Charles Kennedy – 2001 Speech to the Financial Markets Association
Below is the text of the speech made by Charles Kennedy, the then Leader of the Liberal Democrats, in London on 23 January 2001.
Ladies and Gentlemen
I am delighted to be here this evening.
I’d like to begin by thanking Hugh Macdonald and Martin Ely
for inviting me to meet you all.
The former Conservative Chancellor
Nigel Lawson once famously called ACI UK
“a bunch of City scribblers”.
Diplomacy was never really his strong point.
I can assure you that I have a higher opinion of your organisation
and look forward to talking to many of you later to hear your views.
London remains the largest financial centre in the world
accounting for almost one third of global currency business.
As such issues that affect that City and those who work in it
are of great importance to politicians of all parties
and naturally to government, let me be clear from the outset.
I want the City of London and the UK financial services industry
to be the global leader. Government should do all that it can
to enable you to do this.
At home that means competitive taxes, consistent policy, and sensible regulation.
In Europe – completing the Single Market,
winning for the City of London
and getting the economy right for Euro entry.
In the world, opening up the market for financial services.
Where regulators need to be tough they should be,
with the full support of politicians.
Tough because reputation and confidence
The most important ingredient for a healthy economy,
I believe, is financial stability.
That is why the Liberal Democrats entered the last election campaign
advocating independence for the Bank of England.
We were delighted that the Government chose to adopt our policy
which has proved to be very successful.
No decision has done more to end boom and bust economics.
However, the other chief ingredient in economic stability is
exchange rate stability.
On this, the Government has failed.
Prolonged over-valuation of sterling
has done a great deal of harm
to certain sectors of the UK economy.
Which is why the Liberal Democrats
advocate membership of a successful Single Currency
at an appropriate exchange rate
subject to the consent of the British people.
Last May, my party set up a commission,
chaired by Chris Huhne MEP,
whose members included such people as
Willem Buiter of the Bank of England Monetary Policy Committee,
and a variety of other distinguished
City practitioners and economists,
to advise on those measures Britain needs to take
in order to join the Euro-zone successfully.
Their report was published in September.
Yet, almost five months later the Government
still has not taken a lead on this issue.
My Party welcomed the step forward
that was taken in financial regulation
in the City in the last few years.
We have a high personal regard for Howard Davies
and believe the concept of the FSA is the right one.
Whilst regulation must never be over-bearing
we have always believed that the FSA
must take full account of the need
for proper consumer protection
in the job that they do.
In this respect,
regulators need
to be prepared, on occasion, to be tough to ensure that
And that means there should be no hiding place
for those who have mis-sold pensions,
failed to deliver on endowment mortgages
or closed rural bank branches.
Economic efficiency and social justice can, and must,
go hand in hand.
Before moving on to the main theme of my speech
I want to take a moment to
make some points on two specific regulatory issues
of which you will no doubt be aware
and which are of great importance to financial service institutions
as well as to politicians both as public policy makers
and as representatives of our constituents’ interests.
The first is the recent AXA deal on disposing
of its ‘orphan assets’,
And the second is the plight of Equitable Life
whose many policyholders
may suffer some heavy losses
as a result of the company’s difficulties.
Both of these issues are linked,
in my mind,
by the role of the FSA in regulating each company.
And they have implications
for the job that the FSA is doing more widely.
The recent controversy over the AXA deal on ‘orphan assets’
and particularly the role of the FSA
in giving it the green light to that deal
is a source of great concern to me and has been much commented on.
We have great sympathy with the Consumer Association
in the action that they took on behalf of consumers.
Government ministers
seemed to indicate a few years ago
that ‘orphan assets’ belonged to policyholders
in a ratio of 9 to 1.
Yet now, the AXA case would now seem to imply
that this principle has been undermined.
Previously I had understood
that ‘orphan assets’ were to be allocated
according to the ‘90% rule’
whereby nine tenths of the value of those assets
is given over to policyholders.
In the AXA case, the figure is much closer to a mere one-third.
This case is particularly important not only because it affects
the 660,000 with-profits policy holders
who are disputing the £1.68 billion worth of AXA ‘orphan assets’
but also because it has implications for those
with a potential claim on the £20 – 30 billion worth
of unallocated ‘orphan assets’ in other insurance companies.
Many thousands of people
throughout the country could be affected.
How to best dispose of ‘orphan assets’
is a source of some debate I acknowledge,
but I am not at all convinced that the regulator should have agreed
to in effect transfer well- over £1 billion
from AXA policyholders to AXA shareholders.
And I’m not at all convinced that the regulator should have agreed
to a ballot where AXA policyholders
were asked to agree a deal on the basis of
a ‘take it or leave it’ cash offer.
in which only those who voted in favour of that deal
would actually be entitled to the cash.
This is rather like Gordon Brown giving pension increases
only to those pensioners who voted Labour.
Ballots – whether of AXA policyholders, trade unionists or Florida electors – must not be open to question.but at first sight the outcome of the AXA case would seem
to contradict the Government’s intentions.
Moreover, the FSA’s stance throws doubt
on its willingness to defend the consumer interest.
This is not the only issue
in which the role of the FSA has been controversial.
The Equitable Life case is a cause of enormous concern too.
I appreciate that Equitable Life is not insolvent,
but it is in severe financial difficulties.
Many policyholders could suffer losses,
or returns below reasonable expectations.
There has clearly been a serious failure by management,
by the FSA, and quite possibly by the DTI at an earlier stage
which has allowed the situation to develop
into the crisis we see now.
Last year, Vincent Cable MP,
the Liberal Democrat Shadow Trade and Industry Secretary,
called on the Chancellor of the Exchequer
to instigate an immediate independent assessment
into possible regulatory failure by the FSA in this case
which could lead to compensation for any investors
who have been misled.
he Government has acknowledged
that the FSA has a case to answer
but responded to this by announcing
that the FSA itself would be charged with investigating
its own performance as regulator.
This is simply not good enough.
In both the AXA ‘orphan assets’ decision,
and the Equitable Life case,
the performance of the FSA as regulator
would seem to have been inadequate at best.
Many people would call it incompetent
The FSA was set up
to be champion of the consumers interests –
it should be just that.
London cannot afford a ‘paper tiger’.
It is time for the Government to
force the FSA to be more rigorous
and to take its share of responsibility
for any mistakes that have been made.
Investors and the wider public
must have confidence that it is doing its job on their behalf.
The City of London must not be over-regulated,
but must be regulated in a way also needs to must be regulated
in a proper way
so that protects and enhances London’s
excellent reputation
around the globe is maintained.
The reputation of politicians on the other hand
is probably beyond redemption.
You may be surprised to hear someone like me say that,
but I am genuinely concerned that
the public’s perception of politics
and the political class
is at an all time low.
You may have seen some press speculation recently
about the probable date of the next General Election.
Indeed, the media have
reported that an unofficial election campaign
by the three main parties is already underway.
Given that the likely date of the General Election
is the 3rd of May
I am truly depressed that the electoral “Phoney War”
seems to have begun
almost four months before anyone
is likely to walk into a polling booth.
And I am particularly angry because
this is exactly the kind of behaviour
that is putting more and more people off voting
and off participating in the electoral process.
At the last round of local elections in May 2000
voter turn-out in some parts of the country
was as low as ten per cent.
That is an horrendous figure to anyone
who cares about inclusive politics.
I am deeply, deeply worried by it.
And the other two parties are already engaging
in the usual pre-election Dutch auction
over tax and spending –
pretending that you can magically tax people
less and less
and yet spend more and more
on the things that people care about.
The public know that you don’t get
something for nothing.
This kind of debate
with both other parties striving
to reach the lowest common denominator
does a great deal to turn the public off politics
and create cynicism about the promises of politicians.
I fully intend that the Liberal Democrats will enter
into the forthcoming election battle
as the only major political party
who are prepared to be honest with people
about the cost of investing properly
in our public services:
in schools, in hospitals, in pensions and in the police.
This debate should not be characterised simply as “tax and spend”.
All Governments raise taxes
in order to spend the revenue they bring.
I want the debate to focus on
what we as a nation see as our priorities
for investing in public services
based on how we as a nation are prepared to fund them.
I believe that the British people
do want to see investment in public services in this country.
A country in which the NHS
provides decent care for all, free at the point of delivery.
A country in which schools are properly funded
and teachers properly valued.
A country in which older people share fairly in increasing prosperity.
And a country in which all in society feel free from the fear of crime.
And that investment is funded by all of us
through the tax system.
That is why I will enter the forthcoming election
promising honesty in taxation.
Telling people exactly how we would invest their money
in the services which they use,
and from which they may benefit.
In an age of political cynicism
one of the ways that these and many other policies
could best be discussed
in front of as wide an audience as possible
would have been through a debate
between the three main UK party leaders
during the election campaign itself.
As you may know, the BBC and ITV
approached Tony Blair, William Hague and myself
with a set of non-negotiable proposals
for two debates to take place between us during the
final two weeks of the General Election campaign.
I have long believed that in a television age such debates
would be an important addition to the democratic process
allowing the public to see the Party Leaders debating
outside of the juvenile environment of Prime Minister’s Question Time.
Because of this I have agreed to the broadcasters’ proposals for a debate.
William Hague has agreed also.
Unfortunately, as you may have seen in the papers,
Tony Blair has refused to take part,
arguing that the British people are not electing a President
but rather individual MPs.
This is true, and I do not want British electoral campaigns
or British politics
to become presidential in nature.
Well, I accept it is always good to see a sinner repenting.
But only a Labour spin doctor could argue
that the farce of Prime Ministers Questions
is a substitute for a serious leaders’ debate.
Mind you self-evidently debates are dangerous.
So dangerous that they have had them in the United States since 1960.
Canada since 1962.
Germany since 1969.
Holland since 1977.
Australia and New Zealand since 1984.
And South Africa since 1994.
Dangerous?
No, Tony it’s called democracy.
But I do believe that Leader’s debates
would have done a great deal to re-engage
and hopefully re-enthuse the public
ahead of election day.
And now that these debates will not take place
I think Tony Blair must be prepared
to accept much of the blame if
voter turn-out is down again at this election.
By shying-away from debating with William Hague and myself
he is doing the country and the electoral process
a great disservice.
Nevertheless, it would be unfortunate if
arguments over the Leader’s debates
to detract from the issues that will be
crucial in the forthcoming election campaign.
Because there are real reasons
why the next General Election
should concentrate on issues of greater importance
to the British people
and to the future direction of our country.
The Liberal Democrats will enter that election promising
further targeted investment in our public services.
Honesty and openness in taxation.
More decentralisation away from Westminster and Whitehall
to the nations and regions of Britain.
A sensible relationship with our European partners
with whom we, as a nation, do so much of our trade –
not least in the financial services sector.
For the Liberal Democrats 2000 was a very successful year.
In May we recorded 28% of the vote in the local elections,
the highest share of the vote
we have ever received in a national election
which enabled us to capture
previous Labour strongholds like Oldham.
And on the same night we captured
what had previously been the safe Tory parliamentary seat of Romsey
in a Westminster by-election.
I want to translate those results
into further success at the polls this year.
There is every chance for my party to do so.
Liberal Democrats are already in national government
in Scotland and Wales.
We are already in local government in town halls
up and down the United Kingdom.
We will be fighting this election hard.
I intend for my Party to take more votes and more seats
from both Labour and the Conservatives.
No-one should expect us to do any other.
