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Back to the front

To write for the first edition of 2002 invites the most obvious of elephant traps, namely to make political predictions for the year ahead.

It is a trap I propose to walk into with glee. Feel free to rub my nose against my crystal ball in December 2002.

In the world of financial services, the Government is beginning to resemble the German Wehrmacht in 1942. It is fighting wars on so many fronts that one wonders how it has the energy to fight on.

From tax credits to baby bonds, from Isas to annuities, all is under continued scrutiny and reform. Some issues, though, will come to the fore in 2002.

The euro

Apologies for starting with the obvious. Many of you will no doubt have already handled euros on your way back from your Christmas skiing break. The euro will continue to dominate the headlines in Britain.

I do not think there will be a referendum this year but the Government will move much more quickly into softening-up mode.

I also predict (regrettably, as I am a eurosceptic) that the public will become more enamoured of the currency. Much of the debate this year will focus on whether or not we can have a dual-currency economy.

Baby bonds

I do not really understand why baby bonds have not received more coverage. To my mind, they represent one of the most genuinely interesting and innovative policy experiments of this Government.

The consultation closes at the end of February and you can bet that the Chancellor will present pretty firm proposals in the March Budget.

The bonds will be small sums of money, topped up at five, 11 and 16, with family members able to invest and there will be no restrictions to how the bonds can be used when the holder turns 18. They are a fantastic marketing opportunity for banks and insurers alike to snaffle customers in the womb.

Annuities

I think the Government will come to some conclusions about annuities. I do not think they will be very radical. There will be some more momentum behind pushing the open market option, as well as raising the age at which it becomes compulsory to buy an annuity. But radical plans to allow people to have more flexibility with their capital are deemed to complicated and unworkable.

Sandler

Ron finishes his inquiry in the summer. It is very difficult to predict where he will go.

Considering the work that the Sandler team has been involved with, in particular, seeking to understand the economics of the industry, as well as the Government&#39s clear agenda developed over a number of years for simple, consumer-friendly products, one would expect Sandler to address the issue of commission (as far as he is legally able), benchmarking and any other potentially consumer-friendly ideas.

But there is not much more to add to what has been said for the last four years and it is hard to see where Sandler will make his impact.

Much of what he is supposed to address is being covered by the polarisation review, the conclusions of which will be wrapped up in Sandler to give it meat, as well as by FSA league tables and the Davies review into education.

There is enough to be getting on with in that agenda alone, not to mention the outcome of the NHS review.

This will be another busy year for financial services, with more change and fluctuation. Some will be good, heralding new products. Other changes may simply move the regulatory goalposts creating change and uncertainty where it is not necessary.

Consolidated Communications director of public affairs Edward Vaizey makes his political

predictions

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