Are CDC pension schemes “a game changer”?

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Amber Rudd, the Secretary of State for Work and Pensions, has announced a “revolutionary” new workplace pensions scheme – Collective Defined Contribution (CDC) – that she claims will result in improved investment returns for workplace retirement savers.

This is a potentially significant development, which could ultimately involve billions of pounds and affect thousands of workers and employers, notably large unionised workforces. Given the recently low UK savings and business investment rates and the substantial deficits in many defined benefit schemes, it could also have a major impact on labour force relations, intergenerational fairness, capital allocation and the asset management sector.

Cross party and union support

The scheme, originally proposed by the Royal Mail and the Communication Workers Union (CWU) will be introduced, “as soon as parliamentary time allows.” What is interesting is the proposal has support from the Government, the Royal Mail, the unions and, we are told, it has “cross-party support”.
Already operational in Denmark and the Netherlands, CDC schemes offer a middle ground between the declining Defined Benefit (DB) schemes and Defined Contribution (DC) schemes.

For many businesses, the introduction of this new scheme will allow them to provide pensions provisions to their employees without the burden of huge pension liabilities. There is no guaranteed benefit at retirement, rather a target benefit meaning that pensions payments will fluctuate depending on the performance of the investments. Therefore, although risk is pooled, it nonetheless falls to investors, not employers.

Pooled risk

Proponents of the CDC scheme cite a number of advantages including improved investment returns because risk is pooled, regular and relatively reliable income in retirement and reduced risk for scheme members, while cutting costs and red tape for employers. They also suggest there will be benefits for the wider economy such as the prospect of these schemes investing in longer-term assets including infrastructure projects.

The pooling of risk might also provide an excuse for the Government to raise the lifetime and annual contributions caps.
The new scheme could also be transformative for the asset management industry if it entices greater participation in savings, resulting in the potential creation of vast new funds.

Too big to fail

However, whilst the introduction of the new scheme has been hailed as a “revolutionary reform” – a number of questions remain unanswered.

Already concerns have been raised about whether this new scheme would sit easily in the UK’s pensions system or whether it is more at home in a more unionised society. Other questions have been raised about whether this is the most effective way to encourage greater savings into pensions, how will the risk profile of such schemes be managed for the benefit of all members, what demand will there be for such schemes and does it offer investors sufficient choice.

Hargreaves Lansdown has warned that CDC schemes are “similar to the with-profits funds” which let down investors in the past. It has also said that large CDC schemes could become “too big to fail” and that the Government would have to stand behind them. This makes sense. The additional political risk for large quasi-public sector funds must ultimately sit somewhere.

The Dutch and Danish schemes are highly regulated with contributions and returns effectively governed by their central banks.

Notwithstanding the numerous questions, the CDC seems initially to be a constructive development for the provision of pensions in large quasi-public sector businesses such as the Royal Mail and for the Government. Switching to an entirely defined contribution scheme would be powerfully resisted by the trade unions. As the first scheme of its kind in the UK it will be interesting to see how the Royal Mail one fares and whether other businesses or government schemes would follow suit.

Here is a truly revolutionary suggestion. If they are such a good idea, perhaps Members of Parliament could lead by example and switch their notoriously generous pension plan, where employer contributions are approaching one third of salary, into a CDC scheme.

By Charlotte Walsh and George Trefgarne

 

Busting the latest Brexit myths

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Theresa May has told the House of Commons that she will now bring forward three votes:

  • March 12th vote on her new revised deal
  • March 13th if that doesn’t pass a vote for No Deal
  • March 14th if that doesn’t pass a vote to extend Article 50

The pound has risen to its highest levels for nearly two years on the news, to over €1.16 and $1.32 respectively.

However, the news has also triggered the usual cacophony of over-the-top commentary. Here is a brief myth-busting guide.

Myth one – No Deal is “off the table”

While No Deal is clearly much less likely, it is still open to the House of Commons to vote for it and, in any case, a request to extend Article 50 will have to be approved unanimously by the 27 members of the EU Council. The EU might choose to hold our feet to the fire. Furthermore, a short extension may just move the cliff-edge.

Myth two – Mrs May’s deal is off

Geoffrey Cox, the Attorney General, is in Brussels negotiating some revisions to the Backstop. I don’t know him personally, but my legal friends all have supreme confidence in him. If he does come back with something, it may pass in the House of Commons. (I am glad I got 100:1 on him being next Prime Minister just before Christmas.)

Myth three – this is all a ruse to stop Brexit

Such is the level of mistrust, numerous people no longer believe each other. However, it is my firm conviction that there is a majority in the House of Commons for what one might describe as “a soft Brexit” of some kind, but with an exitable Irish Backstop.

Myth four – the EU want to trap us into staying in

Not true. If the UK is still in the EU by July, we will have to run candidates in the European Parliament elections, or the Parliament will be inquorate. This, in turn, would upturn the selection for the next President of the EU Commission. The EU does not want that to happen. It does not want British candidates in the Parliament, joining the populist mob. They would probably like to keep us in a customs union though.

Myth five – one more heave and we can be like Singapore

The European Research Group is not unanimous. Some have been hoping that by pushing the UK into a No Deal scenario, it could become a free trading entrepot, just like Singapore. Singapore is a wonderful, admirable place but there has never been a majority in this country, still less among Brexit voters (many of whom are Labour supporters), for such a low-tax, low-regulation move. Others wanted to go for a Canada Plus deal, which is more attractive but does not answer the question of what to do on March 29th.

Myth six – we are on the way to a second referendum

There is no majority in Parliament for a second referendum. Open Europe estimates that the majority against one is 46. Labour has a real problem in that many of its safe seats are for a second referendum; but the top 45 marginals it is targeting in England and Wales are 78% Leave voting; and the top 25 it is defending are 72% Leave voting.

Myth seven – Norway is dead

Some will know that I published a short book called Norway then Canada last year, arguing that, as a plan B, we should fall back on our existing membership of the European Economic Area (the separate single market treaty) as a first step when we leave the EU. This gained some traction for a few weeks but then fell victim to a barrage from the Brexiteers and Remainers who ran a “kill Norway strategy”.

However, a blog just published on the UK Constitutional Law site reminds us that the Government has not only failed to put the legislation before Parliament to pull us out of the EEA, even if it did it probably would not pass. If all else fails, we can still fall back on it.

Labour is close to supporting EEA membership, but for some reason it wants to stay in a customs union, which is a red rag to Brexiteers.

Sooner or later the politicians will burn themselves out and when they do they will have two options: vote for Mrs May’s deal as adapted by Geoffrey Cox, or go for an EEA-based option.

Time for a National Government? Lessons from 1931

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It is an interesting question as to whether the formation of a National Government would help solve the current Brexit impasse. It has certainly worked in the past.

In 1931 a National Government was formed to get us out of the Depression and overall it did a pretty good job. Britain recovered faster than any other major economy, helped by coming off the Gold Standard, restructuring War Loan, tax cuts and embarking on a housebuilding boom.

When the crisis began that year there was a minority Labour Government, the pound was under pressure and the Cabinet was divided. An Austrian bank called Credit Anstalt had gone bust and contagion had spread to London’s financial markets. The budget deficit was spiralling out of control due to faltering tax revenues and the cost of rising unemployment benefits.

During the summer, the Prime Minister Ramsay MacDonald was trying to get agreement among his Labour colleagues to cut government expenditure and raise taxes. Balancing the budget was a prerequisite to the approval of an emergency loan being arranged by JP Morgan in New York. The Conservative and Liberal parties refused to countenance the £100m in tax rises which the Cabinet agreed to and instead demanded further economies.

Throughout August the political arguments raged and there was an impasse. The critical intervention finally came from King George V, one of the most underrated monarchs in our history. The best narrative of events is in Kenneth Rose’s excellent biography of the King.

On Saturday August 22nd, having only just arrived in Balmoral, the King turned straight round to see MacDonald at Buckingham Palace the following morning.

The Prime Minister tried to resign, but the King talked him out of it at two meetings on the Sunday. The second one took place after the King had a private dinner with Edward Peacock, a director of the Bank of England and partner in Baring’s Bank, who helped manage the King’s affairs. Left-wingers claimed that Peacock was at the centre of a “bankers’ ramp” and had a role in advising the King what to do. He had been summoned at short notice, but he himself said that all they talked about at dinner was the recent fluctuation in wheat and barley prices.

The King told MacDonald he was the only one who could lead the country at that time and he believed he could depend on Conservative and Liberal support. The King then summoned all three parties to a meeting at Buckingham Palace the following day. The Conservatives were led by Stanley Baldwin and the Liberals represented by Sir Herbert Samuel, as their leader Lloyd George was convalescing from an operation.

The King told MacDonald that it was “out of the question” he should resign and told the three men to go into a room, to come to an agreement and they were not to emerge until they had drafted a communiqué which would restore confidence at home and abroad. This took about an hour and the three agreed to form a National Government under MacDonald. This was not a formal coalition, but a “co-operation of individuals” to tackle the economic emergency.

Lord Wigram, the King’s private secretary, noted in his diary:

“His Majesty congratulated them on the solution of this difficult problem, and pointed out that while France and the other countries existed for weeks without a Government, in this country our constitution is so generous that leaders of Parties, after fighting one another for months in the House of Commons, were ready to meet together under the roof of the Sovereign and sink their own differences for a common good…”

Amen to that.

The Labour party subsequently split, but the National Government won a landslide victory in an autumn election demanded by the Conservatives. Churchill transformed it into a “Grand Coalition” in 1940 and it remained in office, broadly successfully, until 1944.

Would such an approach work now? It is hard to see either the Queen intervening or the current party leaders taking a similar approach. But anecdotally, the public appetite for “banging MPs heads together so they sort things out” is very high and they are not immune to this sentiment. It is also noteworthy that first steps in cross party co-operation, both by backbenchers and in formal talks between Theresa May and Jeremy Corbyn, have already been taken. Let’s see what happens in coming weeks.

Get ready for the new EU Shareholder Rights Directive

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The EU Shareholder Rights Directive II (updating a 2007 original) comes into force in June 2019. This is potentially one of the biggest and most positive developments in corporate governance across Europe, including for London listed companies, for many years. It will occur whatever happens with Brexit because the UK has already agreed to it. Yet it has attracted remarkably little attention.

The full text can be read HERE

The Directive is intended to ensure shareholders can exercise their rights across the EU and for the most part, under the UK Corporate Governance code and the Listing Rules, we are already compliant. For instance, UK companies are already obliged to offer an annual vote on executive remuneration.

However, in two notable areas UK companies, brokers, custodians, asset managers and advisers are going to have to ensure they are up to speed and, in many cases, improving their practice. Both have implications from a financial PR perspective.

Intermediaries must enable shareholder rights, even for retail shareholders

All market intermediaries, including those who distribute shares to retail investors during a capital raise such as an IPO, are going to have to ensure that they pass both rights and information properly and in a timely manner between companies and shareholders.

Most intermediaries will claim they already do that and the S.783 of the Companies Act means shareholders can already be identified.

However, having worked for companies during contested situations, such as proxy fights, controversial general meetings or M&A, it would seem there is still plenty of inertia in the system when it comes to discovering who is the underlying owner of shares, whether they or someone else can exercise voting rights, how they intend to vote (if at all) and whether they have the correct information.

There can be numerous complications. Are shares out on loan? Is it a cross border situation? Are retail shareholders involved? Do hedge funds have voting rights or not? Having established the owner, who decides how to vote?

In theory the Shareholder Rights Directive clears that inertia in the system away. In so doing, it also paves the way for using distributed ledger technology to manage both ownership data and the exercise of shareholder rights.

The Directive says that intermediaries in Third Countries (outside the EU), such as the Cayman Islands or the British Virgin Islands, must also comply if they hold European listed shares (though it is not clear how that will be enforced).

Related to that, companies and intermediaries have frequently been neglectful of retail shareholders, usually arguing that as they hold their shares via nominee accounts, ensuring they have information and can vote is too difficult. That is likely to change. Given the growing importance of retail shareholders and platforms such as Hargreaves Lansdown in capital raises for small and medium sized companies, this is an important new development.

Large companies with big retail or employee shareholder bases, such as Centrica, BT, Royal Mail and Santander may also have to strengthen their efforts at enabling them to vote at AGMs.
Asset managers, institutions and proxy advisers will have to be transparent

The Directive creates a new “comply or explain” duty on asset managers and institutions to explain publicly their approach to shareholder engagement, including their approach to ESG (environmental, social and governance issues) and how they have voted. It explicitly references the UN Principles of Responsible Investment. Many investors already do this – and the UK Stewardship Code is already on a comply or explain basis – but it is another step in the move towards voting transparency and institutional accountability.

Proxy advisers will also have to adopt a public code of conduct and report on it. Given the variable standards in this industry, this is no bad thing.

Financial PR implications

The most obvious implication of the Directive is that, during a contested situation, it is going to be easier for the parties to establish who the shareholders are, to ensure that they have voted and to influence them, either via the media or directly.

This should enhance the dialogue between corporates and their investors. It will also mean that activists will potentially find it easier to communicate with other investors. Equally, they will find it harder to exaggerate their voting power.

The Boscobel view is that the lost Unilever redomicile vote in 2018 was a watershed in shareholder democracy, because it demonstrated how corporates can pay a heavy price for becoming disconnected from their owners. Corporate knowledge of shareholder registers and shareholder sentiment is often out of date or partial. The management of the register can sit awkwardly between the Company Secretary, investor relations and the house brokers with proxy advisers only brought in on an ad hoc basis (often when it is too late).

Asset managers and institutions must also ready themselves for continued demands for public transparency on how they have voted and why.

Ahead of the Directive coming into force, corporates should look to re-evaluate their shareholder communications to ensure compliance. Financial PR sits at the heart of this process, providing advice on best practice as well as anticipating issues (which may anyway first surface in the media) and pre-empting them with transparent and concise communications.

Christmas cheer from Thomas Chippendale – The 1721 Naval Store Act had unexpected benefits

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Earlier this year Boscobel moved into new offices at 60 St Martin’s Lane, in Covent Garden, the historic creative hub of London. Some research about a talented previous occupant shows how unexpectedly good things can come if we have the wit to encourage enterprise and civility.

A plaque by the door reminds us that it was on this site that the furniture-maker Thomas Chippendale and his son rented their workshop from Lord Salisbury. It is from here that they manufactured their distinctive elegant hard-wood furniture when the Industrial Revolution was getting into full swing from the 1750s onwards.

1721 Naval Stores Act

What is not commonly appreciated is that the very existence of Chippendale’s innovative English Rococo designs was only made possible by the 1721 Naval Stores Act, which repealed duties on commodities required by the voracious Royal Navy. Among these were mahogany from Jamaica and walnut and pine from North America.

An abundant supply of imported hardwoods stimulated domestic craftsmen, joiners and cabinet makers. Thomas was born in Yorkshire, the son of a joiner and in 1718 and later moved to London.

The Director

In 1754 Chippendale published his celebrated catalogue of slim and lightweight designs, called The Gentleman and Cabinet Maker’s Director. This, it proclaimed reflected ‘. . . MODERN TASTE, as improved by the politest and most able Artists’.

In so doing, he pioneered an interesting business model. The Director was sold to an initial 400 subscribers at £1. 10 shillings each, making him £130,000 in today’s money. Not only did this provide working capital for his business, it advertised his prowess to an influential clientele. It was reissued twice with additional plates.

The initial subscribers included 28 titled persons, 21 designated Esq, and numerous craftsmen, keen to copy his designs. Four subscribers were ladies. Many of the subscribers, such as the Countess of Shaftesbury, the Dukes of Beaufort and Norfolk, and the Earl of Dumfries, went on to commission works from Chippendale.

It was a time of abundance. The Georgian aristocracy were growing ever more wealthy on the newfound prosperity which they benefited from as investors or as landowners collecting revenues from canals and turnpikes or from the mining of coal (and in some cases, it should be admitted slave-owning plantations). There was also a growing, rising, affluent class of entrepreneurs, inventors, scientists, merchants, tradesmen, craftsmen, artists and City professionals. A step change in the human condition, originating in Britain, was underway.

Following Adam Smith’s advice

At times of uncertainty we should take comfort from history, reminders of which are frequently around us. There are lessons to be learned and it helps give perspective. When MPs passed the Naval Stores Act nearly 300 years ago, they cannot have imagined the unexpectedly good things which would ultimately come from following Adam Smith’s advice – coincidentally given to Glasgow students in the same year The Director was published: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical.”

Happy Christmas and fingers crossed, on both hands, for all of you in 2019 from the Boscobel team.

Hedge funds are going long ESG

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For those involved in a corporate action situation, a remuneration vote, or implementing the sustainability policy of a large company there is one audience which you normally have not had to consider: hedge funds. However, there are signs that is changing.

In general, hedge funds are interested in generating alpha, or non-market correlated returns. The typical holding period can be quite short, somewhere between minutes and weeks, and – unless they are engaged in an activist strategy – they don’t usually vote or engage with the company on Environmental, Social and Governance (ESG) issues.

This week, Albourne, a consultancy advising the clients of hedge funds, published a manifesto in which one of the main points is to develop a standardised method of ESG reporting both for corporates and funds. Simon Ruddick, the chairman, is stepping down to promote it.

The Financial Times also carried a piece which claimed about a tenth of hedge fund strategies are now managed according to ESG principles. Half of hedge funds have also signed up to the United Nations’ Principles of Responsible Investment (UNPRI) charter.

Client’s demand

The drive for greater commitment to ESG by hedge funds is coming from their clients. According to a recent survey by the trade association AIMA, some 51% of hedge funds are seeing increased interest in their responsible investment capabilities, with the bulk of it coming from North America.

There have been some notable fund launches in this area. Jana Partners Impact Fund recently took on Apple over the addictive use of smart phones by children. It invests in companies which it, “believes are good bets but could do better for the world.” ValueAct Capital also launched its Spring Fund which invests in companies which, “are emphasising and addressing environmental and societal problems.”

To be fair to hedge funds, there are good reasons why they have not historically taken much of an interest in this area. Not only are their positions frequently of short duration, their primary objective is to generate alpha for their clients and this may in fact conflict with sustainable investing. There may be better returns to be made from a distressed security with a poor reputation. Furthermore, they may actually have a short position or stock on loan, where the votes rest with the legal owner. Or they may invest via Swaps which face the same issue.

Many hedge funds manage systematic strategies which are based on filtering and analysing data. Standardising ESG reporting by corporates, as the UNPRI is moving towards, is likely to enable them to create filters, indices and algorithms to provide ESG signals to adjust their portfolios or their votes accordingly.

Corporates take note

What are the implications for corporates? These are threefold. There is yet more of a requirement to keep the share register up to date and to establish who is the real owner and decision maker of shares out on loan or held via nominee accounts or other synthetic devices. Second, having worked that out, companies need to understand their investment or voting criteria, which may be systematic. And thirdly to engage with the funds and to emit the right signals.

Hedge funds now manage some $3.1 trillion of assets. As we saw in the campaign against the London Stock Exchange led by the TCI fund, they don’t do things by halves and even if they don’t succeed in their demands, they will make their presence felt by boards and companies and will shake things up.

The recent decision by Unilever to pull a vote on its redomicile was a classic example of things going wrong for a corporate. One suspects the company wasn’t clear who owned its shares and what they thought. Most of the names which came out against it were classic long-only funds. In the future, more hedge fund names are likely to be named publicly in such situations.

 

Introducing Section 20 of the EU Withdrawal Act

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Extending Article 50 is easier and more likely than some people let on.

The Conservative party conference is going about as expected, with the Prime Minister reportedly booed at the Association chairman’s dinner; Boris Johnson giving a witty, tub-thumping speech which ended, incongruously, with a call for everyone to back Theresa May; and every Cabinet minister jostling for leadership attention.

Nothing has changed. I doubt anyone is watching much at home. Certainly, I noticed that the YouTube figures for Boris’s speech topped out at 1,896.

None of our political leaders wants to focus their minds on the matter at hand. What happens on 30th March 2019, the day after we are scheduled to leave the EU?

Theresa May wants us to believe we will be out of the EU, but in some sort of limbo. Having handed over a cheque for £39bn, we will have won in return a political declaration for her Chequers proposals which are a complicated and unsatisfactory. Failing that, we will supposedly walk away without a deal.

Boris Johnson wants us to be in exactly the same limbo position. Only “negotiating properly” for a “Canada style free trade deal”. He apparently has no answer to the questions about the Irish border or why the EU would agree to anything he proposes. Perhaps this is why some call it “Blind Brexit”. 

Markets are sanguine

Here is another scenario, which explains why, relatively speaking, markets remain so sanguine. It is easy, from a legal point of view to extend Article 50. Even if Chequers and Canada Plus etc all fall by the wayside, there is still a strong likelihood that Britain will be limping along, obeying all the rules and doing as it is told without any say in the matter.

No wonder the IPO market remains open. Sterling is hovering around $1.30. 10-year gilts are yielding 1.6%. The economy is still plodding along.

Section 20 of the EU Withdrawal Act

The provisions the EU Withdrawal Act, paragraph after paragraph of them, all pivot on “Exit Day” which we are told in Section 20 “means 29 March 2019 at 11.00 p.m.” But later, it goes on to say that:

“A Minister of the Crown may by regulations amend the definition of “exit day” in subsection (1) to ensure that the day and time specified in the definition are the day and time that the Treaties are to cease to apply to the United Kingdom.”

Flip the pages on to Schedule 7, Part 2 (14) and the Act says:

Power to amend the definition of “exit day”.
14. A statutory instrument containing regulations under section 20 (4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

So, put simply the Government of the day can change the day we leave the EU, as long as it gets approval from Parliament. More likely, Parliament would compel it to do so if dropping out without a deal looked probable.

What about the EU? How would it respond to a humiliating appeal from the British Government, perhaps initiated by Parliament, to extend Article 50?

Well, the relevant powers are in Article 50 itself. The third paragraph says:

The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

Is No Deal really likely?

Clearly businesses have both a fiduciary and regulatory duty to prepare for No Deal. One cannot help feeling that, in reality, Limbo Land is much more likely. Extending Article 50 does not require primary legislation by either side.

If everything else falls over, our plan to use the UK’s existing membership of the European Economic Area by applying to join the related European Free Trade Association (by far the best option for 30th March 2019) remains on the table. If only politicians would admit it.

We have published Norway then Canada, a new strategy to avoid a Brexit smash, with a foreword by David Owen, on Amazon LINK.

Making the City work for women…and men

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The City and business are in a stew over women. Although it is in part a PR issue, it goes deeper than that and as a working mother with two young daughters my personal view is much of the debate is not grounded in reality. Instead it is dominated by a handful of high profile voices in the media.

What began in Hollywood, #Me Too, swiftly became a catalyst for change not just, and quite rightly, in relation to fighting abuse but as a call to arms about the lack of equality in the workplace.

Since then the gender pay gap has been revealed and, confirming all our suspicions, the skew is towards men occupying the majority of senior positions, thus accentuating the pay gap and forcing questions over why this is the case and what can be done to rectify it.

The cause is admirable. There should be equality in the workplace. Men and women should get paid the same for the same job. Not many would quibble those statements.

Targets aren’t the answer

However, what a large but silent group of people do quibble with is targets. Hiring targets, board quotas etc don’t help women if there is not an underlying change in culture or ambition for working women – and men.

A recent comment piece by Clare Foges in The Times hit the nail on the head about what workplace equality means: “Real equality in the workplace isn’t a numbers game; it is simply the removal of our sex from the question of whether we are right for the role. As Dorothy L Sayers put it: “Once lay down the rule that the job comes first and you throw that job open to every individual, man or woman, fat or thin, tall or short, ugly or beautiful, who is able to do that job better than the rest of the world.”

As the same article says, headline targets do not create equality. Rather they create the impression that women need special treatment and, of greater concern, imply that women may get jobs for being women rather than because they are genuinely the best candidate for the role. 

 Flexible working for mothers (and fathers)

Targets though are just one part of the problem with the current debate. The real crux of the matter is how to encourage women to join the traditionally male-dominated City and then how to retain them, especially as choices concerning motherhood and balancing family life come into focus.

This is the elephant in the room as it requires meaningful change, not just for women, but for men too. It requires change if true equality is to be achieved and everyone treated the same.

Target setters need to answer questions about what they are prepared to do to encourage women into City roles and then how they will retain them. What genuine changes are they willing to consider to see women and men climb through the ranks? Will they consider flexible working in roles that have typically demanded long hours? Will job sharing become more common? What allowances will be made for family commitments? Should childcare be tax deductible? Can employees be set up to work from home?

These are the sort of changes which should be considered given that so many women, in particular, wrestle with these issues. If they are not considered and addressed, then targets are empty and meaningless.

A comment piece in The Sunday Times this weekend, “Bringing up baby is for Facebook bosses. Working parents get a nanny or get the push,” reveals that these are indeed hard choices for firms, even supposedly innovative ones such as Facebook. Their leaders may make all the right noises about the importance of family and flexibility but the charge from employees is that the digital company, “…actively resists flexibility.”

Couriering breast milk. Really?

It is easy to see how this can quickly turn into a contentious communications issue, both internally and externally as employees and the public feel disenfranchised from the headline debate. Firms need to be careful how they address it and show some empathy.

For example, the recent news that a well-known city institution will courier breast milk to babies of working mothers just shows how wide of the mark firms can be. It quoted an employee that, said institution, “…really is good to women now.” I wonder how many women would concur.

The debate needs to be turned on its head. Employers need to re-evaluate their values and their culture. They need to decide what kind of person they want to employ, what the career path is and how best to retain them. This is not about men and women. It is about people, making life work in and out of the office, for them and their families.

Once firms have fathomed all of the above, they need to engage and explain it to the people they are trying to attract. Communications can help, but the real issue is change.

 

Norway then Canada, a new Brexit strategy

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I have published a short book on the Amazon platform, called Norway then Canada, a new strategy to avoid a Brexit smash. Lord Owen, the former Labour foreign secretary, has kindly written a Forward.

I wrote it over the summer, when the weather was dodgy in the Isle of Wight. I advocate that Britain should fall back on the so-called Norwegian option. This is our existing membership of the European Economic Area Agreement, which Britain signed in 1992. We can then use that as a platform to negotiate a more flexible Canada-style free trade partnership with the European Union.

Brexiteers in Parliament have apparently been misled into thinking the EEA is not an option. The points I make are:

  • The Government, including the Prime Minister, has been disingenuous about our membership of the EEA. The only reason it will no longer operate when we leave the EU, as she claims, is that Britain has not applied to make it operative by joining the European Free Trade Association (EFTA).
  • The Prime Minister is apparently attempting to remove a vital Brexit option and negate an international treaty by subterfuge or by mistake. EEA membership is superior to the so-called No Deal, World Trade Organisation proposals, her Chequers plan or delaying Article 50.
  • The EEA is a commercial treaty with the EU, which also delivers Brexit.
  • We would gain control of our borders. British passports would come back and we can use the treaty provisions to opt out or limit freedom of movement, just as Lichtenstein has done.
  • We would gain control of our laws. Although we would be aligned with the single market, the EEA includes rights of adaptation and veto on new rules. We would be outside of the jurisdiction of the European Court of Justice.
  • We would gain control of our money. There is no obligation to pay into the EU budget. Any payments to the EU would be in return for participating in particular programmes. George Yarrow, an Oxford University economist, has estimate Britain’s net payments to the EU would fall from some £9bn to £1.5bn.
  • We would gain control of our trade. The EEA is outside the customs union and we would be free to make our own trade deals.
  • We would be outside of the Common Agricultural Policy and the Common Fisheries Policy.

In his Forward, Lord Owen says: “This paper is an excellent explanation of a complex, serious and important Brexit option that urgently faces Parliament. Continued membership of the European Economic Area Agreement, given the nature of Article 50, is the only rational option and it should be put into legislative form by a cross party motion supported by as many MPs as possible.”

Lord Owen adds that the Government should then approach the other contracting parties, the EU itself, the other 27 members, and the four members of the EFTA to make our EEA membership operative. But he says this should be temporary, while a more flexible free trade deal is negotiated.

Norway then Canada has been published to coincide with the launch of a new campaign for the Norway Option, led by Conservative MP Nick Boles, called Better Brexit.

Some of you may have had sight of earlier drafts. Thank you for your input. The final version has been updated substantially.

The Amazon platform allows you to download Norway then Canada to Kindle, or to order a hard copy.

Falling back on the EEA, or Thucydides

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Two weeks ago, ahead of the Chequers summit, we warned that it would be a miracle if one or more Cabinet ministers did not resign. And so it has proved.
 
The subsequent Parliamentary chaos, we did not predict. The conduct of all sides in the Brexit process now reminds me of a passage from Thucydides History of the Peloponnesian War when he described the impact of the disastrous wars with Sparta on Athens and on Greek unity.
 
“Thus revolution gave birth to every form of wickedness in Greece. The simplicity which is so large an element in a noble nature was laughed to scorn and disappeared… In general, the dishonest more easily gain credit for cleverness than the simple do for goodness; men take pride in one, but are ashamed of the other… At such a time, the life of the city was all in disorder, and human nature, which is always ready to transgress the laws, having now trampled them under foot, delighted to show that her passions were ungovernable, that she was stronger than justice, and the enemy of everything above her… When men are retaliating upon others, they are reckless of the future and do not hesitate to annul those common laws of humanity to which every individual trusts for his own hope of deliverance should he ever be overtaken by calamity .… The cause of all these evils was the love of power, originating in avarice and ambition, and the party-spirit which is engendered by them when men are fairly embarked in a contest… For party associations are not based upon any established law nor do they seek the public good; they are formed in defiance of the laws and from self-interest…’
 
Thus it is with Brexit, conjured up by the Conservative party, incompetently executed, yet nobody seems capable of finding a solution. Sometimes it is tempting to side with Tony Blair and call the whole thing off. Yet common sense suggests that would be a disaster too.
 
Just to add to the ruin in the nation, the Labour Party has spent the week having a somewhat repellent row about the definition of anti-semitism.
 
While not being personally involved in Brexit, though knowing people on both sides of the argument, I have therefore been suggesting both on the CapX blog and on Twitter, that temporarily falling back on our existing European Economic Area (EEA) membership, combined with the European Free Trade Area as a solution. For those not up to speed on this, EEA is a commercial treaty between Norway, Iceland, Lichtenstein and Switzerland and the member states of the EU.
 
The Pro-EEA argument is simple. As we are already party to the EEA, we would be able to junk the whole Theresa May plan, including the three year Transition and start again with proper negotiating optionality. As it takes us out the of the Customs Union, out of the jurisdiction of the ECJ, and includes a provision for putting an emergency break on immigration, it is compatible with the referendum, while also offering a solution to most of the issues.
 
I am glad to say I am not alone. Rupert Darwall has written a similar piece for Reaction; Paul Goodman has done so for the influential Conservative Home and my ex-colleague Philip Johnston has done so on the comment pages of the Telegraph. However, the clearest and best exposition of the strategy comes from the distinguished Oxford economist George Yarrow. I strongly recommend his paper, here.
 
Falling back on temporary EEA membership is a simple idea which would work. Simplicity may be so large an element in a noble nature, but plainly, this is a long shot. The only hope is that a credible Brexiteer rival to Mrs May, such as Boris Johnson, picks it up. He gave his resignation speech yesterday and it was well-judged. All I can say is that I hope he is listening, although he has not yet endorsed the idea. Senior Remainers are also engaged.
 
One thing is for sure, without a collective change of course, I fear we are in for months if not years of the sort of political depravity recounted by Thucydides.
 

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