An inconclusive outcome at the general election could slow the rollout of key Government policy, including the revolutionary pension reforms.
The outcome of the May election is “the most difficult to predict in a generation” according to commentators, potentially opening the door to 1970s-style battles fought “issue by issue”.
There is also a risk of a political vacuum opening up as senior financial services policymakers either lose their seats or are no longer part of the Government following the election.
So could 2015 really see a repeat of 1974, when two general elections were fought in a year? And will party politics undermine the coalition’s radical pension reform agenda?
Most difficult in a generation
With less than four months until the election, political exp-erts are being careful to hedge their bets over the result.
But they all agree on one thing; that it is shaping up to be the most difficult election outcome to predict in decades.
The latest YouGov polls put Labour and the Conservatives neck and neck with about a third of the vote each followed by the UK Independence Party at 15 per cent and the Liberal Democrats and Green parties tied at about 8 per cent.
The Scottish National Party has surged ahead of Labour in polls north of the border in the wake of the referendum on independence, adding another dimension to what could become a “mosaic parliament” of various parties.
Commentators say the fragmen-ted political landscape increases the chances of another coalition alth-ough not necessarily a repeat of the Tory and LibDem partnership, or even of a single party trying to rule without an overall majority in the Commons.
Cicero director and chief corporate counsel Iain Anderson says: “People are starting to think about the prospect of a minority government because a deal may just be too difficult to do.
“So you’d have either Ed Miliband or David Cameron trying to run a minority government, looking at each issue in turn – literally issue by issue.”
Anderson says the election is reminiscent of the 1974 campaign when the Conservatives recorded the most votes and Labour won four more seats but not enough for an overall majority. There was another election in October of the same year in which Labour gained a tiny minority of just three seats.
Anderson thinks we could be on course for a repeat of that scenario where the Government had to battle to get anything through Parliament.
He says: “The only way to keep the show on the road is by that kind of permanent deal-making, lurching from issue to issue, potentially from vote of confidence to vote of confidence. One of the concerns I have is that it makes governing Britain very difficult.”
He says while the 1974 economy was balanced very differently to today, the UK suffered from “the paralysing effects of a government that couldn’t push through rules”.
Aside from the Finance Act, Parliament is not required to pass any legislation.
Lansons director Ralph Jackson says: “We could have a mosaic Parliament and the impact on policy would be profound because you can’t plan strategically in any particular area. If you’re hide bound by a need to reach consensus in the short term it doesn’t always make for great longer-term policy.”
While the legislative changes req-uired to bring Chancellor George Osborne’s pension reforms into life have largely been completed, the scale of the changes mean tweaks will almost certainly be required.
A lack of experienced ministers could also hinder the smooth implementation of reform and risks creating a “political vacuum”, according to providers.
Liberal Democrat pensions minister Steve Webb has a majority of over 7,000 in his Thornbury and Yate seat. However, the brains behind much of the coalition’s pension policy will likely find himself out of Government as his party’s popularity continues to suffer.
His Labour counterpart, shadow pensions minister Gregg McClymont, may also be out of the running as a poll by former Tory donor Lord Ashcroft published last week shows the extent of the party’s woes in Scotland.
Out of the 16 mostly Labour held seats polled, 15 would have switched to the SNP. Likewise, LibDem and Treasury chief secretary Danny
Alexander would lose his Inverness, Nairn, Badenoch and Strathspey seat if the survey plays out in reality.
Conservative Mark Hoban had been tipped as a future pensions spokesperson for the Tories but he recently announced he will be stepping down from Parliament, pot-entially leaving a gaping hole in financial services expertise.
Industry insiders say Department for Work and Pensions select committee member Nigel Mills could be a contender for a senior pensions role but may be seen as compromised following a story in The Sun that showed him playing mobile game Candy Crush during a debate.
Another insider told Money Marketing his company was modelling scenarios that could see Webb ret-ained as pensions minister.
He says: “Most would consider Steve Webb a successful pensions minister and he’s had wide support from the industry. Initially we ruled him out but now we’re thinking he shouldn’t be. He could be part of a formal or informal coalition, even if on a temporary basis and with the LibDems not in power.”
Royal London head of corporate affairs Gareth Evans says: “There is the possibility of a vacuum in the pensions space post-election.” But he adds there are opportunities to influence policy outside the Government.
He says: “We’ll see Webb in a pensions role, even in opposition he can be helpful in framing debates. But that requires legislation being made for someone in the opposition to make a difference.”
Standard Life head of pensions strategy Jamie Jenkins’ major concern is if a new Government attempts to impose further change in any of the major reforms of the last five years.
Last year, Money Marketing revealed how senior Labour figures were exploring how the party could rein in some aspects of the new pension freedoms to better fit the party’s philosophy.
Jenkins says: “I’m less concerned about who is pensions minister, there’s plenty of knowledge around the Treasury and DWP and regulators given the focus we’ve had over the last few years.
“What’s more important is the party politics. A complete change in government would potentially bring about a big change in the view of how we should be managing pensions. While I don’t see a big reversal of something like auto-enrolment or even the Budget, you could see further change which might be quite disruptive in the period where we’re trying to implement both.”
Aviva head of pensions policy John Lawson says following the changes “there is less need now for an expert in the next five years as those changes are rolled out”.
“If we’re only looking at things like tax relief – which is owned by the Treasury anyway – or something like increasing contributions into auto-enrolment, that could quite easily be grasped by someone not familiar with pensions.”
In the background, support for a permanent independent body responsible for pensions policy has been growing over recent years – even gaining tacit support from McClymont. But others say wrestling such a crucial area away from politicians will be an impossible task.
With less than 90 days to go until polling day, the outcome remains no clearer than it did a year ago. As Cicero Elections shows, neither Labour nor the Conservatives can break the 35 per cent mark that traditionally crowns a winner, while the threat of minority parties grows by the day.
As the SNP looks increasingly set to gut Labour in its heartland, UKIP and the Greens continue to establish themselves as the rightful home for disaffected voters.
This alone paints a complicated picture, let alone the full picture, which further includes Welsh nationalists, an array of Northern Irish parties and the ever-suffering Liberal Democrats. Never mind pentagonal politics – we are witnessing the Borgenisation of the British political landscape.
The uncertainty this crowded field creates has led political historians to draw comparisons to 1974. The general election in February of that year created the first hung parliament since World War II, with Wilson’s Labour winning a plurality of four seats and Heath’s Conservatives winning the popular vote by 0.7 per cent.
The resultant unstable Labour government led to a second general election in October of the same year – a first in British political history.
Current polling and party positioning indicates an outcome as indecisive as February 1974 is not impossible on 8 May. The real question is: what happens if we repeat history to the extent of a second general election just eight months later? Such sustained political uncertainty holds inherent risks for business. In any normal election cycle, as a given party takes the lead, the circus of electioneering gives way to the business of policy.
However, without a clear majority no party will make this crucial transition from election to policy machine. The rate of legislative output in such an environment would make the last four months of zombie Parliament seem positively frenzied. The necessary ongoing embedding of recent pension changes will be put on ice.
Most crucially of all, key policy decisions including the UK’s place in the EU – and latterly Scotland’s place in the UK – will be treated as vote-winning sound bites rather than key policy decisions requiring prudent scrutiny and deliberation.
Although it may serve up the entertaining drama of multi-party politics, the Borgenisation of our politics looks set to cripple our policymaking.
Iain Anderson is director and chief corporate counsel at Cicero Group
Bhupinder Anand, managing director, Anand Associates
It would be extremely unfortunate to have inexperienced people in ministerial roles who have not been particularly involved during the changes. Pensions is a complicated area and is about to become more complicated. People will need leadership from the Government.