An object lesson in how not to make law

Solvency II debate reflects a frustration with EU politics.

Solvency II, the forthcoming regulatory directive for Europe, has been labelled as “an object lesson in how not to make law”.

Steve Webb, UK’s Minister for Pensions, turned up the heat on the insurance space last month when he called the European Union to abandon the new changes that are being proposed by Solvency II, the ever-delayed package of regulatory guidelines that will shape the insurance business in the EU in the next few years.

His concern had particularly to do with the effect of Solvency II on benefit pension schemes. According to a working paper by the European Insurance and Occupational Pensions Authority (EIOPA), the new regulatory changes could add a cost of £450bn to pension schemes.

Leaving no room for doubt he added: "any such new rules would harm businesses’ ability to invest, grow and create jobs, and many more schemes could be forced to close. I continue to urge the Commission to abandon these reckless plans".

Other heavy weights in the British government have expressed their concerns too. Andrew Tyrie, chairman of the Treasury Committee, has revealed his ill-feeling on Solvency II, following a lengthy debate with the chief of the new Prudential Regulation Authority (PRA) Andrew Bailey.

Days before Webb’s statement, Tyrie said “Strengthening and harmonising the prudential regulation of the insurance sector across the EU could bring significant benefits. But we haven’t seen any yet. Even now, no one can be sure what it will add”.

Andrew Bailey had labelled the process the EU has followed on Solvency II as “shocking” and the costs arising from the delay in its implementation as “staggering”. The UK insurance industry is the third largest in the world and a key activity of the UK economy. So it is only reasonable that the local watchdog, and other involved government officials, will express their concerns on any changes that are likely to affect consumers and hinder the development of the business locally.

However, the criticism is also reminiscent of the current mood with the way a relevant part of Britain feels policies are being carried out in the EU. The sentiment is that well intentioned and necessary reforms, drag indefinitely under the hand of the EU and become so cumbersome that can make the problem it came to address worse.

Britain will hold a referendum to decide whether it remains a member of the EU by the end of 2017, that is in four years time. The deadline of Solvency II has consistently been postponed from November 2010, to November 2012, then January 2013 and January 2014. Now, it is not likely to happen before January 2016. The chance of a sharp u-turn on the envisioned Solvency II regime seems unlikely, considering how EU’s policymakers have acted in recent years. By the time it comes into place, the UK might feel comfortable enough with its Individual Capital Adequacy Standards regime, just when it needs to decide how convenient it is to remain in the EU.

Photograph: Getty Images

Carlos Pallordet is a writer for Timetric

Photo: Getty
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Jeremy Corbyn's opponents are going down a blind alley on tuition fees

The electoral pool they are fishing in is shallow – perhaps even non-existent. 

The press and Labour’s political opponents are hammering Jeremy Corbyn over his party's pledge/ambition/cruel lie to win an election (delete depending on your preference) to not only abolish tuition fees for new students, but to write off the existing debts of those who have already graduated.

Labour has conceded (or restated, again, depending on your preference) that this is merely an “ambition” – that the party had not pledged to wipe out existing tuition fee debt but merely to scrap fees.

The party’s manifesto and the accompanying costings document only included a commitment to scrap the fees of students already in the system. What the Conservatives and Liberal Democrats are claiming as a pledge is the following remark, made by Jeremy Corbyn in his Q&A with NME readers:

“First of all, we want to get rid of student fees altogether. We’ll do it as soon as we get in, and we’ll then introduce legislation to ensure that any student going from the 2017-18 academic year will not pay fees. They will pay them, but we’ll rebate them when we’ve got the legislation through – that’s fundamentally the principle behind it. Yes, there is a block of those that currently have a massive debt, and I’m looking at ways that we could reduce that, ameliorate that, lengthen the period of paying it off, or some other means of reducing that debt burden. I don’t have the simple answer for it at this stage – I don’t think anybody would expect me to, because this election was called unexpectedly; we had two weeks to prepare all of this – but I’m very well aware of that problem. And I don’t see why those that had the historical misfortune to be at university during the £9,000 period should be burdened excessively compared to those that went before or those that come after. I will deal with it.”

Is this a promise, an aspiration or a target? The answer probably depends on how you feel about Jeremy Corbyn or fees policy in general. (My reading, for what it’s worth, is that the full quote looks much more like an objective than a promise to my eyes but that the alternative explanation is fair enough, too.)

The more interesting question is whether or not there is an electoral prize to be had, whether from the Conservatives or the Liberal Democrats, for hammering Labour on this topic. On that one the answer is open and shut: there really isn’t one.

Why not? Because the evidence is clear: that pledging to abolish tuition fees largely moves two groups of voters: students who have yet to graduate and actually start paying back the fees, and their parents and grandparents, who are worried about the debt burden.

There is not a large caucus of fee-paying graduates – that is, people who have graduated and are earning enough to start paying back their tuition fees – who are opposed to the system. (We don’t have enough evidence but my expectation is that the parents of people who have already graduated are also less fussed. They can see that their children are not crippled by tuition fee debt, which forms a negligible part of a graduate’s tax and living expenses, as opposed to parents who are expecting a worrying future for their children who have yet to graduate.)

Put simply, there isn’t a large group of people aged 21 or above voting for Corbyn who are that concerned about a debt write-off. Of those that are, they tend to have an ideological stance on the value of a higher education system paid for out of general taxation – a stance that makes it much harder for the Conservatives or the Liberal Democrats to peel those votes off.

The whole thing is a bit of a blind alley for the parties of the centre and right. The Tory difficulty at this election wasn’t that they did badly among 18-21s, though they did do exceptionally badly. With the exception of the wave year of 1983, they have always tended to do badly with this group. Their problem is that they are doing badly with 30-45s, usually the time in life that some younger Labour voters begin to vote Conservative, largely but not exclusively because they have tended to get on the property ladder.

Nowadays of course, that cohort, particularly in the south of England, is not getting on the property ladder and as a result is not turning blue as it ages. And that’s both a bigger worry and a more lucrative electoral target for Labour’s opponents than litigating an NME interview.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.