Why lobby?

Recent research into MPs elected in the 2005 General Election found that only a minority (29%) of our current Westminster MPs have had any previous experience of working in business before entering parliament.  This is not to say that our elected representatives are not qualified to legislate on areas where they have no direct experience, but rather underlines why it is so important that business and other organisations and individuals take part in the democratic process.

Effective political communications can provide a bridge in the democratic process so that parliamentarians, ministers, civil servants and regulators are aware of issues that are necessary for them to make decisions and enact policy having taken due consideration of the views of all those involved.

It should also be recognised that lobbying, or more accurately the practice of political communications is a two-way street, in fact MPs, MSPs, AMs and officials are hungry for this information in order to gain credibility for their policies or for their own scrutiny of proposed legislation. Government, political parties, policy makers, regulators and other related organisations directly benefit from the lobbying activities of businesses charities and NGOs through the development of partnerships which aid the development of this process. Often the biggest political mistakes made by Government happen when they have not adequately accounted for the views of their key stakeholders.

The development and widening of the policy process to encompass wider stakeholders by the Government since 1997 has been extensive, making this landscape much more difficult to navigate and understand where decisions are being made. The structure of the policy making process in the UK has become increasingly fragmented largely as a consequence of devolution as well as a growth in the number of executive agencies, independent regulators and non-departmental public bodies. Hundreds of consultations are published each year and the Government has also increased pre-legislative scrutiny in order to consult the public, business and other stakeholders before legislation is published. This is symptomatic of modern government in the United Kingdom and requires substantial effort and input from all stakeholders so that they can meaningfully take part in the policy making process and ensure a positive impact.

Lobbying can take many forms. Primarily you might want to affect policy or legislative change or simply wish raise your profile and generate political understanding for your interests. A successful political communications campaign will always rest on the credibility of an organisation’s cause and the effectiveness of their message. At the end of the day, lobbying or making your voice heard, is a necessary and essential part of the democratic process.

Matthew Revett, Grayling Political Strategy

The views expressed in this article are the author's own personal opinions and may not reflect those of Shepherd and Wedderburn.

20 December 2007

Scottish Futures Trust - The way forward for Scotland?

The term Public Private Partnership refers to collaborations between the public and private sectors in the delivery of public projects or services.  The Private Finance Initiative (or PFI) is a form of Public Private Partnership. 

PFI projects involve long-term contracts and are generally used by local authorities, public bodies and central government to procure the construction or refurbishment of an infrastructure asset (e.g. schools, hospitals, prisons, roads etc) by a private sector contractor or consortium of private sector contractors.  The contractor/consortium is then also responsible for operating and maintaining the asset for the duration of the contract (typically between 15 and 30 years).  This creates an incentive to use quality materials and workmanship from the outset and to seek out efficiency savings. 

The consortium is both incentivised and penalised by a mechanism that involves a series of targets and performance indicators.  Instead of the public sector bearing the financial burden of the entire asset up front, the consortium is responsible for the construction/refurbishment of the asset and once it is available for use, the public sector spreads the cost of construction and maintenance/operation over the lifetime of the contract by making regular payments.

The current Scottish Government is opposed to PFI as a method of funding public projects on the basis that it commits the public sector to long-term payments, which usually contain an element of profit for the consortium involved.  However, since extracting a public body from a PFI contract can be as costly as allowing it to continue for the 25 or 30 year period originally envisaged, it is unlikely that many existing contracts will be terminated.

While there is little that can be done about the financial obligations under existing PFI contracts, the current administration is committed to not increasing that debt.  In fact a proposed PFI scheme for a new prison has already been abandoned.  The prison will instead be procured and run by the public sector.  

As part of their election manifesto, the current Scottish Government proposed the "Scottish Futures Trust" as an alternative procurement/funding method and they plan to make a further announcement once they are ready to explain the proposal in more detail.  Current understanding is that this new model would be designed to encourage greater use of public bonds to achieve lower cost borrowing and the retention of public assets in trust for the Scottish people.  This "not-for-profit" vehicle is aimed at reducing the high levels of public debt associated with PFI and the level of profit that the private sector has been able to achieve on some PFI deals in the past. 

Detailed information has not yet been provided on how the proposed trust would be implemented.  In the August 2006 Scottish Nationalist Party (SNP) paper on Scottish Futures Trust, they refer to similar trusts in the United States where investors can invest in public infrastructure project bonds.   However, in the United States such bonds are exempt from income tax and are therefore attractive to investors.  This may be difficult to achieve in Scotland in view of the limitations on the powers devolved to the Scottish Parliament under the Scotland Act 1998 and the political issues that would arise were a tax advantage created in Scotland but not across the rest of the UK.    

In fact, "Not-for-Profit" education projects, which use PFI contractual structures, have already been implemented in Scotland and the Scottish Government may look to these projects to assist them in working up their proposals for the Scottish Futures Trust.  These schemes retain private sector involvement and the associated benefits of the "asset" not being paid for until delivery and the knowledge that a maintenance regime will be in place.  However, any surplus profit on the projects is paid into an educational trust for the benefit of the local authority area rather than distributed to the project company and investors.

The concept of reduced borrowing and idea that public institutions could be held in trust for the Scottish people may be appealing but this needs to be weighed against one of the main benefits of PFI – risk transfer.   In PFI projects, the party best placed to manage a particular risk assumes responsibility for it.  This means that at least part of the risk in a particular project is transferred away from the public sector, albeit at a premium.  The reality of a public funded project is that the public will be responsible for the maintenance of the asset irrespective of whether they are in a position to manage that risk.

Irrespective of the procurement method used, there will always be a need for new schools and hospitals and it will be interesting to see how the Scottish Government develop their proposals in this area.

20 December 2007

EU Reform Treaty

With all the fuss surrounding Prime Minister Gordon Brown's absence from the signing ceremony in Lisbon, the new EU Reform Treaty (or the Treaty of Lisbon as it is now known) has been the subject of extensive coverage in the press.  Here we take a look behind the media frenzy at the actual reforms contained in the Treaty and what needs to happen before the Treaty comes into force.

27 European heads of government signed the Treaty of Lisbon on 13 December 2007 in the hope that they can now move on from the failure of the European Constitution.  The Lisbon Treaty differs from the doomed EU Constitution on the basis that it amends the existing Treaties instead of replacing them.  References to anthems and flags have also been removed from the substantive provisions.  Through the Lisbon Treaty, Europe hopes to:

1. achieve greater democracy and transparency;
   
2. become more efficient; 
   
3. protect the rights and values of EU citizens; and
   
4. increase the EU's global influence. 

Democratic and transparent
Provision has been made to strengthen the role of the European Parliament and to create a new monitoring mechanism to ensure that the EU only acts where it is better placed to do so than the individual Member States (i.e. the principle of subsidiarity).  Further provisions see the introduction of the Citizens' Initiative, whereby one million citizens from various Member States will be able to invite the Commission to bring forward new policy proposals.

Efficient
The Treaty also includes plans to make voting rules more straightforward and to streamline the EU institutions.  This is particularly important given the recent expansion of the EU to 27 Member States. 

Measures will include reducing the size of Commission so that there are fewer commissioners than Member States by 2014, with Commissioners being selected on a system of equal rotation among the Member States for five year terms.  In the European Council, an elected President of the European Council serving for a two and a half year term will replace the current rolling six month presidency.

The Treaty also aims to speed up the decision making process by extending the use of Qualified Majority Voting (QMV) to make it the standard system of voting in the Council.  This will replace the need for unanimity unless specifically required by the Treaties.  From 2014, QMV will be based on a double majority of Member States and people and will be achieved when a decision is taken by 55% of the Member States representing at least 65% of the population of the EU. 

Rights and values
The Treaty transfers increased powers to the EU institutions, in particular in the areas of security and justice, and it is hoped that this will enhance the Union's ability to protect its citizens by responding to crime and terrorism as well as reinforcing the values behind the concept of the EU.

Furthermore, the Treaty gives binding force to the rights contained in The Charter of Fundamental Rights.  However, it is important to note that the UK has secured a specific protocol so that the Courts will not be able to hold that any of the UK's legislative provisions or administrative practices are inconsistent with the Charter.

Global influence
Under the Treaty, the European Union will have a single legal personality and it is hoped that this will strengthen its negotiating position and make it more visible to third countries. 

There will also be a new High Representative for the Union in Foreign Affairs and Security Policy combining several existing posts to increase the impact and coherence of external actions.

Ratification
It is interesting to note, however, that for the above provisions to take effect, the signed Treaty will now need to be ratified by each Member State.  If just one of the 27 Member States fails to ratify the Treaty, it will not come into force.  Given the fate of the previous EU Constitutional Treaty after its rejection by the French and Dutch voters, the Member State governments are likely to try to avoid holding referenda unless bound by their constitutions to do so.  So far only Ireland has announced plans for a referendum on the Lisbon Treaty.  Opposition parties in the UK will no doubt continue to call for a referendum on the new Treaty on the basis that some of the content is similar to the Constitutional Treaty on which a referendum had been promised.  However, the UK Government are more than likely to push for ratification by Parliament and have already introduced the European Union (Amendment) Bill, which will enable the UK to ratify the Treaty.  The goal at the moment is for the Treaty to be fully ratified in time for it to come into force on 1 January 2009, allowing relevant provisions to be operational before the next European Parliament elections in June 2009.  Whether that is achievable remains to be seen.

For further information, please visit the Treaty of Lisbon homepage at http://europa.eu/lisbon_treaty/index_en.htm.

20 December 2007