So, the first part of the Boundary Commission's proposals for reducing the number of MPs from 650 to 600 is out and the bun fight has started. The squealing and special pleading is all too predictable and will lead to some bitter rows within all three major parties. As I have pointed out before, alot of this will be so much hypocritical nonsense.

Let's take a step back and remind ourselves why a review like this is necessary.

Too many MPs
Since the university seats were abolished after the Second World War the number of MPs has crept up from 625 to where it is now at 650. It was briefly higher for the 1997 and 2001 General Elections when it peaked at 659 but a few seats were trimmed in the post-devolution boundary review before the 2005 election. This was too timid a nod towards the implications of devolution for the role of the Westminster Parliament.

As the number of MPs has risen we have seen an enormous transfer of powers away from Westminster, firstly to Europe and now to the three devolved parliaments in Scotland, Wales and Northern Ireland. We simply do not need as many Westminster MPs as we once did. I accept that the reduction from 600 to 650 seems abit arbitrary and would be easier to justify had a proper study been carried out to ascertain what type of Parliament we need as we move into the second and third decades of the 21st century but it is a good start.

Silly sized constituencies
In addition, there is the problem of too big a spread in the sizes of constituencies which seems counter-intuitive most of the time with urban seats in tight geographical areas having fewer voters than more rural seats that already cover large regions, often embracing dozens of small towns and villages. I don't really care whether you think this favours Labour or the Tories - it doesn't make much sense.

Having looked through the Boundary Commission proposals last night I feel it has done a very good job. I am sure there are a few proposals that will need looking at very hard but, overall, it looks very sound. It even solved the 'Devonwall' problem at neatly as could be hoped with the proposed Bude and Bideford constituency. Most of the noise from displaced MPs will amount to little more than a protection of their own interests but the collective impact of the distress this much needed change will cause is that it might unnerve the government and persuade it to postone the review until after the next General Election. I hope not.

 

I have often urged the wider insurance industry and financial services sector to do more to engage with Parliament and not leave all the lobbying to trade associations. This week is a sharp reminder of why that is necessary now as much as it has ever been.

Let's step back briefly and remind ourselves of what we are dealing with.

First, Parliament makes the laws that change the lives of people, the businesses they work in and depend on. It is no good trying to plead that what goes on in Westminster is not relevant to you or that you don't want anything to do with it because you don't like politicians. It is there, it is important and it isn't going to go away unless we lurch into dictatorship which we haven't done since the days of Oliver Cromwell.

Second, it is full of new people as around one third of MPs - the largest proportion since the end of the Second World War - were newly elected in May. This has both benefits and drawbacks. It brings fresh thinking into Parliament, new expertise and a renewed vigour. On the down side, it means that alot of knowledge and understanding of the insurance and financial services sectors (among others) has gone out of Parliament. This poses a challenge.

Third, there is one hell of alot going on at the moment that directly affects the industry and its customers. Take just the last few days for instance.

• The Transport Select Committee is enquiring into the rise in motor insurance premiums
• The Treasury Select Committee is looking at the proposed regulatory changes with Lloyd's appearing today
• Yesterday there was a debate and vote on compensation for Equitable Life policyholders
• Yesterday there was a meeting of the All Party Parliamentary Group on Insurance & Financial Services to discuss flood defence spending
• On Monday the Government announced that there will be a three hour debate on the Retail Distribution Review

As I said, that is just in the last few days. In the background the Finance Bill, which enacts the radical Budget proposals put forward by Chancellor George Osborne last month, has been rumbling along. There is lots more too.

The industry is quite well served at the moment by its various trade associations. The Association of British Insurers is at its most effective for some years, the British Insurance Brokers' Association has stepped up to the plate, Lloyd's is a polished performer in Parliament, the various IFA trade bodies are doing a good job and there are others contributing too. However, the national trade bodies can only do so much. MPs, especially those with slim majorities, have to pay attention to their constituencies and are usually keen to accept invitations from businesses to meet them and their staff. This is where everyone in the industry has a role to play, especially in hammering home the message that UK financial services is about alot more than just the City of London.

Don't forget too that MPs face an uncertain future. If the Bill to reduce the number of MPs to 600 goes through alot of them are going to face the next election with new boundaries and thousands of voters that they don't know and who don't know them. We will even see MP fighting MP in some areas. This means they are especially keen to make as many contacts as possible and listen to the concerns of businesses in their constituencies. Believe me, this sort of local lobbying makes a difference.

So, make it a priority to contact your MP, especially if they are new (and regardless of party), introduce them to your business and start to inform them about what the laws they are debating in Parliament right now will mean for your business, your staff and your customers.

I have been experiencing a sense of déja vu ever since Ed Miliband snatched the leadership of the Labour Party from his brother at the weekend. As I watched his worthy but rather dull speech to the Labour Party conference yesterday this sense of experiencing a re-run of recent political history kept returning. Then, this morning, I put my finger on it. Ed Miliband has committed the same mistake as William Hague in 1997.

Cast your mind back 13 years. The Tories had just lost a General Election after a long period in office, John Major had resigned as leader and two of the big beasts of the Conservative Party, Michael Howard and Ken Clarke, were lining up to slog it out for the leadership. William Hague, then 36, agreed to run as deputy on Michael Howard's ticket and this was announced one evening. By the next day, he had decided to go it alone and run for the leadership himself. He won it and it turned out to be one of the worst decisions of his political career.

What happened was that having agreed to back Howard, Hague was then persuaded by his close aide, Alan Duncan, that he could win the leadership himself. This turned out to be the correct analysis but the wrong judgement. I've always thought the Hague could have been leader of the Conservative Party almost whenever he wanted. 1997 was certainly not the time to take it on as the Tories had too much to do to throw off the messy legacies of a once successful leader who had become deeply unpopular (Thatcher), bitter divisions over Europe and an increasingly sleeze-ridden last few years in office.

The parallels with the position the Labour Party now finds itself in are many and for the 40 year old Ed Miliband not particularly auspicious. He, like Hague, was a late entrant to the leadership contest having calculated that he could win enough trade union votes to snatch the prize from his brother. But why would you want it now? Wouldn't he have been better to let someone else take it on now, suffer all the problems that the party will have in throwing off the unpopular Blair/Brown legacy and then come in after defeat at the next election as the saviour? 

Having said there are significant parallels with the position the Tories were in in 1997, it is important to highlight some differences too.

First, the scale of Labour's defeat in May was nowhere near as bad as the trouncing dished out by Blair to the Tories in 1997.

Second, Labour in 1997 inherited a pretty sound and improving economy. Labour this time bequeathed an economic disaster, the remedies for which may yet prove so politically unpopular that the Coalition collapses under the strain.

Third, Labour is a deeply sentimental party and does not ditch its leaders lightly unlike the more ruthless Tories and, in recent, years the Liberal Democrats. Failure at the polls doesn't mean an end to a leadership, as Neil Kinnock proved.

 All that said, I still think it is unlikely that Labour will win a majority at the next election: if the reduction of Parliamentary constituencies and the equalisation of electorates in the 600 seats that are left goes through then it will be almost impossible for them to do so.

Which brings me back to my feeling of deja vu. Why go for it now? I think we could be watching a man who could have been Prime Minister one day but will probably never achieve his ultimate ambition for the simple reason that he let that ambition overwhelm his political judgement, let alone any sense of family loyalty.

One of the most interesting features of British politics since the General Election has been the almost total lack of coherent opposition to the Coalition government. Of course Labour politicians have shouted at it alot but it has rarely amounted to much more than knee-jerk opposition to everything that it says and does: you get no real sense of any alternative course of action.

This sad state of affairs is largely down to Labour's ludicrously cumbersome and extended leadership election process which has had the effect of paralysing the official opposition for over four months. Fortunately, this finally comes to an end at next week's Labour Party conference, after which we can expect real politics to resume.

This phoney war contributed to the rather empty feeling after Nick Clegg's speech to the Liberal Democrat conference yesterday which predictably lacked policy substance but also lacked any real passion. True, he managed a fair bit of vigour when attacking Labour for the appalling economic (and for liberals, civil liberties) legacy it left but we all know that the main  culprits in that department have all departed the political stage so it felt contrived. He couldn't attack the Conservatives as that would have looked foolish, even if his party tried to hand him some tools for that job earlier in the day by voting against the government's education policies. So without any political enemies in his sights, Clegg had little to offer beyond an extended rallying call to his troops to hold their nerve when the flak really starts flying when the spending review is unveiled.

Now, I know many Liberal Democrats will say this is a typical media misunderstanding of the new politics of co-operation and consensus and that we must learn to expect politicians to spend more time looking for where they agree rather than disagree but it does seem to be a world extraordinarily bereft of passion and belief. Labour's lazy negativity since the election has allowed this thesis of co-operation rather than confrontation to gather credibility and for the assertion that it is what the public wants to go almost unchallenged. I don't think it will hold for long once Labour has a new leader and once the public starts to feel the effects of the accelerated deficit reduction programme.

I think some of the Coalition supporters have mis-read the increasingly indecisive election results (at least in terms of the share of the popular vote) over the last 40 years as an expression of a public desire to see greater co-operation between parties and consensus. It isn't. Most people have voted for parties that offer something they believe in and which represent values that are very distinctive. The consequence of that diverse and divided electorate was finally realised in May when we woke up to a Parliament where none of the parties has a majority. Against a background of economic crisis, a stable government was essential and there was only really one serious option for achieving that, a point that Mr Clegg made well yesterday. The challenge of coalition politics is to forge a workable compromise from different policies and different political beliefs, not to pretend that such differences are not important or even that they no longer exist.

Starting next week, we will see who is right on this. Once Labour has a new leader, the phoney war will be over. It will obviously be a very close contest and whoever wins will have a very tough job rebuilding a party drained by 13 years of increasingly controversial government but they will almost instantly sharpen up Labour's attacks on the Coalition. They will also offer David Cameron a real target to shoot at when he stands up in front of the Conservative conference the following week. I expect by the time Parliament returns later in October it will feel much more like real politics has resumed. 

Our first post-war coalition government has now lasted 100 days; not a great achievement in itself but a convenient moment at which to pause and consider its impact on the financial services sector.

I thought it would provide an interesting perspective to look at what has been done by considering impact that the Liberal Democrats have had on policy in this area. After all, the only real alternative to the Conservative/Liberal Democrat coalition following May's General Election was a minority Conservative administration. This would have been unstable and would have be looking to create a suitable opportunity to call a fresh election later this year or early in 2011 to drive for an overall majority. This would have made it rather more cautious in a couple of crucial areas.

The first would have been overall economic policy where I think it is inconceivable that a minority Tory government would have proposed such a drastic programme of public expenditure cuts, as much as it may have wanted to. It is only the security of the coalition's majority and the prospect of not having to face the electorate for five years that has instilled the confidence in George Osborne and the Treasury team to announce a high risk strategy of spending cuts. They are prepared to run the risk of a stalling recovery because they believe the economy will come out of the other side much stronger and know they have the time to wait for the hoped for benefits to become manifest.

The second policy area where I think we would have seen a more cautious approach applied is pensions. The backlash to the various announcements about raising the retirement age and abolishing barriers to working longer has been sadly predictable and is not something a government constantly looking over its shoulder at the opinion polls would have risked provoking.

Beyond that, most of the rest of what we have seen so far in the way of policies for the financial services sector would have been much the same.

The reform of the regulatory structure looked initially as if it might be strongly influenced by the Liberal Democrats but, after some debate within the coalition we have seen the Conservative manifesto proposals rolled out virtually unchanged. The Financial Services Authority is going and its responsibilities split between the Bank of England and a new Consumer Protection and Markets Agency, coupled with a clearer focus on financial crime. The Liberal Democrats were dismissive of calls to restructure the delivery of regulation, preferring to stress the need for more effective management if systemic risk within the existing structure. They would have retained the FSA.

Action to get the banks lending and to rein in remuneration has largely reflected the promises and rhetoric of the Conservative election campaign. They may not be as keen as their coalition partners on shaking up the banks but they know full well that they cannot afford to be seen to be soft on them. This is one area, however, where policy could take a more distinctively Liberal Democrat turn over the next few months. The Treasury is currently consulting on the proposal to impose a levy on the banks and Vince Cable's Department of Business, Innovation and Skills published a wide-ranging consultative document - Financing a Private Sector Recovery -  just before the recess containing some quite radical proposals to force banks to lend more to businesses. The more fundamental battle over the structure of the UK banking sector, with the possible separation of retail and investment banking (favoured by Cable and the Lib Dems), has been temporarily postponed with the creation of the Independent Commission on Banking to review this area but it will force its way back onto the policy agenda next year.

The final policy that merits a mention is the decision to press ahead with compensating the policyholders of the failed Equitable Life. In opposition both the Conservatives and Liberal Democrats were highly critical of the Labour government's steadfast refusal to bring this long running saga to a conclusion and both included pledges to act quickly in their manifestos. The recent proposals to set in train a process of compensation would have happened with or without the coalition.

 Apart from banking reform, there are relatively few significant policy differences between the Conservatives and Liberal Democrats in financial services so we are not likely to see many battles here which threaten the stability of the coalition. Those battles will be fought elsewhere as the full implications of the depth of the public expenditure cuts dawns and as the process of electoral and political reform begins to gain some real momentum.

Vince Cable's candid interview in today's Guardian confirms that the decision to abolish the Financial Services Authority and split its role between a beefed-up Bank of England and a new Consumer Protection and Markets Agency was a matter some some contention within the newly-formed Coalition government.

The original agreement between the Conservatives and Liberal Democrats was silent on the matter and it looked as if the FSA had won a reprieve - certainly this is how quite a few of us read the agreement. That turned out to be a premature judgement as Chancellor George Osborne seized the initiative and announced to a dinner of City grandees at Mansion House in  the middle of June that the reform of financial services regulation was going to proceed largely along the lines set out in the Conservative manifesto. He added some clarity over the split in responsibilitry between the Bank of England and the new CPMA, especially by adding the oversight of markets to the new body's role, but it was a Tory policy through and through.

Now Vince Cable has confirmed that this was more or less how it happened, trying hard to relegate it as an issue behind what he sees as the more pressing problem of getting the banks lending again. His dismissal of the debate about "how you organise the furniture, the quangos and so on, is to my mind a secondary problem" isn't entirely convincing given his thorough going pre-election condemnation of the collective global failure of regulation to prevent the slide into crisis from the middle of the last decade onwards which was especially well articulated in his book, The Storm: the World Economic Crisis and What it Means. It was, he argued, a broader problem of tackling of systemic risk on a multi-national level, rather than shuffling and re-shuffling regulatory responsibilities on a national level.
 

The announcement yesterday by Treasury minister Mark Hoban that we are still probably at least a year away from getting compensation into the hands of Equitable Life policyholders falls some way short of the expectations that the coalition government partners raised during the General Election campaign just three months ago.

I pointed out at the time just how unusual it was to see such specific pledges in election manifestos but both the Conservatives and the Liberal Democrats followed through their longstanding criticisms in Parliament of the Labour government on this issues with clear cut promises.

"We will implement the Ombudsman's recommendations to make fair and transparent payments to Equitable Life policyholders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure" - p12, Conservative manifetso.

"We will make pensions and benefits fair and reward savers by...meeting the government's obligations towards Equitable Life policyholders who have suffered loss. We will set up a swift, simple, transparent and fair payment scheme" - p18, Liberal Democrat manifesto.

We can certainly say there is nothing "swift" in what has been proposed. Mr Hoban made it clear that there are several stages to go before any money finds its way into the hands of policyholders who will be especially disappointed to hear that yet another commission is going to be set-up, albeit with the more encouraging brief of advising on the best way to allocate payments. This is expected to report in January next year with the best estimate of when compensation payments might actually start flowing being the middle of 2011.

I still struggle with the need to keep setting up more and more committees, enquiries and commissions, certainly for this final stage of calculating and distributing payments. We have a very good mechanism in place already for handling compensation claims - the Financial Services Compensation Scheme. The FSCS has already proved itself very capable of acting beyond its original remit with the way it responded to being tasked by the last government to hand out £7.4bn of public money to the 300,000 savers with the collapsed Icelandic banks. Equitable Life requires less money to be distributed to more people and the calculation of losses on different types of pension plan are much more complex than with bank savings plans: this just further reinforces my view that we should make a start on this by using the expertise and systems that are already tried and tested.

The next problem is sorting out just how much the Treasury is prepared to put on the table and this is where the government does seem to be getting into some difficulty. The report from Sir John Chadwick - commissioned by the last government to come up with a limited scheme to compensate those worst affected - was also published yesterday and it has some extraordinary figures ranging up to £4.8bn for the relative loss suffered by policyholders. It is, of course "relative loss" that the Tories focused on in their manifesto with the important qualification "as a consequence of regulatory failure". Some headlines today have suggested that the actual compensation fund could be set as low as £500m. This figure has been arrived at by taking Sir John's lower range of £2.3bn to £3bn for absolute loss together with his suggestion individuals be paid only 20% to 25% of that. The chances are that this approach would have been broadly adopted by the Labour government but it doesn't really match up to the promises that the coalition partners have made.

The two big problems that are really contributing to the further delay are the need to focus on the proportion of the relative loss caused by regulatory failure. A fair chunk of that £4.8m is generated by the fact that comparable life companies have performed very well in the intervening years and policyholders need to be told that they cannot expect to be compensated for a poor choice of fund managers: that is how markets work. What they can be compensated for is the failure of regulators in the early 1990s to pick up on how Equitable Life was over-stretching itself by promising guaranteed returns that were not achievable, at least not without huge detriment to non-guaranteed annuity policyholders. We are still no nearer to putting a percentage on that, although maybe Sir John is trying to help us in the right direction.

The other problem is the Treasury's over-riding desire to cut public expenditure significantly and Mr Hoban acknowledged the importance of this in his speech to Parliament yesterday: "This scheme will be a significant spending commitment for this government and cannot be considered in isolation from the other spending decisions that it will need to make over the coming months and what is affordable in that context".

Where does this leave us? It leaves us waiting for the government to put a sum of money on the table. This is what should have been done some years ago. I actually do not think you can ever really pin down just what proportion of the losses suffered by policyholders are down to regulatory failure and what proportion is down to all those other factors constantly present in the savings, investment and annuities markets, so you might as well put an ex gratia sum on the table and get on with distributing it. Regardless of the figures Sir John Chadwick has come up with I have always thought that anything over £1bn would satisfy most of the political campaigners for compensation, although unlikely to appeal to the more ardent members' action groups. Funny enough if you apply Chadwick's 20% to 25% cap to his estimates of relative loss rather than absolute loss you get to this sort of figure. In the current political and economic climate a settlement of £1.2bn to £1.5bn would be seen as very reasonable and I think that is where we will end up.  

The latest newsletter keeping key executives and public affairs professionals up-to-date with the activities of the david.worsfold@incisivemedia.com