Never has there been so much speculation ahead of European Parliamentary elections in the UK, yet still so much surprise when what was predicted actually happened. The UKIP tremors turned into an earthquake, hitting the Liberal Democrats hardest who lost all but 1 of their 11 MEPs.
But what does all of this mean for insurance companies, the wider financial services industry and indeed the UK as a whole? And how much influence will we have to advance British interests?
British influence in Brussels
Regardless of one’s views about whether the UK should be in or out, much of the UK’s financial services legislation originates from Brussels. Whether you believe this is right, because of the benefits being in the single market brings for UK firms and the UK economy as a whole, or wrong because too much is coming from Brussels, the fact of the matter is that the UK is in the EU now so Brussels matters. The only way to ensure British interests are advanced, that any legislation is appropriate and proportionate is by engaging.
So we need our whole team on the field. The biggest immediate concern for British interest groups in Brussels over recent weeks has been whether the new set of UKIP MEPs will engage in Brussels. Will the new UKIP delegation, despite their opposition to anything coming out of Brussels, get stuck in to the immediate needs of negotiating and fighting for UK interests in the EU? Or will it, in practice, mean 24 empty British chairs in the European Parliament?
Votes in the European Parliament can be won or lost by one or two votes. Showing up matters. If all the previous UKIP MEPs had voted against the controversial financial transaction tax, the European Parliament would have rejected it, and that would have changed the dynamics of the ongoing debate around it.
UKIP has returned with some credible individuals with financial services and business backgrounds. UKIP’s new MEPs could be a real asset for the UK if they choose to represent their constituents and their country in Brussels actively. We all hope this will be the case.
A more volatile/less predictable European Parliament or business as usual?
Across the EU, the elections have resulted in an increase in MEPs from fringe parties – many of which are Eurosceptic. How this set of smaller parties and individuals will translate into the European Political Groups will be the subject of much bargaining and bartering over the coming weeks. Marine Le Pen (President of the Front National in France) and Nigel Farage (leader of UKIP) will already be on the phones looking for Group allies (25 MEPs from seven different member states are required to form European Political Groups).
It is important to remember that at least two third of MEPs elected on Sunday remain committed to the EU. It is already clear that the EPP (the Conservative group – without UK Tories) will come back the largest, followed by the Socialist (S&D) group (where Labour sits). This is the usual balance, and is no different to the previous European Parliament. Together they hold the majority.
However, what is different is that it will be difficult to form compromises with other Groups. The sheer number of different national parties (many with just a handful of individuals) will make finding a majority of votes amongst them at any one time a challenge. This could go two ways:
- It could result in a Parliament now wholly built on deals (on legislation) between EPP and S&D. Helped by the arithmetic of the seats in the European Parliament, there can be a tendency of Brussels insiders to pretend little or nothing has happened. This may also help drive the big two (and perhaps three) mainstream political parties closer together, in their search for business as usual. This would not be easy for the UK, where there are no UK MEPs represented in the EPP, and now only one in the European Liberal Group (ALDE).
- Or it could have the opposite effect. A very unpredictable Parliament where deals are made ad hoc dependent upon the issues of the time and how easy it is to rally a collection of smaller groupings. This would be a challenge, and an unpredictable one.
However, such a picture of the European Political groups will take some weeks to form. For example, in Germany, the new Eurosceptic (anti-euro not anti-eu) party Alternative fur Deutschland rose from nothing to 7 MEPs. It has said it would look to join forces with Tories not UKIP. Meanwhile, UKIP has said it will not join the Front National in a European Political Group, despite Marine Le Pen’s anti-EU stance and willingness to do so. This puzzle still needs putting together.
Reaction of parties nationally
This is the first time that a UK Party with no national MPs has won the British popular vote in the European Parliament. With a year to go before the General Election, the question is how will the Conservatives, Labour and Lib Dem Parties react to the surge of support for UKIP?
I guess the answer will be whether they see it as the British public’s genuine concern about the UK position in the EU OR if UKIP’s success is identified as a broader reflection of a disaffection of the mainstream parties.
In the former scenario we can expect to see more pressure for an in/out referendum, and becoming a focal point on the election campaign, alongside immigration. The latter means a far greater challenge for the ‘mainstream’ (if they can still be used as a differentiation from UKIP), to reconnect with the voter, and for the party leaders to remain supported by their own membership.
Each of the above are key to understanding whether the British influence and interests will be better or worse following these elections. Unfortunately for those of us who prefer certainty over the future of the EU (and the impact of legislation over the next five year term) only time will tell.
Carol Hall is Head of European Affairs, Association of British Insurers.