Insurance Post

General Election 2015: The ties that bind

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Concerns that political influence is for sale refuse to go away. But could the system really be changed to stop MPs having outside business interests?

Scrutiny of the connections between business and politics has never been more intense, especially when it comes to large amounts of money changing hands. The Channel 4 and Daily Telegraph sting that caught out two respected former Foreign
Secretaries – abour’s Jack Straw and the Conservative’s Malcolm Rifkind – just before the upcoming election put the issue right back at the top of the political agenda.

During Straw’s final speech at the end of March – he had already decided to retire from Parliament before the controversy – he reflected on the changes he had seen in his 36 years as an MP: “Parliament has become stronger. MPs have never been more hard-working and this place has never been more visited, yet cynicism about politics is more pervasive than I can recall. The age of deference has come to an end, which in many ways is no bad thing. We are no longer on a pedestal.”

Rifkind, who was forced to stand down because of the row, didn’t seem to share Straw’s view about MPs being hard working. He was caught on camera saying he didn’t have a full-time job and found plenty of time to do other work.

The huge changes Straw was reflecting on are set to continue, not least because of the ease with which MPs can take on outside interests that pay very generously has been exposed – £5000 a day was the figure most frequently mentioned in the Channel 4 Dispatches programme – and the feeling it left among the public was that they are somehow being short-changed by part-time MPs. Coming a little over five years after the expenses scandal, it has done nothing to reassure the public that MPs are not merely in politics to make a lot of money.

It also resurrected the concerns that political influence is for sale to the highest bidder, an issue that goes beyond individual MPs to the way the parties themselves raise the huge sums of money needed to fight modern election campaigns.

Labour has gone into the election promising to ban MPs from accepting directorships and paid consultancies. Its manifesto is short on detail as to how this will be achieved. It says nothing about MPs who already hold directorships, perhaps in family firms, and nothing about the House of Lords. A spokesman said Labour’s priority for the second chamber was to replace the Lords with an elected Senate and he anticipated the same rules regarding paid interests would be extended to it then. He also said the proposed ban would be phased in during the next parliament, allowing existing contracts to expire before a 2020 cut-off.

Labour leader Ed Miliband set out the reasons why he felt there should be a ban in a letter to the Prime Minister earlier this year: “I believe MPs are dedicated to the service of their constituents and the overwhelming majority follow the rules. But the British people need to know that when they vote they are electing someone who will represent them directly, and not be swayed by what they may owe to the interests of others.”

If such a ban came into force it would cost many MPs dear. In 2014 the Register of Members’ Interests revealed that 91 out of 305 Conservative MPs earned around £4.3m outside parliament, while 22 out of 256 Labour MPs clocked up £2.4m, although £1.36m of that went to Gordon Brown, who donates most of the money to a range of charities, including his own foundation.

Insurance and politics
The insurance industry has its fair share of financial connections with individual MPs, although several of these will disappear in the next parliament as the MPs concerned are standing down (see box). Two who may be challenged on their interests if Labour emerges as the governing party are Sir Paul Beresford, Conservative, MP for Mole Valley, who was paid £13,000 in 2014 to act as a consultant to Lockton, and Sir Nicholas Soames, Conservative MP for Mid Sussex, who was paid £98,000 last year as a senior adviser to Marsh. Both Lockton and Marsh declined to comment on these long-standing arrangements and the MPs haven’t responded to enquiries. Soames was an insurance broker with Sedgwick, which was acquired by Marsh, before he became an MP in 1983 and is on record extolling the virtues of having MPs with close connections with business and commerce.

This is a theme on which former Conservative MP and long-time chairman of the All Party Parliamentary Group on Insurance & Financial Services, John Greenway, was very forthcoming: “The question of whether MPs should have outside interests is fundamental to the kind of parliament we want to have in the UK. There would be several undesirable consequences of any rules prohibiting any outside earnings. It would mean that once elected, MPs would have to give up existing business commitments and this would be a deterrent to many people coming forward. The House of Commons membership would become even more the preserve of career politicians with no experience of business, commerce or the professions and individuals able to finance themselves from family or previously earned wealth. Financial support would be offered and arranged by other means, for instance through trade union sponsorship, which lacks the transparency of the current arrangements for the registration and declaration of outside interests.

“Throughout my 23 years in parliament I maintained a number of insurance interests. I like to think the industry benefited greatly from my advice and involvement, including my 10 years as an elected member of the Insurance Brokers Registration Council. Specialist knowledge and experience can also greatly benefit an MP’s constituents as happened in my case when hundreds of homes in Ryedale [where he was MP] were flooded.”

Many in the industry share this view says Stephen Riley, president of the Insurance Institute of London: “On the whole I support MPs having outside positions, whether as advisers or board members.

“Obviously these need to be declared as they are at the moment and not detract from an MP’s first job of serving his constituents. Perhaps a maximum of one day a week averaged over a year.

“Insurers would benefit from a two-way flow of information regarding political developments that may affect financial services and MPs by being better informed about the consequences of their actions – on pensions for instance.

“If MPs are banned from taking on any outside work I believe we will have significantly less well-informed MPs and, therefore, worse legislation. Politics would become a less attractive career and the quality of MPs would deteriorate even further. Any ban on outside work would also mean no journalism or legal work by them too.”

MPs with paid connections to the insurance industry who have stood down
(Click to enlarge image)

 

Business can help politics
Steve White, chief executive of the British Insurance Brokers’ Association, was also supportive of MPs being free to take up some outside work: “It is very important that government fully understands business and the sectors within [it], like insurance and brokers. Having a politician as a non-executive board member can help achieve this. It works both ways, so that they understand the business and the challenges that it faces, and the business highlights their issues within a wider context. Involvement in business provides a broader picture and experience for the politician.”

Former Conservative cabinet minister Lord Hunt of Wirral is currently chairman of the British Insurance Brokers’ Association.

If Labour is in a position to introduce a ban on directorships and consultancies, it has indicated it may still leave some scope for outside earnings, especially for those from a professional background such as the law or medicine who may need to keep professional qualifications up-to-date. After all, many MPs only survive a single term and the average length of service in parliament is just 11 years. Such leeway is likely to be tightly controlled, however, with a cap set at between 10% and 15% of the £67,000 current annual salary of an MP.

It is easy to see why Labour is shying away from proposing a similar ban on peers as many of them have business interests that pre-date their arrival in the Lords: indeed, many are appointed because of their business interests and several have connections with the insurance industry.

 

Selection of the main connections between members of the House of Lords and the insurance industry

Lord Ashton of Hyde (Conservative) 
Elected as working hereditary peer in 2011 when he became the 4th Baron. Was CEO, Faraday Underwriting and Faraday Re and a member of the Council of Lloyd’s until appointed a government whip and spokesman in July 2014

Lord Blackwell (Conservative
)
Life Peer. Chairman,  Scottish Widows

Lord Carlile (Liberal Democrat)

Life Peer. Chairman, Lloyd’s Enforcement Board

Lord Hunt of Wirral (Conservative)
Life Peer. Chairman, Biba. Chairman of financial services division DAC Beachcroft

Lord Leitch (Conservative)

Life Peer. Former CEO Zurich Financial Services. Chairman, Bupa. A wide range of other non-executive directorships in the financial services sector

Lord Levy (Labour)

Life Peer. Financial consultant to  RK Harrison

Lord Sharman (Conservative)

Life Peer. Was chairman of Aviva until June 2012 but doesn’t currently list any insurance industry interests

Lord Sheikh (Conservative)
Life Peer. Former owner of Camberford Law but doesn’t currently list any insurance industry interests

Source: Lords’ Register of Interests 2014


A ban on paying MPs directly would not bring an end to the connections between the financial services sector and individual parliamentarians as the door would still be open to support them in other ways.

The most significant support is the provision of research, secretarial and administrative fucntions,  with the major firms of accountants such as Deloitte and PWC offering very significant support to a range of opposition spokesmen and women and chairs of Select Committees. For instance, Labour’s shadow Chancellor Ed Balls received over £80,000 of technical and research support from PWC between March 2014 and March 2015 and the shadow business secretary Chuka Umunna received £68,000 from it. At a more modest level, Wrightsure Insurance Group contributed £6000 of constituency office accommodation to Jackie Doyle-Price, Conservative MP for Thurrock.

Disappearance of trade associations
What has virtually disappeared over the last 25 years is the payment of MPs directly by trade associations. There was a time when almost every trade association in the insurance industry had a paid parliamentary consultant: now there are none. This is no surprise to Nick Starling, the former director of general insurance at the Association of British Insurers: “Trade associations paying an MP is not a good idea. At the ABI we worked very hard to make sure it was seen as apolitical by working with MPs of all parties. It would have been disastrous if any of those relationships had been paid for.

“What is important is that trade associations use their members and their networks to build up relationships with constituency MPs wherever they have offices.”

Starling was also quick to defend MPs: “Most MPs do a very good job. People are very muddled about what they want from MPs. A lot of people say they want people who have a wide experience and don’t want MPs who have done nothing but politics in their careers. MPs might only be there for five years so are you expecting them to drop everything if they already have established careers?”

At a national level, the amounts of money donated by individuals and companies are huge. Since the last election in 2010, around £221m has been donated to political parties. £52.6m came from trade unions with all but £900,000 of that going to Labour. Corporate donations reached £48m but are now dwarfed by individual donations, which topped £120m.

The really big individual donors come from the property and financial services sectors, with hedge fund manager Tony Farmer leading the way with £4.2m to the Tories since 2010. Labour has also enjoyed support from City connections with over £1.5m from the financial services sector and over £2m from property. On the whole, insurance does not feature high in the lists of either individual or corporate donors for any of the major parties.

However, the stand-out donation came from Brightside insurance group co-founder Arron Banks – who now runs Go Skippy – who pledged £1m to UK Independence Party last October in a blaze of publicity, after claiming he was insulted by former Conservative leader William Hague. Hague dismissed Banks’ defection to UKIP as inconsequential despite him having previously donated £25,000 to the Conservative Party. This prompted Banks to up his planned donation to UKIP from £100,000 to £1m, making him their largest backer alongside Paul Sykes.

The funding of politics always has been a sensitive issue and has embraced many scandals and much public outrage over the generations. It seems little ever changes in that regard, even if the focus switches from time-to-time.

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