and David Hill, current Director of Communications at No.10.

All were clearly well-placed to give a real insight into the parties, how they felt the campaigns had gone so far, and the realities of a hung parliament.
 
To put it simply, a “hung parliament” is one in which no party has an overall majority, which means no party has more than half of MPs in the House of Commons.

It means that the government will not be able to win votes to pass laws without the support of members of other parties.
 
At Thursday’s election the number of seats contested will be increasing from 646 to 650 as a result of boundary changes.  

That means that on the face of it, an absolute majority would require one party to win 326 seats and that if no party won that many seats there would be a hung parliament.  

In reality, it is not quite that simple because the speaker and his deputies do not usually vote.

Also, in the current parliament, there are five Sinn Fein MPs who refuse to take the oath of allegiance to the Queen and as a result are not entitled to vote.  

But in the simplest terms, Labour will lose its absolute majority if it loses 24 seats and the Conservatives will gain an absolute majority if they gain 116 seats. Any result in between will result in a hung parliament.  
 
If there is a hung parliament Gordon Brown will remain in power unless or until he chooses to resign. The constitutional convention is for the prime minister to resign if he can no longer “command the confidence” of the House of Commons.

If Labour is not the biggest party after the election then Brown may feel under moral pressure to resign.

When parliament reconvenes, the vote on the first Queen's speech will indicate whether the prime minister has the confidence of the house.

Alternatively, the opposition can table a motion of confidence in the Commons. If Brown lost the vote, convention dictates that he would resign.
 
Brown could also try and form a coalition with the Lib Dems to take their combined tally over the 50% threshold.

But it is very unlikely that the Lib Dems would be willing to support Brown if he doesn’t have the most seats.

It would then fall to Cameron to try and form a government. He could do this by building a coalition, offering the Lib Dems a say over certain policies and a handful of senior government jobs.

Or he could form a minority government, cobbling together enough votes to get individual pieces of legislation through.

But if he were defeated on a big piece of legislation like the Budget, or in a no-confidence vote, he would have to call another election.

Traditionally, the Lib Dems are closer to Labour, but they are tight-lipped on who they would prop up this time round.

Clegg is said to dislike Brown, so could call for his resignation in exchange for support.

But that would mean the UK gets its second unelected leader in a row.
 
All three speakers agreed that Thursday’s result is just too close to call, and so any of the above scenarios are a possibility.  

What was also very clear from the speakers was that if there is a hung parliament, then Special Advisers and All Party Parliamentary Groups (which form around specific issues i.e “insurance and financial services”) are likely to have greatly enhanced roles, and it is here where organisations will need to focus their political lobbying.

They also made some interesting comparisons to New Zealand where a hung parliament is the norm (due to the different voting system) – and where individual MPs have a lot more influence on Bills, than they would under the UK system, where the government of the day has in recent years been able to push through legislation relatively unimpeded.

This certainly gives us food for thought as to how the political process, and as a result, our lobbying approach, will change after the election.
 
For those of you who enjoy the odd flutter, the speakers all had the following tip on the result – “bookies tend to make better predictions than other pollsters!”.

They said you should also remember the rule used by Mike Smithson, a blogger who runs politicalbetting.com and who has successful predicted the results of all elections, and by-elections in recent years using the following rule – the poll most likely to be accurate is the one which gives Labour the lowest percentage of the vote.

It will certainly be interesting to see if this comes true on Thursday!

As we settle in to 2010 and the new decade, the new world for mortgages is becoming a little clearer.  We have seen the first re-brand of a lender, uniquely before launch.  The brand formerly known as Checkmate is acquiring an entire management structure with an appropriately skilled executive and non-executive team, to satisfy the new rigour being employed by the FSA.  We have to trust that this new approach from Canary Wharf delivers better products and processes capable of sustaining sound commercial judgement.  The target is that any newly approved lender has the team and plan capable of coping with whatever the market will throw at them in the future.  This has to be the right objective.

History tells us however that this may not be bornE out in reality.  Regulatory intervention to protect holders of final salary pension schemes is now seen by some as having only served to drive such schemes from the market.  Controls and guidance on With Profits may have made them safer, but applied restrictions that make them such anodyne performers that they deliver no risk return premium to cash.

This is why I worry about the MMR. The FSA is staffed by lots of very good people with the right objectives and positive intentions.  It is their intention to do the right thing.  In that they have our full support.  That was the case with Pensions and With Profits.  It is however unfortunate that sometimes when government or regulators interfere in markets and products, their actions can have unintended consequences.  

I am hoping that having started the discussions, listened to feedback and analysed all the data, that we will now enjoy a short period of calm reflection.  Where we assess carefully what the objectives are.  Where we consider what are the issues which need to be addressed, to deal with the risks of today, not those of yesteryear.  Perhaps we need a prioritised list of issues and a list of optimal solutions.  In undertaking the work to date the FSA has done a great job in getting all the issues out on the table and debating a great range of solutions.  The trick now is applying the most appropriate and proportionate remedies that deliver a safer market without unduly constraining its ability to operate effectively and grow.  We all need to accept that the old days are gone, but over-regulation risks hindering a return to a "normal" market.  By working together, regulator, lenders and brokers, we should not over-shoot the target and impede growth.

Last week I attended an anti-money laundering conference organised by the Asset Recovery Working Group ‘Payback' Team and hosted by the Serious Organised Crime Agency's (SOCA) UK Financial Intelligence Unit (UKFIU). The conference was very well attended by a real cross section of businesses ranging from financial advisers and mortgage brokers to retail stores and nightclub/casino organisations.

Speakers sent out a very clear message about the Suspicious Activity Reports (SARs) regime; suspicion based reporting works! Now I hear some of you saying that you've submitted SARs in the past but no action appears to have been taken on these. SOCA readily admits that it has failed to communicate well with the industry in the past but is now attempting to remedy this situation. After making its first SAR a firm can expect to get feedback from SOCA to let them know that it has been received and to also help with any further submissions. Another means of communication with the regulated community is "Payback Times", a quarterly publication which gives information on the recovery of the assets of crime.

You might think that making a SAR on what seems trivial to you is not worth the effort. You should remember that an individual SAR may not have much for law enforcement to go on in isolation but it can become part of a jigsaw that builds a case showing criminal activity. Although the reporters' identity remains confidential, SARs are held on a database that can be accessed by local law enforcement and other government agencies. These records are kept for between 6 and 10 years and can highlight not only what most people consider to be organised crime, such as drug crime and/or people trafficking, but also cases of tax evasion and benefit fraud.

At the conference a speaker from FSA talked about the change in regulatory approach of late, mainly due to the economic crisis. Internal fraud is on the increase with employees being targeted by criminals to steal client information for ID fraud; it has also been reported that there's been a 15% increase in attempted mortgage fraud. A thematic review is currently being carried out and although the results aren't due to be published until January next year, early evidence shows that small firms don't take the threat of being used for financial crime seriously enough. One of FSA's four statutory objectives is the reduction of financial crime so we are likely to see more enforcement action against firms and individuals who shirk their responsibility.

As a closing shot FSA said that law enforcement had closed down a document factory which was producing fake ID, evidence of income and such documents which were being used by the perpetrators of financial crime. What was more surprising was that a list of this factory's customers was found and many of these were regulated firms. I'm guessing those firms can expect a knock on the door from the Regulator......................... or worse!