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

Paul McMillan
Show Hide image

"We're an easy target": how a Tory manifesto pledge will tear families apart

Under current rules, bringing your foreign spouse to the UK is a luxury reserved for those earning £18,600 a year or more. The Tories want to make it even more exclusive. 

Carolyn Matthew met her partner, George, in South Africa sixteen years ago. She settled down with him, had kids, and lived like a normal family until last year, when they made the fateful decision to move to her hometown in Scotland. Matthew, 55, had elderly parents, and after 30 years away from home she wanted to be close to them. 

But Carolyn nor George - despite consulting a South African immigration lawyer – did not anticipate one huge stumbling block. That is the rule, introduced in 2012, that a British citizen must earn £18,600 a year before a foreign spouse may join them in the UK. 

“It is very dispiriting,” Carolyn said to me on the telephone from Bo’ness, a small town on the Firth of Forth, near Falkirk. “In two weeks, George has got to go back to South Africa.” Carolyn, who worked in corporate complaints, has struggled to find the same kind of work in her hometown. Jobs at the biggest local employer tend to be minimum wage. George, on the other hand, is an engineer – yet cannot work because of his holiday visa. 

To its critics, the minimum income threshold seems nonsensical. It splits up families – including children from parents – and discriminates against those likely to earn lower wages, such as women, ethnic minorities and anyone living outside London and the South East. The Migration Observatory has calculated that roughly half Britain’s working population would not meet the requirement. 

Yet the Conservative party not only wishes to maintain the policy, but hike the threshold. The manifesto stated:  “We will increase the earnings thresholds for people wishing to sponsor migrants for family visas.” 

Initially, the threshold was justified as a means of preventing foreign spouses from relying on the state. But tellingly, the Tory manifesto pledge comes under the heading of “Controlling Immigration”. 

Carolyn points out that because George cannot work while he is visiting her, she must support the two of them for months at a time without turning to state aid. “I don’t claim benefits,” she told me. “That is the last thing I want to do.” If both of them could work “life would be easy”. She believes that if the minimum income threshold is raised any further "it is going to make it a nightmare for everyone".

Stuart McDonald, the SNP MP for Cumbernauld, Kilsyth and Kirkintilloch East, co-sponsored a Westminster Hall debate on the subject earlier this year. While the Tory manifesto pledge is vague, McDonald warns that one option is the highest income threshold suggested in 2012 - £25,700, or more than the median yearly wage in the East Midlands. 

He described the current scheme as “just about the most draconian family visa rules in the world”, and believes a hike could affect more than half of British citizens. 

"Theresa May is forcing people to choose between their families and their homes in the UK - a choice which most people will think utterly unfair and unacceptable,” he said.  

For those a pay rise away from the current threshold, a hike will be demoralising. For Paul McMillan, 25, it is a sign that it’s time to emigrate.

McMillan, a graduate, met his American girlfriend Megan while travelling in 2012 (the couple are pictured above). He could find a job that will allow him to meet the minimum income threshold – if he were not now studying for a medical degree.  Like Matthew, McMillan’s partner has no intention of claiming benefits – in fact, he expects her visa would specifically ban her from doing so. 

Fed up with the hostile attitude to immigrants, and confident of his options elsewhere, McMillan is already planning a career abroad. “I am going to take off in four years,” he told me. 

As for why the Tories want to raise the minimum income threshold, he thinks it’s obvious – to force down immigration numbers. “None of this is about the amount of money we need to earn,” he said. “We’re an easy target for the government.”

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

0800 7318496