As Havard Hughes explains, the next few years could be as revolutionary as the Big Bang for the future of financial services in the UK, so it’s time for the City to stand up and be counted.
It must have seemed like a jolly jape, dreamt up behind the Parliamentary bike sheds. The coalition had a brilliant wheeze to stitch up the unions by introducing a spending cap at elections. No longer would Labour have access to limitless pots of cash from their union barons. Better still, the brothers would be forced to reveal their shadowy party-political hand. But this little noticed land grab has had unforeseen consequences. With the general election now 99 days away, it could mean that City voices are silenced – just as plans to ratchet up taxes and regulation are being debated and an EU referendum looms.
The idea that no-one will speak up for financial services when we potentially have a referendum on leaving the EU in 2017 is positively sinister.
So panicked are some groups in the City that rumours abound that many are contemplating a protracted period of silence. If this were to be the case, it would not only be a gross abdication of duty, but a disservice to both democracy and these groups’ members. According to a report prepared for The CityUK, the UK financial and professional services sectors contributed some £174bn to the UK economy in 2012, paid £65bn in tax in 2012-13, and employed 2m people. This makes the City the UK’s most important industry. The idea that no-one will speak for it during the next few months, and possibly for years afterwards, is surely absurd. The idea that no-one will speak up for financial services when we potentially have a referendum on leaving the EU in 2017 is positively sinister.
Defining the new law
So what is this new law? Essentially, those spending money during election campaigns in a way that can be seen as ‘party political’ must now account for this spending and register with the authorities. There is also an upper limit, policed by the Electoral Commission, as to what is acceptable. These changes came from the Lobbying Act, which updated the lugubriously named Political Parties, Elections and Referendums Act.
That sounds simple enough. The unions can no longer funnel their members’ hard-earned subs to boost friendly MPs without putting the whole thing in the public domain. More significantly, the legion of state-funded campaign groups that have mushroomed in recent years will have to publicly disclose if they are essentially campaigning for MPs and parties that will keep funnelling them taxpayers’ money.
But here lies the rub. The legislation does not just apply to state-funded groups or unions. It potentially applies to any organisation that intervenes ‘politically’ in a campaign.
The CBI discovered this to its cost. It was held to be participating politically in the Scottish referendum, as it planned a dinner with the pro-union Prime Minister. With no such event slated for his pro-independence opponents, there was considerable indigestion all round. But why was this a problem? After all, not even the cream of Edinburgh’s business elite could have planned to spend the then referendum cap of £150,000 on the dinner. In the end, they didn’t even cross the Scottish threshold of £10,000 to require registration as a ‘non-party campaigner’ in the first place. The problem was that organisations that style themselves ‘non-political’ can face a backlash from members if they are suddenly in the position of being asked by the Electoral Commission to register as a political player. Moreover, some organisations have constitutional structures that prevent “political” involvement of any kind. For example, the Companies Act requires a members’ resolution for political expenditure.
Time to stop running in fear
Yet there is no rational reason for business groups to panic at the law and abstain from involvement in the election. There are generally only two circumstances where an organisation need comply with the registration requirements: when they organise a public-facing event that could be deemed to favour one party over others, or when they intervene in a party-political manner on certain issues, say by running advertisements. Registration is free and the Electoral Commission is eminently approachable. All registered organisations have to do is fill out a straightforward return, arguably more straightforward than those completed for financial regulators, for example. No City executive need fear the consequences. Alternatively, if sudden registration is likely to cause embarrassment, organisations should discuss this with their members at an early stage.