A year to the day yesterday, Mr Johnson became PM and the subsequent 12 months have set in motion changes and events that have far reaching consequences for the future of the UK. Here, Head of External Affairs, Seth Williams reflects on his year inside the Westminster bubble and what might lie ahead.
It’s been a hell of a year. Frankly, at times it’s just been hell – but enough of my children’s reflections on home-schooling. As we head into the Summer Recess, below are some thoughts on how we got here and what’s ahead for the sector.
By this point last year, politics in the UK had already become surreal. Between the 2017 and 2019 elections, we were given a master-class in just how powerful Parliament can be – we went from wafer thin Government majorities to no majority, Theresa May to Erskine May, and at one point Oliver Letwin (remember him?) was de facto PM in Parliamentary terms. Having reached the point of complete political log-jam, Mr Johnson was gifted the opportunity of an election by SNP guile, Lib Dem miscalculation and mismanagement of the Labour party. Very few politicians have the political charisma of our current PM and his 80 seat majority is testament to his extraordinary ability to connect and persuade – he is rightly credited with a historic majority, beating Jeremy Corbyn and ‘Getting Brexit Done’ (whatever that means).
Actually, despite all my talk of change – one thing that hasn’t yet changed in material terms is our relationship with the EU. Not yet at least – that scintillating/depressing/life-changing/terrifying (*delete as appropriate) experience awaits us all 161 days from today. The context for such an existential change in our global economic, social and political status could not be more different to that envisaged in 2016.
Aside from its appalling and tragic human impact, the spectre of Covid-19 has changed a huge number of fundamentals impacting the way we live our lives, work and socialise. From the sector’s perspective, there is a huge amount of work to do in reputational terms as a result of the persistent issues stemming from business interruption – all of which has masked the vast amounts of work that has gone on right across the insurance and long-term savings industry to support individuals, businesses, charities and the NHS. So, if there’s one objective from my perspective from here – it is rebuild reputation. It is actually worth saying that at no point since Covid-19 impacted have we stopped (and often it’s felt like we haven’t slept) – the first six months of this year have seen 214 pieces of case work, 77 meetings with Parliamentarians items and 99 mentions in the Parliaments of the UK and devolved nations.
So, what can we expect in the second half of 2020? What should we be preparing for and what opportunities should we be seeking out? Here are ten things that we should have firmly on our agendas.
1. Command and control Government
Dominic Cummings was central to the Brexit victory for Vote Leave and credited with the strategy that set out the path to victory for Boris Johnson in 2019. He dominates the scene unlike any adviser before him – which other serving adviser can you recall giving a live press conference to defend themselves in circumstances that would have seen every other adviser in any other era resign? Like or loathe his approach, it is certainly having impact on the Government’s profile, policy priorities and the machine: the longer Mr Cummings is in post, the deeper entwined Mr Johnson’s reputation becomes with that of his adviser – can he operate without him (answer probably, as long as the quality of other such as Sir Edward Lister also behind the throne); more hawkish the UK’s approach will to international trade negotiations (in particular with the EU) – don’t forget that we were due to see a trade deal ‘done by July’, it’s now October; and the more likely radical and long lasting change to the civil service and structure of Government will be brought about in some form – we’ve already seen the end of DFID, which begs the question of how extensive the eventual reshuffle will be when the Department disappears in the Autumn. Incidentally, if anyone doubts the politicisation of the Civil Service it’s worth watching this clip of the longest serving Home Secretary of modern times (and PM until this time last year) reacting to Sir David Frost’s appointment as National Security Adviser.
2. Coming back from Corona
Any Government would have had a real task on its hands with the outbreak of Covid-19 but it is easy to overlook that the Government – the actual people in the Cabinet – were already all knackered and only just beginning to find their feet at the beginning of the year following five months of fighting Parliament, a General Election, seasonal flooding and then Brexit. The Government’s response has included the scale of economic intervention that John McDonnell would surely have dreamed about unleashing as standard, but over the next six months that will be withdrawn and the long road to economic recovery will need to begin. That will primarily have implications for the many rules that we have seen encroach on our daily live – from wearing face masks in shops to working from home but more fundamentally on the Government’s approach to a second wave – the PM described a second lockdown as a ‘nuclear option’ – so if the winter brings on a resurgence, expect continued and potentially widespread local lockdowns before we see a return to anything UK wide. Following the impact of business interruption insurance claims over the last four months, the onus on the industry to be better prepared next time around is considerable – the work being led in a number of quarters on pandemic insurance solutions will be critical over the next 12 months, as will developing deeper public and public policy understanding of insurance. We’ll continue to service and update our Coronavirus information hub and issue weekly member updates for the foreseeable – all feedback welcome.
3. Tax and Spend
The Government’s agenda will be about rebuilding the economy in the wake of Covid-19 and ahead of Brexit. Doubtless that will have a tax impact – don’t forget though that it is less than nine months’ since the Conservative party was elected on a manifesto that trumpeted a triple tax lock (no rise in VAT, no rise in income tax, no rise in VAT for five years) and a pensions triple lock. Very little goes down worse with the electorate than reneging on recent tax pledges, so expect the Government’s focus groups to be busy over the next three months working out the least worse options here – one tax avenue I suspect they won’t bother focus grouping is corporate taxes: taxing big business (those with the broadest shoulder and all that) and potentially one-off sectoral tax raids could well be on the menu (don’t forget the Autumn will see a change in leadership at the CBI too…) The Comprehensive Spending Review (announced this week) and Autumn Budget provide us with an opportunity to set out and, where necessary, campaign on the industry’s priorities and concerns including on pension tax relief and IPT. Given our proximity to Brexit and the changed nature of our economy, the TSC has a timely inquiry on the future of taxation – which given the timescales for response (28 August), is likely to see us respond initially at a strategic level.
4. Life outside the EU
We have all loved the rollercoaster of Brexit so in reality it should be no surprise at all that a deal over our future relationship with the EU looks set to go to the wire – it was June, then July, now October – I predict that if a deal is to be done (and it will be a bare bones deal at that) it will be done just in time for Christmas. With less than six months to go, if no deal is struck, the insurance industry will be need to be well positioned to ensure customers are aware of the need to travel by car with a Green Card and have adequate travel insurance, in particular to account for a lack of EHIC arrangements. Beyond the consumer impact, the consequences (positive or negative) of our new trading relationship with the EU will VNUK. One of the long-sought and little-reported developments of recent weeks has been the very interesting HMT-led initiative to review the prudential frameworks in the UK post Brexit, including Solvency II. A call for evidence is expected ‘in the Autumn’ (which we all know could mean April next year…) This is a unique opportunity that the industry must seize to set out the improvements it wants to see to optimise the industry in the UK – given the overarching economic and political context we have, we will only succeed in securing changes we want through demonstrating relentlessly – through illuminating and persuasive case-studies - the power and potential of the industry to contribute to UK plc and benefit customers.
5. Devolving or dissolving the UK
The UK has been on a trajectory to greater devolution since at least the 1970s and this has been made real since the introduction of tangible devolution under Tony Blair since the end of the 1990s. With large mandates comes the opportunity to act for the long term but Tony Blair benefitted from a Scottish Labour party that dominated the political landscape – Boris Johnson has no such mandate north of the border and next year’s Scottish Elections should be a real concern for this Government. The SNP has been playing the long game and nobody should delude themselves that they will settle for devolution – they might as well change the party’s name. If anyone doubts the significance of persistent support for independence in Scotland, you just have to look at the hastily arranged visit by the PM yesterday and its headline messages – don’t forget that focus groups have been an essential feedback loop for Government for decades now: the twin spectres of Brexit (for a country that didn’t support it) and Covid-19 for a country that, despite Westminster, has supressed it, will certainly be presenting a campaign challenge to those that want to keep the UK together. Ultimately though is the flaw in the thinking – keeping the union cannot be a campaign, it has to be through meaningful demonstration of relevance and value. Over the last five years, the ABI has strengthened its engagement across the nations of the UK, under the leadership of Alastair Ross and we will continue to provide you with engagement and insight as head into further choppy devolved political seas in the months ahead.
6. Ageing with grace and saving with confidence
The UK Government was elected on a manifesto that promised to fix the crisis in social care once and for all. The impact of Covid-19 has exacerbated the need to address this for the long term and so we wait with bated breath to see if the Autumn Budget brings forward any tangible measures such as the previously rumoured compulsory tax for the over 40s. If this was easy territory, it would already have been addressed – if such a tax were brought in, there would inevitably be criticisms given everyone isn't expected to require social care in their lifetime but in that regard it’s no different to the long-held principles of risk pooling that under pin other areas of public life. As and when there is an announcement and clarity of the future framework, the insurance sector will certainly have a role to play in the funding of social care. One of our big fears of Covid-19 was that pensioners would panic and raid their savings – this hasn’t happened as far as we can tell (expect to see more in this from us tomorrow), which is obviously positive, but the impact of Covid-19 brings a whole new set of pressures on to Automatic Enrolment and businesses' ability to support their employees over the longer term. There are a number of political challenges coming down the track and more than enough issues in the industry in-tray: for improving the guardrails for people making retirement savings decisions under Freedom and Choice, improving the lifetime guidance journey, ensuring legislation is brought forth and properly scrutinised for a permanent ‘super-funds’ regime and unpicking some of their Lordships amendments to the Pensions Schemes Bill, to name but a few.
7. A Green recovery, climate change and more flooding
We saw during last year’s election campaign how even the most charismatic of leaders can be impacted by events, when the Prime Minister was criticised by locals in Doncaster following devastating local flooding. Amongst other things that episode led to the review currently being undertaken by Amanda Blanc looking at under insurance in the affected areas. We have long known the real and reputational impact of flooding and it’s telling that in preparing for the winter, Downing Street has listed Flooding (alongside the flu, Covid-19 and Brexit) as risks the military should be scenario planning for – meanwhile the recent announcement of substantial investment and a holistic approach to long-term flood risk is really welcome. Should we see a further isolated or widespread flooding event this Autumn or Winter it will be more important than ever for the industry to be on its A-game in terms of response and service to affected customers. As managers of climate risks and investors in assets that can mitigate those risks, the UK’s insurance and long-term savings industry can play a leading role in the Government’s Green recovery and the overall objective of tackling climate change. COP26 may have been delayed but it represents an opportunity for the industry to demonstrate its appetite and get stuck into what is ultimately the biggest challenge facing all of us over the medium and longer term. Bang on cue, the Treasury Select Committee has announced the resumption of its inquiry into decarbonisation of the economy and green finance.
8. A healthy, resilient and diverse workforce
The one common experience for most of us over the last four months will have been working from home. That will have been different for everyone but for employers across the UK it will provoke many of the same questions and challenges – how do we transition back to the office; indeed do we transition back to the office? How do you support workers better in future, regardless of location, to ensure productivity and continued mental good health? These challenges and more are at the heart of some of the work we are doing to increase awareness amongst employers and policymakers of the really important role of protection insurance in supporting a resilient workforce. Indeed, since April, there have been new obligations on employers to make their employees aware of the safety nets available to them. Our new Work and Wellbeing Hub is designed as a spring board for this work and we will be continually updating this and feeding content to journalists as well as preparing for political and wider stakeholder engagement in the weeks ahead. At the same time, one of the stand-out but little known features of the last four months has been the role of private hospitals and private medical insurers in lending resource and capacity to support the NHS. We must seize this tangible demonstration of collaboration and use it to knock on the head the lazy assumption in some parts of Whitehall and Westminster, of public good, private bad. Changing tack, achieving true gender and ethnic diversity in the insurance and long-term savings industry has to be a constant objective for the industry. Aside from being a no-brainer, expect increased interest from Government on this in the months ahead – Covid-19 has masked many things in the short term but you cannot escape under-representation and part of the industry’s renewal has to be better reflecting the customers it serves.
9. Build, Build, Build (particularly in the ‘Red Wall’ North and with adequate professional indemnity insurance and non-flammable materials…) So yes, building stuff is the way to go if you want to a) address an employment issue and b) address a housing shortage. Depending on how you calibrate the necessary partnerships with private industry there’s potentially lots of infrastructure projects to be developed as well (obviously including the long anticipated HS2 project..). So this latest in a rich heritage of three word political slogans (alright it’s one word repeated three times, hat-tip Tony Blair…) could set the scene for an interesting period ahead – expect the focus, given the new-found Conservative constituencies to be very much focussed in the North of England. Underpinning it all of course is the urgent need for a complete overhaul of the UK’s respective buildings regulatory frameworks. This week we welcomed the publication of the draft Building Safety Bill and this important piece of legislation will be critical workstream over the months ahead – there are long-standing insurance challenges stemming from the inaction over the removal of cladding and the highly unsafe nature of many high rise buildings. We have been making the industry’s voice heard on these issues for many years and well before the tragic events of Grenfell Tower – we now have an opportunity as an industry to engage and create a system that is fit for the future.
10. Cross-party engagement
Whilst the Lib Dems (with fewer MPs than previously) are still pursuing the longest and possibly most irrelevant leadership election in the party’s history, the Labour party’s new leader has been in place for barely three months. In that time, relationships are actively being reset with key constituencies that suffered enormous harm under the previous regime, including the UK’s Jewish population and the Labour party’s own HQ staff. We have started our own engagement strongly with the new Labour leadership and this week saw us launch an exciting new set of essays on the post-Covid economy in partnership with the Fabian Society – you can see our launch event with Shadow Chancellor Anneliese Dodds and read the essays here. Throughout the Covid-19 crisis, we have engaged cross-party and by party with large numbers of backbenchers who have constituency issues relating to Covid-19. As we approach the Autumn we are preparing for full scale engagement across both House of Parliament and the devolved nations of the UK – we are always keen and interested to hear your own plans and share insights, so do drop us a line if you think we can help. As we wait for more clarity from the political parties on their virtual conferences, we continue to reflect on what activity we will undertake but it will be pretty minimal – a virtual party conference feels a bit like a virtual slice of cake, tantalising but ultimately pointless…