Hill+Knowlton Strategies

Welcome to the first edition of Friday Fiver, H&K’s Financial and Professional Services team’s guide to the things you really should know about this week in the world of Financial and Professional Services in the media, Westminster and online.

The elephant in the room… Bankers’ bonuses have been agenda item number one this week. They were always going to be given the appearance of Bob Diamond, the Chief Executive of Barclays, at the Treasury’s Select Committee evidence session on Competition and choice in the banking sector and the Government’s apparent climb down from tougher regulation.

Described in some quarters as a masterclass in persuasion and others as typical of a man sunbathing in a tropical tax haven batting away beach-sellers (I wasn’t sure of that analogy either) whatever the truth, the Boston Red Sox man was always likely to divide opinion. The reality is banker bonuses are a perennial communications issue.

With a global industry like banking whose fortunes are reliant upon the talent of individuals, any attempt to discriminate between markets will result in ceding competitive advantage. In short, banker bonuses are a necessity. However, to the man in the street or the average tax payer (who only recently bailed out the banks) these bonuses look sickeningly out of synch with the fortunes of others. In reputational terms it is an annual time bomb that will go off like a New Year hangover every year. The solution is unclear, but making the role of bankers more transparent, showing them as the experts that they are and painting a picture of the good that they do, would be a start.    

Elsewhere in the world of Financial and Professional Services… accountancy firm KPMG is offering to pay university tuition fees for its intake of trainees from this autumn. The proposal will see 75 students through a six-year scheme with the firm, leading to a BSc degree in accounting at Durham University as well as the ACA qualification. With tuition fees set to rise dramatically from 2012, this is a great initiative from a firm to recognise that many bright and able A-level students will seek out alternatives to higher education. Could this set a precedent for others in the private sector to follow suit when it comes to talent recruitment?

Labour has won the Oldham East and Saddleworth by-election… with a majority of more than 3,500 in what will be seen as a boost to Ed Miliband’s leadership and a blow to Nick Clegg and the coalition. Under the circumstances of Phil Woolas’ election win overturned for ‘misrepresentation’ and his subsequent ousting from the Labour Party, the Liberal Democrats would have been hoping, perhaps even expecting, to win in normal circumstances. As everyone has pointed out this week, unlike General Elections, by-elections tend to be a barometer for the popularity of Government’s as oppose to a verdict on how the country should be run and the spell of fiscal austerity we are currently under and the pending cuts are not (we hope) normal or indeed, popular.

Incidentally, as the Spectator pointed out earlier in the week, the fates of Ed Miliband and Nick Clegg appear inextricably linked; one it would seem cannot succeed without the other one having to fail. Ed Miliband has made a combative start to the year, his new comms team are clearly having an influence on Labour’s economic message, demonstrated in Ed Miliband’s article for the Times this week, where a more coherent riposte to the ‘Conservative-led coalition’ as it is now referred, seems to be forming. He followed this up with an improved performance in PMQs too (see Iain Martin’s summary here, worth reading for the penultimate paragraph alone). This has all been in spite of the Shadow Chancellor being unable to recall the rate of National Insurance live on TV. Still, it is Alan Johnson, and I can’t help but think this could further endear him to the British public. 

So congratulations to Debbie Abrahams, new MP for Oldham East and Saddleworth!

Straight talking on pensions

Yes I know, pensions can be a very dull subject for many, but this week the Government tried to do something about it. Next year a major new project will be launched called ‘auto-enrolment’. In a nutshell this means every employee will have a pension plan setup for them and will pay 4% of their salary each month into it. It’s designed to get the whole country saving for retirement, but if you don’t want to, then you can quit the scheme after three months.

Now here’s the important bit – pensions are considered the dullest of the dull. That’s in no small part due to the language used to describe them which is full of horrible jargon (I could have referred to ‘contribution rates’, ‘opt-out’ or ‘defined contribution scheme’ in the paragraph above for example).

To combat this, the government has unveiled their ‘phrasebook’ for auto-enrolment. This is a guide for anyone involved in the project (HR managers, pension providers etc) which explicitly tells them which words they can and can’t use when describing the project to employees.

It’s a bold move, and one that critics will claim has been tried many times before. But before you join the list of dissenters, take a look at the pdf and decide for yourself – this time, it really could work.

Takeover talk… In an earlier blog post my colleague Jonathan Henderson, took a look at the problems occurring at fund manager Gartmore towards the end of last year.

As was widely predicted at the time, without the firm’s “star managers”, the business was likely to struggle to retain investor confidence. Sure enough, this week larger rival Henderson Global Investors (no relation) announced a £1.7bn deal to take over the business.

This is not the first time Henderson has picked up a manager in distress. The company took on struggling New Star for a nominal amount back in 2009. It will be interesting to see how this latest deal benefits Henderson but according to Citywire the jury is still out on whether the purchase makes sense.

Nick Clegg’s hope was for a ‘hung’ or ‘balanced’ Parliament so that he could lead the LibDems into government.

He got his wish – but he didn’t wish for this.

Having lost seats rather than make the gains which ‘Cleggmania’ briefly offered, he is a weakened leader and each of the options in front of him potentially offer the end of his career.

Option 1: If Clegg joins with the Tories thousands of LibDem supporters and voters will be devastated. His hands will be soiled with the cuts the Tories have to make. And if any deal does not involve electoral reform – and it is difficult to see how one could – he will be seen as a man who sold his principles for a ministerial car and little else.

Option 2: If Clegg shores up Labour – even without Gordon Brown – he will be seen as the man who revived an administration which the public had rejected. And there would be no guarantee that in those circumstances a referendum on PR wouldn’t be seen instead as a referendum on what would be bound to be an unpopular government.

Option 3: But if Clegg decides to do a deal with no one the LibDems will be seen as not having the spine for government.

The deal with the Tories is the likeliest at the moment. But whether LibDem and Tory backbenchers can keep their discipline for very long is very doubtful.

Another election within months seems a certainty at the moment. And going into that, Clegg’s hands are unlikely to look as clean as they once did.

Dirty deals to be done – and someone has to be a statesman.

In a campaign in which the only sound prediction was that nothing could be predicted it might seem odd to try to say what the next few days hold.

But assessments about where the parties are and how they might work together are still possible.

Labour is amazed still to be in the game. Going for a fourth term, after the worst recession in 60 years, the expenses crisis and with a deeply unpopular leader they should have been thumped. That they weren’t is a testimony to an on the ground campaign run on a shoe string. And the nation’s questions about David Cameron.

The difficulty for them is how can any deal keep Gordon Brown in power when he has been beaten? Will he fall on his sword for the good of the party and say this is a defeat for him and not for Labour and get rid of the biggest barrier to a coalition for the LibDems? Mmm. Doubt it.

But then what about the Tories? With the electoral circumstances in his favour how can David Cameron not have won? Already there are murmurings of discontent in the Tory party about how he could have failed to comprehensively beat Gordon Brown.

The Tories tend to realpolitik and will do what they have to, to get to power. But then they draw lines in the sand, like over the Euro – and over electoral reform.

It is unlikely that the Tory party would stomach a change to the voting system – and even if he agrees to one, or a referendum on one, it is by no means certain his new Tory MPs would follow David Cameron through the lobbies.

And then there is Nick Clegg. Cleggmania, it appears, didn’t have the staying power of Jedward. His party has done badly but now they hold the balance of power.

What will keep Clegg’s mind fevered? Shoring up Gordon Brown could be electorally toxic. The cuts the Tories would insist on this year would be a key reversal of LibDem policy – and therefore electorally toxic. And to fail to do a deal in the national interest could be equally toxic.

But Nick Clegg has a better chance of electoral reform than any Liberal leader in their modern history. Labour are more likely to deliver it but shoring up Brown could cost Clegg his career.

Each leader has the world to gain – and their career to lose.

How the next few days work out is a labyrinth, enjoyable to speculate about but ultimately no one really knows the ending – other than this likely final reel.

The country will be back at the polls within 12 months. Whatever deal is struck, or not struck, it is unlikely to last.

Clegg surely cannot do a deal with the Conservatives without an agreement on electoral reform, and even if he is willing it is unlikely David Cameron could deliver it.

Yet surely Clegg cannot do a deal with Labour unless Gordon Brown either steps down or – ironically considering what he demanded of Tony Blair – puts a short timetable on his leadership.

If there is a minority Tory government the LibDems could again be in the worst of all worlds – Labour will vote against Tory budget cuts, but would the LibDems join them when stability is seen as being in the national interest?

The parties need to seek something which is stable for at least six months or the bond and currency markets will start dictating to them with all the economic devastation that would cause.

Whatever deal is struck is unlikely to bring anything other than short term stability.

And, even then, for any deal to be struck demands sacrifice from each of the party leaders involved. Considering that Bank of England Governor, Mervyn King, says that the party (or parties) that do go into government will have to do things which make them electoral losers for a generation, perhaps the long term winners will be the party that is excluded.

We are in for a weekend of drama. By Tuesday a deal is likely to be struck. But whether under a new electoral system or not, the country is likely to be at the polls again within the next 12 months.

Well, what can we say with any certainty after an extraordinary election night?   

The Conservatives, and to a greater extent the Liberal Democrats, have not done as well as expected.  

Despite the surge in support following the televised leader debates, the Lib Dems have actually lost ground compared to 2005.  

The Conservatives captured some – they did well in Wales –  but not all of the marginal seats they needed, and hence have fallen short of the winning post.  

Labour have done slightly better than expected – their vote held up in well in London and Scotland – which has contributed to the denial of a majority to the Conservatives. 

This is also why we have seen some, but not all of the senior Labour casualties expected. 

As for what happens next, even if the Conservatives won all seats left to declare, they will not have a majority, so we definitely have a hung parliament.  

According to precedent, Gordon Brown remains Prime Minister while he seeks to form a coalition that will give him a majority.

In the last hour though, Brown’s chances of achieving this have received a major blow, with Nick Clegg repeating his view that the party with most votes and seats – the Conservatives – should seek to form a government. And David Cameron will be making a statement at 2.30 on his plans for a broad-based government that will act in the national interest.

Signs of irresistible momentum? Perhaps, but another thing we can say with certainty is that Gordon Brown should never be ruled out…

Make sure to check back here as this unpredictable election race reaches its climax.

The debates are over. Now is the time for decisions to be made. So says the Prime Minister Gordon Brown.

His fear though must be that the voters have already decided. Their minds are already made up. And what they seem to have decided whoever it is who will run Britain it won’t be Gordon Brown.

No one believed that the debates would be the forum in which the PM would flourish, but in the last one he had to. Nothing suggests that the public feel he did.

Now the Labour campaign have less than a week to find a way to reach out to the one in four voters who say they have yet to make up their minds. The question is how.

David Cameron hasn’t flourished in the debates as some thought he would, but he has done enough it seems. This has not been a triumphant march to Downing Street for the Conservatives, partly thanks to the surprise effect of Nick Clegg.

But there is just the sense that they are beginning to inch their way to a meaningful gap over their opponents.

Yes the holy grail of a 40 per cent share of the vote seems far away, but leads of two and three per cent are now regularly turning into leads of five and seven points in some polls.

If Labour and the LibDems fade, in an election when the contest seems genuinely three way, the Conservatives could pick up seats more easily than they expected without the scale of swing that was described when it looked like a two horse race.

The last seven days are going to be the hard yards of this campaign as all three main parties try to grind out votes.

For Labour at the moment it looks like a battle for survival – they may be all but guaranteed to be second in the number of seats but to come third in the popular vote would be devastating.

Clegg’s LibDems need to ensure that this election doesn’t turn into a psyche-scarring false dawn. They are likely to fade a little, but are unlikely to get a chance like this again to grasp second place.

And for David Cameron, his own personal survival is at stake. Many within his own party will question how he cannot win an outright majority in these circumstances – and unpopular PM, a party in office for 13 years, the worst recession for 60 years and then the expenses scandal.

If he fails to win a majority we can expect to be back at the polls within 12 months, but there will be many in his party who will feel they might need a new leader for that election if he fails to convince in this one.

The questions in the final week are these. Can the Conservatives do enough for outright victory? Will the Labour vote collapse to make that easier for them? And can Nick Clegg stop his vote softening and regain momentum?

And all of this in an election where the Governor of the Bank of England, Mervyn King, has said that the party that wins is likely to be out for a generation because of all the unpopular things they will have to do to straighten the nation’s finances.

A good election to lose? No one in the leadership of the three parties will think so. And then there is the question of how badly it is lost.

This election has been the most dramatic and unpredictable for decades. Predictions now are risky.

But unless there is a dramatic shift, it looks like this election might just be the first in a pair.

And how the bond markets react to that will determine the futures of the parties – and the futures of millions of Britons.

We promised yesterday to assess the fallout from #bigotgate and the impact it might have, so here we go:

The Heartbeat graph below details recent Twitter activity referencing the three party leaders and suggests Gillian Duffy did indeed have a big impact online.

Webmongs, I won’t lie to you – I am having what fat, sweaty policemen from 1970s detective shows would legitimately refer to as ‘a rough one’ (quite possibly whilst mopping their sweaty forehead with a gingham handkerchief – repeated attempts to find an image to accompany this phrase have proved fruitless, but I can now safely say that I do not recommend Googling “fat sweaty police chief” with Safe Search turned off).

Despite this, my dedication to bringing you the very best some stuff I found online this week continues unwavering. Not least because this post marks the 10th anniversary of this (in)glorious experiment in exactly how much rubbish one can get away with churning out in the name of ‘work’. That’s right – you’ve now had 10 weeks of this crap. It probably feels like longer.

To celebrate this momentous milestone, I would like to run a competition. That’s right, YOU CAN WIN A PRIZE. Just leave a comment at the bottom of this post, telling me something interesting. The person who posts the thing which I like best will win…a book. One of my books, to be precise (I’ll try and make an appropriate choice depending on who it is). I might even throw in some other stuff too, depending on what I’ve got knocking around at home.

I’ve just reread that – effectively what I’m offering you is a random choice of second-hand novel and possibly some other miscellaneous, used tat. This is a rubbish competition. Sorry.To make up for this, here’s some links and words:

Read the rest of this entry »

Day two in the Big Election House and no one got evicted.

The pressure was on David Cameron who, had he put in a performance as poor as the first debate, would certainly have been on the way out. Instead he pulled out a strong performance which keeps him in touch with Nick Clegg who breezed through again.

And Gordon Brown? He certainly took risks. Admitting his weakness in presentation and asking the public to vote for him even if they don’t like him was brave. He was better, he didn’t win but he kept himself in the game.

Which all sets up the third crucial debate next Thursday.

This is the talent game show meets the mini-series. Three debates on consecutive Thursdays followed up by a 12 hour special the following week when the winner – or winners – or indeed multiple losers – will be revealed.

This will be a test of not just whether the political system will change but also the media landscape. The Tory press are battering Nick Clegg. If the public stick with him their power will have been enormously undermined.

The first debate hugely influenced tactics for the second and what will be fascinating is how the second influences tactics for the crucial third.

Cameron had learned from the Clegg play book, and indeed so had Brown. The key was to make it one candidate against two. A three party race perhaps, but with each party trying to make this election a binary choice.

So it was Cameron’s change against Clegg and Brown on the left. Clegg against the ‘two old parties’. Brown’s experience against the naivety of his two younger opponents.

That seems to be a test which Clegg is still best placed to win.

All the leaders can claim to have had their moments in the debate and that is reflected in the polls. The LibDems and Tories are neck and neck, but Labour are also back in touch and back in the game.

Labour will hope that the economy is where Gordon Brown can triumph in the last debate and come across as stability as people to the part of the campaign when they tend to vote with their wallets not their hearts.

Cameron will hope that his voice of change will be more compelling than Clegg’s.

Both Cameron and Brown have a momentum of sorts after the debate but Clegg showed he had resilience.

But this election still looks like the most astonishing game of political Russian roulette we have seen in modern times. If the Conservatives don’t win they could go into melt down. If we end up with a LibDem/Labour coalition, electoral reform could end the Tories chances of ever forming a majority government.

If Labour come third their survival could be in question.

Can Nick Clegg keep it up and could he win the popular vote and claim to have the biggest mandate to be PM in a hung parliament?

This is arguably the biggest tv cliffhanger since Dallas and the question ‘who shot JR?’

The thing is we are not quite sure who is getting shot yet……

In advance of the second leaders’ debate on Sky later today, a quick analysis on Heartbeat shows that none of the parties have taken a decisive lead on foreign affairs issues such as the wars in Iraq or Afghanistan or Europe online. The graphics below demonstrate that references to the parties and these issues respectively are experiencing peaks and troughs in tandem and in relatively low numbers too.

This, I think, demonstrates to an extent that discussion on real policy issues is being stifled in favour of personality and that the parties’ are failing to differentiate themselves on these issues to the electorate.

The Lib Dems are on top, we assume this is because of their success following the last leaders’ debate. It will be interesting to see if they can stay there and if any specific issues peak after this evening’s debate.  

Incidentally, the dramatic rise of Nick Clegg and the Liberal Democrats following the last debate is captured perfectly in the graph below.

Let’s see if tonight’s debate has anything like the impact of the first.

Apart from the hint that most political commentators don’t really like the public, the commentariat have been fairly explicit in what they think this election is about.

It is the Pop Idol election. Thanks to the LibDems bounce in the polls after the first TV debate, the election has been turned into a gameshow. Can Nice Nick make it through the next two weeks?

I would put it a slightly different way. This is the ‘F*** you’ election. The public seem to dislike the Prime Minister and they don’t much like David Cameron. They want to punish someone for the MPs’ expenses, the bankers and the fact that we are in for tough times ahead. They want to punish them. They just didn’t know how until now.

The debates meant they saw for the first time a guy they didn’t really know. Nick Clegg didn’t win the debate with a great argument, or a clever line. He won it by sounding like the public and not being Brown or Cameron.

The polls suggest to me the public are saying: “We are going to vote for him ‘cos it will really f*** you two.”

That makes Clegg almost impossible to attack. His new support isn’t built on policy or ideas – however good they are – it is primarily built on the fact he is not the other two and sounds credible. He appears apolitical and therefore if the political establishment beat him up in the usual way it might only boost his credibility.

It is like a teenager realising that everything their disapproving parents say about their girl/boy friend is true but still going out with them anyway to piss ma and pa off. Nothing they say will then change their behaviour.

I am not saying the public are teenagers – they are the boss. But maybe they are sick of being treated like children and this is the best way available to them to make a point.