Robin Ellison – How TPR might do its bit to boost UK economic growth

Never too old to take a test

Lord Renton in the mid 1970's was a well-known MP who famously passed his driving test when he was 92. He was also involved in writing a report on the way in which UK laws were drafted and implemented; that report (The Preparation Of Legislation, May 1975) celebrates its 50th anniversary this year, and in June there is a memorial conference in Portcullis House.

In some ways his report is rather charming; it was written at the dawn of digital, when personal computers were not even a dream. It spends some of its pages, for example, explaining the difference between ‘hardware' and ‘software', and commenting on ‘visual display units'.

The report was prompted by the complaint that our laws are too frequent and too complex; as Ecclesiastes reminds us, nothing new under the sun. It also objects that there is or was no central system of finding out what the laws are, and that not much had improved since:

• a report on the problem in Scotland in 1425;
• an outburst by Edward V in around 1550: ‘I would wish that . . . the superfluous and tedious statutes were brought together into one sum together, and made more plain and short, to the intent that men might better understand them';
• an outburst by James I on the topic using the then equivalent of the ‘F' word;
• a similar inquiry to Renton's in 1875.

The position today of course is by a degree much worse. The good news is that we have legislation.gov.uk and bailii.org to find out statutes, statutory instruments and law reports, so things have improved somewhat. And statutes no longer have to be written/printed on vellum (although they still have to be bound in vellum – the argument being that vellum lasts 5,000 years, but even archival paper only lasts 200 years). And we all know that law is expensive; the current railway nationalisation bill, for example is 6 pages long (https://bills.parliament.uk/bills/3732), and impenetrable to read (it breaches pretty much every recommendation made by Renton) – and is priced at £8.50 if we want to buy a copy (which no one does since it can be printed off the website for free).

But Lord Renton did not explore what hardly existed exist 50 years ago – the explosion in tertiary legislation, ie rules that are issued by regulators, the number of pages of which are unknown, and which frequently breach the normal codes of the rule of law, ie that the laws should be known. Both TPR and HMRC change their rules without telling us, and they are notoriously hard to find. In the United States, although they also have a superfluity of regulation, regulators' rules are not valid unless they are published in the Federal Register.

Lord Renton struggled with the role of computers in law-making, and could not have envisaged that computer-power not only made law-drafting easier, but also allowed the creation of an Financial Conduct Authority rule-book that is 10-foot high if printed. He passed his test in a car that needed a choke, whose windows had to be wound by hand and where he could use a starting handle when the battery was flat. Some things were simpler and better then.

Lord Renton and pensions

To spare most of us having to reread the report (which is now hard to find) below is a quote which may resonate (para 6.3):

One example of what the Chief National Insurance Commissioner may have had in mind is the type of enactment which operates by way of hypothesis. This is often the best, and sometimes the only method of drafting the enactment correctly, but it puts considerable strain on the general reader, especially if he is left to find his own way to (and through) the specific provisions which govern the hypothetical situation, and not less so if one hypothesis is piled on another as in the footnote to Part II of Schedule I of the National Insurance Act 1946 to which we were referred by Lord Simon of Glaisdale:

‘For the purpose of this Part of the Schedule a person over pensionable age. not being an insured person, shall be treated as an employed person if he would be an insured person were he under pensionable age and would be an employed person were he an insured person'.

Prizes for TPR/Treasury

Many of us over the years have won prizes, a cycling proficiency certificate or even a degree; nowadays in the pensions field there may be around a dozen award ceremonies every year. However we may affect disdain or indifference, we secretly are comforted to receive a lump of lead crystal with our name on it. It may make us more valuable in the market or demonstrate to our bosses that what we are doing as a team is recognised by the industry. And, of course, we all know people who get a prize for having bought a table at an awards event or deserve it even less than us.

Rachel Reeves who is having a bad day with the press at present, could do with a prize of some sort. She might want to have a chat with Wonga Woman, who won the Turnip Prize in 2024 for a work of art entitled Tax in Creases; it came, she said, with a bill for VAT (Vegetable Added Tax). It comprised an unironed shirt (creases, eh) with carpet tacks (tax) scattered over it. The prize was a turnip mounted on a 6in nail ('Tax in Creases' wins spoof Turnip Prize, BBC News, 3 December 2024). Irritatingly, in 2022, .Gov was a runner-up with Red Tape, a roll of red insulation tape (Shortlist for spoof art award the 'Turnip Prize', Mail Online, 21 November 2022).

Maybe The Pensions Regulator might want to compete next year with a tea bag glued onto a dissimulating press release, and call it ‘TPR'; simple is good – entries are disqualified if too much effort is made for an entry, but the competition is fierce with around 200 entries from around the world.

Zeitgeist

Sometimes we can't keep a good idea down; there is a feeling in the air that the time has come for a new thought, product or service, which is replicated across geographic boundaries and in different people all at the same time. If Steve Jobs had not invented the iPod, someone else would have; likewise electric cars or defined benefit pension plans. The creative juices of humans are irresistible.

The mood in the air this year is deregulation. In the States, Donald Trump has hired Mr Musk to run a new Department of Government Efficiency (DOGE), to cut $2trn off the US budget by abolishing or reducing a host of government agencies. In the European Union in September 2024 Mario Draghi identified excessive regulation as holding back Europe (The Draghi report on EU competitiveness, 9 September 2024); and here in the UK Sir Kier Starmer has asked UK agencies to identify regulations holding back UK productivity (Europe needs to tackle its red tape problem, Financial Times, 3 January 2025; and How do UK regulators plan to cut back rules and boost growth?, Financial Times, 15 January 2025).

TPR agrees to help Sir Kier

So, Sir Keir Starmer and Rachel Reeves have both made it clear that they expect regulators to do everything they can to improve UK productivity; they have apparently written to both TPR and the FCA to seek comfort from them that they are helping the UK to pay its way, and in particular have enough money to fix potholes on our country's streets (Starmer asks UK regulators for ideas to boost growth, BBC News, 28 December 2024).

This is an imagining of how a TPR response could be encouragingly positive:

Dear Prime Minister

Thank you for your recent letter asking what we can do to bring about intelligent and less interventionist regulation, so as to improve Britain's productivity.

You write ‘… I am convinced the biggest supply-side challenge is the way overweening regulators and a dysfunctional planning regime combine to stop our country building… a rapid review of regulators is under way that will root out the bureaucracy that stifles growth… the government will make sure that every regulator in the country takes growth as seriously as businesses.'

We agree. My Board considered your letter at what was quite an expensive three-day awayday (train fares have risen alarmingly, we find) at one of those spa hotels in the north of England (as part of our levelling up commitment) and are determined to meet your request as much as we can without prejudicing the rights and expectations of pension scheme members (or what we rather patronisingly call ‘savers'). Accordingly, we have concluded that there would be no measurable adverse outcomes to pension scheme members if we:

• • Ditched our work on consolidation (about which there is now considerable contrary evidence)
  • Ditched our research work intended to lead to additional requirements on trustees. Any inappropriate behaviour by private equity backed trustee firms and/or sole trustees will be dealt with in future by group litigation by members, and by social and other media
  • Ditched our DEI work
  • Ditched the requirement to file annual returns – we do nothing meaningful with the data, which in most cases is replicated by HMRC and PPF
  • Reduced our headcount from 1000 to 100, and paid them market-level salaries
  • Ensured some of the savings are used to train our remaining team in outcomes-based cost-effective regulation and the principles of rule-making (noting as above about Lord Renton, that none of us are too long in the tooth to learn and take a test)
  • Ditched the funding requirements, which we now realise have cost UK plc around £650bn, ie rather more than the missing £22bn
  • Ditched the excessive application costs for new defined contribution plans
  • Ditched the ponderous and unnecessary threats to trustees for missing their dashboard dates
  • Created a positive rather than a negative approach to regulation in the way we deal with schemes and employers
  • Empowered and made accountable our account directors, so that they no longer need to travel in groups in minibuses for meetings with trustees
  • Produced annual, externally validated, value-for-money reports on our own performance
  • Accepted that it is not our business to restructure the pensions market, and acknowledged that our knowledge of the future is less perfect than that of the market
  • Delegated prosecutions to the Serious Fraud Office, and disbanded our enforcement team
  • Agreed a regulatory budget of no more than 20 pages a year of new consultations, rules, guidance etc
  • Scrapped the trustee toolkit; there's no shortage of industry-organised training opportunities

We estimate that these reforms will result in total savings of around £5bn - £10bn a year, being additional capital now available for investment by UK trading companies. This estimate has been produced in the way in which we produce our other VFM estimates, using a Board member's finger in the air. Similar figures have been produced by Oxford Economics, showing that the annual costs of compliance in financial services are just shy of £38bn, so we might be along the right lines.

Thank you for allowing us to make such a significant contribution to the improvement of the economy of the country.

Yours etc

It's just as bad in the States

Lee Child is a highly successful novelist. He tells a personal story, not in one of his books, which are fiction, about US regulation (Spectator, 17 August 2024):

‘The New York City Department of Buildings has a new database that reveals everything. Apparently 20 years ago someone remodelled my apartment and planned for a gas dryer in the laundry room. Then, still in the planning stage, they changed their mind to electric, and forgot all about the gas. But by then the gas permit had been obtained, and because they forgot all about it, had never been ‘closed out' on completion of the work and showed up in the records as still active. I had to deal with it before I could sell. I arranged a city inspection, and I showed the guy that there was no gas connection. He agreed there wasn't, but said the permit was so old it couldn't be closed now. I would have to apply for a new permit. For something I didn't want and wasn't going to install? Yes, he said, and then have another inspection to prove it wasn't there.'

FCA v TPR: risks for regulators

There is about to be a small war between the FCA (and Prudential Regulation Authority) and the Treasury on one side and TPR on the other in relation to what pension funds should be doing with their money. The recent DB funding statement pays lip service post the Mansion House speech to encouraging risk-based investments, but it does not really believe it, and is still looking for schemes to move to buy-out, and schemes that plan to run-on will struggle to reduce their bond portfolio in their statement of investment principles. Meanwhile Sam Woods of the PRA is calling for institutions to take more risk (Red tape threatens to turn City into a ‘graveyard', warns Bank of England official, Daily Telegraph, 18 October 2024) and Nikhil Rathi, FCA Chief Executive has said ‘Right now, we are challenging longstanding principles to seize the opportunities in this age of predictable volatility. Be that with far-reaching reforms of listing rules, incentivising pension funds to take greater risk, or radical proposals for prospectuses – so companies can raise 75% of existing share capital without one, and adjusting liability so investors get the forward-looking information they want.' (Speech by Nikhil Rathi delivered at FCA International Capital Markets Conference 2024, 8 October 2024).

It is probably time for TPR to state categorically that trustees and others are free to make their own risk assessments in investment policy. Meantime the UK CEO of the Danish bank Saxo noted that he had inflated his headcount by 40pc to cope with regulation after the 2008 financial crisis. He suggested that reforming regulation and the FCA would do more to revive the flailing London stock market than other suggestions (Red tape has inflated out headcount by 40%, bank boss says, Daily Telegraph, 14 October 2024)

By the way

If we search ‘The Pensions Regulator' on Trustpilot, we get a result that suggests there may be room for improvement.

Robin Ellison is, among many other things, the chairman of the College of Lawmakers, a retired pensions lawyer, a visiting professor in pensions law and economics at Bayes Business School, City, University of London and chair of several pension funds