Evening round up of the main political betting markets

May 12th, 2016

The Republican nomination

The June 23rd EU Referendum

Winner 2016 White House Race


Sentence first, verdict later. Rushing to judgement over BHS

May 12th, 2016

Green photo

Sir Philip Green potentially makes for a good pantomime villain.  He has never gone out of his way to charm the public and he has contacts in elite political circles.  His wealth is fabulous and flaunted.  His tax management strategies have blazed across the front pages of the newspapers.  And now his former flagship company BHS has gone bust, leaving a pension scheme that is half a billion pounds short, and he has taken large dividends from the company over the years.  Parliamentarians and the press are out for blood.

Have the press nailed a new corporate predator or are they engaged on a witch hunt?  Disappointingly, the answer is that it is far too soon to tell either way – not that it will stop people from speculating according to their preferred agenda.  We can, however, look at what the story has to tell us about how this country handles dull but important subjects.

Employers have been offering pension schemes to their workers as far back as the seventeenth century but their current efflorescence dates from the first half of the twentieth century.  For many years the only government regulation concerned the tax breaks that employers got for offering pension schemes.

It was not until the 1970s that their integration with social security started and it was only after the Maxwell empire collapsed in 1991 that the DSS intervened to set minimum levels of pension scheme funding.  This was revised in 2003 following a series of highly-publicised cases where some employers had stuck to the bare minimum on winding up the scheme, resulting in some long-serving employees receiving almost nothing.  It was only from that point on that employers were placed under obligations to ensure that pension scheme funding was adequate to secure all benefits.

This may sound extraordinary but it had not been a significant problem until then.  Until the mid 1990s, securing pension scheme benefits with an insurer had been cheap (because of high interest rates and pessimistic assumptions about life expectancy).  With inflation remaining persistently low from the early 1990s onwards and life expectancy being repeatedly revised upwards, insurance company quotations soared in price.  It certainly did not help that for the first few years of this century the stock market was in the doldrums.  A theoretical problem only became live then.

The government also put in place as from 2005 anti-avoidance measures to seek to make sure that shareholders could not asset strip businesses to sidestep their obligations to the pension schemes that they sponsored.  The power to monitor and enforce this was given to the Pensions Regulator.  If everything went wrong, the government had set up a levy-funded lifeboat called the Pension Protection Fund.

Why am I labouring over the time frame of this?  First, to show that the current regulatory system is pretty new and hasn’t been tested much.  Secondly, to show that the obligations that BHS and Sir Philip Green were under changed considerably during his ownership of that company.

At this point, you might be asking why all pension schemes aren’t now kept fully funded on an insurance company basis.  That would indeed guarantee all pensions are paid in full.  This was a proposal touted by the European pensions regulator, which it has only backtracked on in the last month.  That would, however, require British industry to inject something like £250 billion into their pension schemes straight away (for comparison purposes, that’s more than three times the British government’s annual deficit).  Obviously, this was not particularly appetising to the private sector.

So pension schemes, overseen by the Pensions Regulator, have been seeking to get to full funding over appropriate timespans, having regard to the strength of their sponsoring employer.  The art is to get the schemes as secure as possible as quickly as possible without crippling their employer’s business.

This would be a tall order for even the nimblest regulator, weighing the risks of corporate insolvency over the proposed recovery period against the risks being run with the proposed actuarial assumptions, while keeping a close eye on external economic conditions.  The Pensions Regulator is not the nimblest regulator.

And now things have gone wrong for BHS.  Solid facts are quite hard to come by but it seems that its pension scheme was in actuarial surplus as recently as 2008 (quantitative easing was a hammer blow for pension scheme solvency).  That begs the question what assumptions were being used but actuaries have professional duties to be prudent.  Should the Pensions Regulator have insisted on greater prudence?  Don’t forget that it would have been looking at this at the time when the markets were going through a historic crash.  The Regulator at that time decided as a general principle that pension scheme trustees need not push employers too hard.  That seemed wise then and still does.  It was better to give companies a bit of breathing space than to force them into insolvency to no purpose.

The Pensions Regulator is still investigating what it might do about BHS.  That investigation looks likely to be complex and document-heavy (the Regulator is ploughing through 70,000 pages).  Already, however, some members of the DWP Select Committee seem to be grandstanding.  The Pensions Regulator’s chief executive was given little support on Monday afternoon from the MPs quizzing her.  Some of the questions looked inappropriate given that a quasi-judicial process is ongoing.

The Select Committee – which has the luxury of not being held to account for its decisions – should be focussing on the decision-making process.  The Pensions Regulator may well have made mistakes.  The Select Committee should be mindful that it is looking at events with the benefit of hindsight.

And perhaps we can break new ground and avoid a series of dramatic recommendations for upending the current system.  Changing the regulatory regime in response to the latest news story every few years is not good for consistency and doesn’t help the Regulator.  Whatever system we have in place, a balancing act between funding securely and giving business flexibility will need to be struck.  Perhaps we could try the current one out for a little bit longer?

Sir Philip Green may make for a tempting target for Parliament and the press.  But whatever the rights and wrongs of this particular case, our problems with our pensions system are much more deep-rooted.

Alastair Meeks


Exactly six weeks to go to the day that Britain decides on its future in Europe

May 12th, 2016

Why we should stay in Europe according to Alan Johnson  Labour    BBC News   YouTube

The polling, however, has been reduced to a fizzle

After a period when referendum polls were coming out almost everyday there’s suddenly been a lull in the number of polls being published. It is now May 12th and just three surveys have come out where the fieldwork has taken place in May. All of them have been online. The last phone poll was completed on April 26th.

Hopefully this is a temporary interruption caused by last week’s range of elections and that the polling will soon get back to the intensity you would expect this close to such a crucial vote.

Meanwhile a special PB/Polling Matters Podcast Keiran Pedley and Leo Barasi look at the polling information that we currently have and discuss the state of the campaign. How confident should IN and OUT be? How should we treat Don’t Knows in opinion polls? What will turnout be and why does this matter? What are the key issues each side should focus on and who is best to make the case for Remain and Leave as we approach polling day?

The weekly TV show should return next week.

You can follow Keiran on twitter at @keiranpedley and Leo at @leobarasi

Mike Smithson


Following the SNPs loss of its Holyrood majority last week ex-party boss Salmond says the voting system unfair

May 11th, 2016

This from a party that got 56 of Scotland 59 Westminster seats last year on 50% of the vote


Guest Post: Summer 2016 might lead to a generational shift in the two main parties

May 11th, 2016


Guest Post by Mortimer

Summer 2016 could prove a watershed moment in modern British politics. April and early-May have already seen the incumbent leadership of the English Conservatives shown up in comparison to Ruth Davidson’s success north of the border, and the old guard of an apparently gaffe-obsessed Labour Party cheered by victory in London yet criticised by the triumphant Sadiq Khan. More pressure on the Conservative leadership is likely if, as the polls currently indicate, the referendum on June 23rd really is in the balance.

Perhaps less obvious an influence to our current thinking is the forthcoming Chilcott report, which is (finally) to be published on July 6th and could focus current thinking on past political problems. Whilst the current core Labour leadership were vehemently opposed to the Iraq War, at least two quite prominent members of Corbyn’s current shadow cabinet held positions in Blair’s cabinet during the conflict: Hilary Benn and Lord Falconer..

Other prominent and not-so-prominent politicians from both sides of the aisle who have been in Parliament since 2001, now veritable veterans of some pretty difficult times in British history, might begin to think it is time for fresh Lieutenants, if not young Generals, to take on the burden. Given that MP selections are made earlier and earlier in the electoral cycle, the end of a bruising referendum campaign and the publication of what promises to be a lengthy report into one of the most controversial parliamentary decisions of the modern era, some might begin to consider announcing retirement from public life in the coming months.

So what might be the impact of this confluence of events? Younger, or at least less experienced MPs will surely come to the fore in summer reshuffles.

If Corbyn is serious about uniting the party, which I’m still to be convinced of, he should call on the skills of Dan Jarvis, and promote the likes of Lisa Nandy and Heidi Alexander, both of whom have only been MPs since 2010/11 and yet outperformed their shadow cabinet colleagues in recent months.

For Mr Cameron, if he can survive at a helm, has fewer younger talents to call upon in his immediate cabinet. That said, Greg Clark has, like Justine Greening, only been an MP since 2005 and both are proven media performers. Michael Gove was in the same intake and proved himself in the limelight yet more in the past weeks. Priti Patel and Dominic Raab joined Nandy and Alexander as new MPs in 2010, and must surely hope for promotion to the full cabinet from Minister of State and Parly Under Secretary positions soon.

Moving on to possible leadership replacements – which it would be foolish to ignore given possible threats to both Cameron’s and Corbyn’s position after two divisive election campaigns – might the more youthful Chuka Umunna be ready to commit properly to a Labour leadership contents this time, or has his star fallen in favour of Jarvis and others?

In the Conservative party, of which I am a member and to which I feel slightly more attuned to both signals and noises, I can’t see an obvious youthful replacement for Cameron, and, let us be honest, the leadership coming with the fully-paid up title Prime Minister leaves less room for such an outsider as he was himself in 2005 triumphing. I’ve been tipping Greg Clark to ultimately replace him for several months, but as the life-expectancy of Mr Cameron’s own leadership appears to be dwindling, I’m more convinced that the middle aged Tory cardinals will elect an older Pope. Michael Fallon has proved himself as a campaigner and seemed to much value as the Major-esque unifier to miss for my book (currently 50/1 as next permanent Tory leader with Ladbrokes), but it is hard to look beyond May at the still generous 8/1 in the same market.



Almost all the online polls when tested against real results last Thursday overstated UKIP

May 11th, 2016

This looks like a good pointer to referendum polling

Well done to Matt Singh for picking up this – how in the range of elections last Thursday the online pollsters across the board appeared to be over-stating UKIP. His analysis covers the London as well as the Scottish and Welsh elections.

The details are in the chart from his Tweet above and appear to make a convincing case which given the gap we are seeing between phone and online on the June 23rd referendum could be highly relevant as we follow the polls for that massive election.

    We saw exactly the same broad pattern in the 2014 Euro elections when UKIP finished on 27%. Opinium and Survation’s final polls had the party on 32%, ComRes 33% and TNS on 31%. The YouGov online poll got UKIP spot on. ICM online undershot by 2.

At the last year’s general election, not admittedly the polling industry’s finest hour, we saw the same split with online having larger UKIP shares than the phone firms.

As can be seen from the table below the gap between phone and online ahead of the referendum is very marked.

EU Ref polling   Google Sheets

A key factor, I believe, is that UKIP polling support is heaviest in those socio economic groups which have a long record of being less likely to vote.

Mike Smithson


Not surprisingly YouGov finds that on EU people trust those they most agree with

May 10th, 2016


Urgent question. David Cameron’s big mistake so far

May 10th, 2016

Cameron European

As with any bureaucratic body, the EU pulses to a rhythm of regular meetings.  The EU being a more complex body than most, multiple cycles of meetings are sinuously interwoven.  Most prominently, at least four times a year, the Prime Ministers of the 28 member countries convene for the European Council.  The most vital business of the day is dealt with at these summits.

Anyone with experience of meetings knows that to control the agenda is to control the meeting. The terms of Britain’s renegotiation with the EU had been an important agenda item for successive meetings for some time.  At the December 2015 European Council, the European Council agreed to find mutually satisfactory solutions in four areas of concern at its February meeting: competitiveness; economic governance; sovereignty; and social benefits and free movement.  The stage was set for David Cameron to conclude his deal.

However, in the run-up to the February meeting, the migration crisis became still more pressing than previously.  Far from dying down over the winter months, numbers of migrants to the EU continued in high numbers.  EU member states had been put under unprecedented pressure by the vast migrations of 2015 and if no action was taken there was every prospect that 2016 would prove still more distressing.  Should this crisis be addressed before Britain’s EU renegotiation?

David Cameron did not relent.  He forced the Council to keep up the pace on the renegotiation, coming away with his agreed deal which he then recommended to the British public.  He duly set the referendum date for 23 June.  The migration crisis was left to be addressed at a later Council meeting.

We can speculate as to his thinking.  If the migration crisis was to get worse, it was imperative to hold the referendum before it peaked in the late summer, so that the campaign was not overwhelmed by the chaos and disorder prompted by migration throughout Europe.  By insisting on rapidly agreeing a deal, he hoped to get the vote out of the way first.  It was in truth an implied vote of no confidence in the EU to be able to address the migration crisis.

With the benefit of hindsight, this looks like a serious error for the Remain campaign, for the Conservatives and for David Cameron personally.  By insisting on prioritising his pet project ahead of something that was demonstrably urgent and important, he alienated his fellow EU leaders.  It’s hard to accept that technical arguments about the incidence of social security benefits are particularly critical if you’re trying to work out how to stop half a million pairs of feet tramping across your country in the coming weeks.  That cannot have improved the terms of the deal.

Worse, if David Cameron wanted to persuade the public to remain in the EU, he needed the EU to operate effectively on the pressing subject of the day.  Britain, just as much as the rest of the EU, had a compelling motive to get migration under control.  On this occasion, the statesmanlike thing to do was the politically smart thing to do.

Imagine an alternative history of the last few months in which David Cameron had decided to defer consideration of the renegotiation with the EU until the migration crisis had been solved.  Initially he would have come under more pressure from his more belligerent Leaver colleagues to get on with it, but that would have been background noise only.  The terms agreed in relation to the migration would probably not have been settled until the March European Council meeting, so the budget would have taken place before the Cabinet had divided on the referendum question.  Iain Duncan Smith would no doubt have bitten his tongue, the better to wield influence in the referendum campaign when it was eventually launched.  So the budget would have passed far more smoothly and the government would continue to feel more purposeful.

The next European Council meeting is due in June, so the local election round would have taken place without constant noises off.  With the spotlight on Labour divisions, the Conservatives would have almost certainly done considerably better.  The big political story would be the continuing agonies of Jeremy Corbyn’s Labour.

Meanwhile, the media would have taken proper note of the sharply diminished number of migrants.  If David Cameron had inserted himself in the narrative of the deal, he would be getting part of the credit for this.

In the meantime, the two rival camps for Leave would still be slugging it out.  The argument was only ended by the Electoral Commission so it is unlikely that it would have ended otherwise.  This could only be to Remain’s benefit.

The deal would still need to be struck, of course.  Would it have been any better than the deal got in February?  David Cameron would have had a legitimate claim for extra flexibility from other Prime Ministers.  But let’s assume that he got exactly the same deal as before and called the referendum over the summer for the end of September 2016.  The referendum would have clashed with much less government business and the slugfest could have taken place without distraction.  The Conservative party would look rather more coherent than before.  And the mood music from the perspective of Remain would sound rather more upbeat.

All this was lost because David Cameron decided to prioritise his own hobby horse.  Right now it looks like a very serious mistake.

Alastair Meeks