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Puppets on a string: Are FCA and Govt dancing to the lobbyists’ tune?

Financial services lobbyists met with Government ministers and senior regulators from the FCA more than 600 times in 2013.

But is this a problem or democracy in action?

In the week that Legal and General left the Association of British Insurers arguing it can better lobby alone, Money Marketing has examined ministerial diaries and those of senior regulators to investigate what these appointments tell us about how financial services policy is being shaped.

So who is getting the most access? Is Apfa doing enough to lobby for advisers? Is a lobbying crackdown in the UK and Europe necessary and, if it is, will it have any effect?

Tip of the iceberg

Money Marketing has looked at the 2013 ministerial diaries for the Treasury, the Department for Work and Pensions and the Department for Business Innovation and Skills. We also looked at those for FCA chief executive Martin Wheatley, chairman John Griffith-Jones and director of supervision Clive Adamson from when the new regulator was set up in April 2013 to the end of the year.

The diaries reveal 613 contacts between ministers or senior regulators and financial services firms or trade bodies. These include ministers attending breakfasts, dinners and speaking engagements and from group meetings where each organisation present is counted seperately and one-on-one meetings.

The FCA’s diaries do not include meetings with regulated firms.

Trade associations had 186 contacts, banks had 228 contacts, insurers 69 contacts, investment firms 62 contacts and accountancy firms 68 contacts.

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Speaking to Money Marketing on the condition they remain anonymous, one lobbying firm employee said this kind of access gives big companies and trade groups “disproportionate influence” over policy.

“The meetings recorded in these diaries are the tip of the iceberg,” he says. “There are also meetings with officials, special advisers and others that go unreported.

“Of course, firms can always just make a donation – direct or via the business dinners the political parties push every year in conference season. Basically, an opportunity to raise issues for 10 grand a pop.”

One of the major lobbying firms in the financial services sector is Cicero Consulting. Its clients range from Barclays to the City UK. Its director and chief corporate counsel Iain Anderson is also chair of the Association of Professional Political Consultants.

He says: “This comes to the question of whether lobbying is a legitimate exercise in a democracy and I would argue absolutely it is.

“It is up to public policymakers to work through that lobby and come to their own view. I quite strongly refute there is any undue influence and would argue the private sector usually has to work harder to get the meeting.”

Anderson also points out diaries of special advisers are published, but they are only required to declare meetings where hospitality is provided.

Apfa

Last year, the ABI met with the Treasury eight times, with BIS five times, with the FCA three times and with the DWP nine times. Over the same period, the British Bankers’ Association met the Treasury 11 times, BIS seven times and the FCA four times.

By contrast, Apfa met with FCA chief executive Martin Wheatley twice.

Apfa director general Chris Hannant says the organisation engages on “all levels”, including meetings with Treasury and FCA officials which are not included in the register. He adds the body also responds to consultations.

He says: “It is rather unfair to compare us to the ABI because they cover more issues and have far more pol-icy staff than we have in our team of three. We also see ministers at other opportunities like party conference events that won’t show up in the diaries.

“We should be judged on results, not the number of meetings. We saw off an attempt in Priips to cap advice fees, we secured a cut in advisers’ fees to the Money Advice Service from around £4.5m to £1.7m, reduced reporting requirements for advisers and we’ve got the long-stop into the FCA’s business plan.”

Highclere Financial Services senior partner Alan Lakey sat on Apfa’s council for 19 months before standing down in July. He says the effectiveness of Apfa’s lobbying is a concern of many advisers.

He says: “It could be down to a lack of lobbying or inappropriate lobbying or them being inept. They’re claiming credit for victories they can’t prove are theirs.”

Cracking down

In the UK, the Transparency in Lobbying Act will introduce a statutory register for lobbyists although it will only apply to organisations where the main business is lobbying.

According to Anderson, this means only political consultancy firms like his are in scope. By excluding charities and in-house lobbyists the Act covers just 1 per cent of the industry.

Speaking for Cicero rather than the APPC, Anderson says he would be happy for the Act to have included a requirement for meetings with ministers’ special advisers to be published, something which it currently does not include.

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The “secret lobbyist” has told Money Marketing the Act is seen as a “laughing stock” within the industry although things could yet get tougher for the industry due to pressure from Europe. The new European Commission president Jean-Claude Juncker is pressing for a compulsory register of lobbyists in Brussels, saying “our citizens have a right to know” who Commissioners, their staff, MEPs and representatives of the council are meeting.

It is unlikley, however, to deal with what some call a “revolving door” between Government, Whitehall and lobbying firms, an example of which is the UK’s proposed European Commissioner Lord Hill. 

Hill worked for the Conservative party’s research department and as a special adviser to Kenneth Clark. After that he became a senior consultant for Bell Pottinger and eventually set up Quiller Consultants, which according to the APPC register has among its clients the City of London Corporation and HSBC. Hill has reportedly sold his shares in Quiller’s parent company Huntsworth.

Former member of the European Parliament’s economic and monetary affairs committee and Green MEP Phillippe Lamberts has said: “We want to reduce the influence of lobbying and we don’t want to let the wolves into the sheepfold.”

Independent regulatory consultant Richard Hobbs used to work for Lansons, another major financial services communications and lobbying firm. He says Lamberts’ language is unhelpful because it paints lobbyists as an enemy, whereas actually policymakers often depend on their knowledge.

He adds: “There is a fair bit of neurosis about all of this. While it is right to question how influential powerful interest groups are, the number of occasions where that influence has any discernible results are relatively small. The very large proportion of representations fail.”

Transparent?

The APCC register contains information on which organisations have hired lobbying firms. Money Marketing contacted around 80 financial services firms, organisations and trade bodies on the register asking for details of meetings with ministers and regulators as well as what they pay the consultancy. Only 22 responded, and only a handful provided detailed responses.

The Financial Ombudsman Service paid Fishburn Hedges £49,968 in 2012/13 and 2012/14 for “business continuity planning” and for support while the service re-tendered a contract to carry out a regular review.

Responses from other organisations were less forthcoming. Fidelity said it is a client of Cicero Consulting “as a matter of public record”. St James’s Place said it hires Bell Pottinger “for their media expertise” and the Equity Release Council said the questions were “to some degree intrusive”.

Organisations may be forgiven for not wanting to broadcast what exactly it is they are lobbying our elected leaders on but while this information stays hidden questions over the industry and influence will remain. The secret lobbyist says: “Despite what the industry likes to say about transparency, lobbying is based on confidentiality. And it is not that all of it is dodgy, it is just that the public really don’t know much about it.” 

EXPERT VIEW: The secret lobbyist

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Large corporates and trade bodies have the spending power for an experienced internal team and an expensive agency – and the connections that come with that.  This gives them hugely disproportionate influence over policy. The meetings recorded in these diaries are the tip of the iceberg. There are also meetings with special advisers and others that go unreported.

The Government’s Transparency of Lobbying Act is something of a laughing stock among the more ethically minded end of the lobbying industry and ensures, by way of a glaring loophole, that special advisers can continue to do the rounds lunching lobbying firms and their clients, picking up policy ideas to drop in the ears of their bosses. 

Depending on their political sympathies, some special advisers use meetings to warn lobbyists of regulatory threats, or share valuable intelligence on forthcoming legislation well before any less well connected stakeholder group might get it. 

I am aware of senior figures in the lobbying industry lunching regularly with the top special advisers of all three party leaders – and of course half the time the adviser is thinking of their own career, probably as a lobbyist, after their time in Whitehall. Perhaps with the same lobbyist they are lunching.

Of course, firms can always just make a donation – direct or via the business dinners the parties push every year in conference season. Basically, an opportunity to raise issues for 10 grand a pop.

In the case of the big six accountancy firms, some cover the bill for their own staff to go on secondment at the heart of the policy process – in some cases helping to vet and edit party policy. Despite what the industry likes to say about transparency, lobbying is based on confidentiality. And it is not that all of it is dodgy necessarily, it is just the public do not know much about it.

An employee of a lobbying firm, who wishes to remain anonymous

EXPERT VIEW: Iain Anderson

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Lobbying is an essential part of any democracy. Anyone can lobby government and a very wide range of individuals and organisations do.

Some of the best funded, best organised and most effective campaigners are community groups, consumer groups, trades unions and the charitable sector. Remember Joanna Lumley and the Gurkas!

Many of those groups have deep pockets for political campaigns which dwarf private sector budgets.

No one should seek to misrepresent the policymaking process as a closed shop for large institutions.  To do so only distracts from encouraging anyone to lobby.

Throughout the financial crisis the sector has won and lost arguments with policymakers – witness the debates on banking reform, retail distribution, regulatory perimeters and capital.

Some arguments won – some lost. That’s the nature of a healthy democratic process.

In my experience the consumer lobby – and we work with it too – is as effective as the finance sector in marshalling its arguments and having them land with policymakers.

So it’s not a one way street. It’s a ‘public’ policy process now more than ever in a digitised world. And that’s as it should be. That is the best way to achieve balanced public policy which reflects the overall public interest.

Professional lobbyists influence is based on our ability to marshal the evidence through undertaking research or gathering market data, not on cosy networks. 

And what of lunching with those Special Advisers? Well they also have to publish their diaries – just like their ministers. The information is there for anyone who cares to look.

I agree the process can become more transparent and publicly accountable, but it is consultant lobbyists that are pushing for this. Association of Professional Political Consultants members publish all our public policy clients and all our consultants and have done so for the past 20 years. The Government’s own plans for a lobbying register will capture less than 1% of lobbying.

Better public policy needs more lobbying not less.

Iain Anderson is director and chief corporate counsel for Cicero Consulting and chair of the Association of Professional Politicial Consultants

ADVISER VIEWS

Mike Pendergast IFA Zen Financial Services says: “I suspect banks and insurers have more decisions go their way because they get more access, as this piece shows. Bodies that lobby for IFAs like Apfa mean well but don’t seem to have as much of a say, probably because they are not big enough.”

Bob Wilson financial adviser Greensky Wealth says: “Lobbying is part of democracy but the problem is it is the large organisations can do more of it and will lobby in their own interest. And you always want full disclosure so special advisers’ diaries should be published in full.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Okay ~ with exactly which Treasury and FCA officials has APFA had meetings, what subjects did it raise at those meetings and what were the outcomes of those meetings? As for responding to consultations, anyone can do that. It’s hardly something that warrants APFA beating its puny chest about.

  2. The revolving door is the biggest issue for me. There needs to be a minimum of 18 – 24mths break between officials from govt, the treasury, quangos such as the FCA and private companies changing roles. That way they are hired for their knowledge rather than inside information. The banks and regulators have been guilty of this for years and with the onset of the credit crunch illustrated how light touch regulation was applied in all the wrong areas for the banks.

    Will it change? Not whilst we have too many vested interested at the top of government sadly.

    I admire the like of Alan Lakey getting actively involved and we need more like him working AT the regulators rather than WITH the regulators.

  3. Not that we need confirmation of something we already know all too well, but Hannant’s comments constitute an unfortunate admission that, in the lobbying stakes, APFA is decidedly in the flyweight league.

  4. Lobbyists or bungs backhanders and various other INDUCEMENTS. What is the difference between a ” Lobbyist ” and a product provider who ” influences ” by way of free lunches , or FREE dinners, or opportunities to PAY Them for their SPEECHES AND SPEAKING ENGAGEMENTS ( see Conservative MP’s – who make more money form making speeches than as an MP ? ? ? ) ?
    WHY does their contract of employment permit these ? The sponsorship of Government in its many facets – is NOT DEMOCRACY IN ACTION – these people have been purchased and PAID FOR !
    TOday David Cameron has been photographed in a ” Wet Suit ” ( whilst appropriate ) . . I wonder if he was sponsored by the . . . . Dulop Rubber Company or Speedo’s or Michelin Man ? I wonder how much the conservative party were given for such wiliness to make a fool of himself – in Rubber . . .where other members of the conservative party may also dress up in rubber or . . . . . ? Perhaps David Cameron is now into CB Radio speake – where David Cameron he is RUBBER DUCK . . . . . to his ” convoy ” party, and party members . . . and his new female cabinet members . . . .The Christmas party should be interesting . . . . . bring in the photocopier . . . . . .?

  5. Editor’s comment:
    In the print version of this article, we incorrectly stated that “Zurich paid MHP an undisclosed amount to help them lobby over, among other things, protection, charges, pensions reform and long-term care.”
    We would like to clarify that MHP are employed by Zurich to support its in-house press office and public affairs teams and not to provide a lobbying service.

  6. I wonder if the same applies to Lloyds and TSB who own Scottish widows and other subsidiaries where the last Tory Grandee Sirr win Bischoff and their latest Tory Grandee appointed as chairman – can use their influence – in lobbying or other inducements – to further their cause. The problem with sponsorship in its many forms – means we are not able to trust an MP as being open honest or transparent . . . . . eg speeches and after dinner speaking events . . or pre dinner speeches – where some mak emor money than they do as MP ?

  7. AIFA recruited a senior FSA official as head, he was verbally abused and left soon after. Can’t blame him.

    The advice sector has serious issues, as serious as what Sants found when he went to work for Barclays.

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