Financial services could be hung out to dry
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Hung Parliament: ‘Industry needs to put its case and this will mean working with politicians from across the spectrum’
McGee: ‘Tearing up fragile consensus’
Aegon has warned the financial services industry to prepare for uncertainty over the future of financial regulation, pensions and tax relief if the forthcoming general election results in a hung Parliament.
Head of corporate affairs Francis McGee says a formal coalition between two parties or a minority administration relying on the votes of smaller parties would bring a lot of uncertainty over future financial services policy.
He says while issues such as the retail distribution review, money guidance and EU measures such as Solvency II, look set to continue regardless of the outcome of the election, other plans are not so certain.
McGee says: “The future of the FSA, which is set to be abolished altogether if the Conservatives win outright, is one such area. Would a minority Conservative administration be able to push their plans through if they needed Liberal Democrat MPs to vote with them?
“Similarly, the Conservatives have committed themselves to a quick review of the existing plans for the National Employment Savings Trust.
“But it is not clear that the LibDems would support a move which could be construed as tearing up once and for all the fragile consensus around the Turner package.
“With the LibDems arguing for equalisation of tax relief at the basic rate of income tax and the fiscal situation as serious as it is, a minority or coalition Government of any stripe would find it more difficult to avoid the temptation to make further inroads into tax relief on pension contributions.”
McGee says the industry needs to be geared up to cope with the uncertainty that a hung Parliament would bring.
He says: “Even in the event that one side or the other ends up with a small working majority, we could expect to see a subtle but distinct shift away from the idea that the Government can just decide what it wants to do and force the legislation through Parliament. It would have to make concessions to be sure of getting its way and that would mean more emphasis on building coalitions across parties on specific issues.
“The industry needs to be ready for these potential changes and diligently put forward the case for a robust financial services industry. Crucially, this will mean working with politicians from across the spectrum to ensure the interests of our customers and employees are properly reflected in this process.”
Lansons public affairs director Ralph Jackson says the uncertainty of a hung Parliament would have a negative effect on business. He says in the event of a hung Parliament, the LibDems “would not prop up a discredited Labour party, nor do a deal with Cameron”.
He says it is more likely that the LibDems would act as an independent force in Parliament, voting on issues on a case-by-case basis.
Jackson says: “On economic policy, where the country badly needs a sense of strategy and direction, the worst outcome is no real result.
“The Tory emergency budget after they win, should they win, will be very austere and will be hard to swallow for some. If there is no clear mandate, then the pain will be put off but that is bad for UK competitiveness and economic recovery.
“Regulatory reform would be delayed to year two or three if the Tories do get a mandate after a second election, so it would be a useless outcome for the financial services sector, intermediaries and ultimately the consumer.”
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