In December, Vicky Ford was incredibly busy rushing around Edinburgh in preparation for the IFoA’s autumn lecture. So much so, that we eventually had to postpone our scheduled interview.
“This is the busiest day of the year, other than last week,” she comments when we finally catch up a few weeks later.
We speak on one of the four days a month when the European Parliament sits in Strasbourg rather than Brussels. Ford is clearly not a fan of the Franco-Belgian ping-pong. “I’ve campaigned to get rid of Strasbourg ever since I was elected. I’m not saying the EU is perfect, it’s far from perfect and it definitely needs reform.”
Before we get onto the subject of the EU and Brexit, I’m keen to explore Ford’s pre-political career. Having studied maths and economics at Trinity College, Cambridge, she could have made a great actuarial student. Was that ever considered? She chuckles politely, but it’s clear that it wasn’t on the cards. Instead, she entered investment banking via JP Morgan’s graduate programme in London, eventually staying there for over a decade. Why that particular route?
“I joined as an economist, and someone who is interested in what makes the economy tick,” she says.
“In my time in banking, a lot of what I did was infrastructure finance. And I was particularly lucky to be with the leading team at JP Morgan at a very exciting time in European history. We raised the money for the first investments by the West into Eastern Europe after the fall of the Berlin Wall.
“We also raised the first money to go to a South African company after the end of apartheid, which was for an electricity company to put power into the townships. We helped rural companies to start their own businesses.
“And probably, in retrospect, the most interesting was helping to raise funds for some of the first mobile phone networks. Money for Turkcell, for example, which brought communications to Turkey, and for networks all over Italy, France, and the Netherlands. That was the beginning, I guess, of the digital revolution in communications.”
This was obviously a very satisfying period for Ford, observing firsthand historic global events and the subsequent uses of capital to advance the basic infrastructure of emerging economies. “It’s the raising money for real projects. I like seeing things being built and made. I’ve always seen, if you can help unlock finance into investment, what that can do for economic growth.”
The step into politics
A shorter stint at Bear Stearns was followed by a move away from finance. “I had a family and I wanted to spend some time with them.
I was enormously lucky that I spent between 2003 and 2009 having some great time with my kids when they were young, as well as being involved in local politics.” In 2006, Ford became a councillor at South Cambridgeshire District Council, chairing the finance committee.
In the aftermath of the 2008 financial crisis, politically engaged individuals with deep knowledge of global finance were at a premium. Ford’s abilities were inevitably called upon to ensure Britain’s interests were represented at a European level. “I never asked to be an MEP. I was very firmly asked, by very high up in the Conservative party if I would do it. There was a need to have people with banking and financial experience in the European Parliament, in the place where they would be seeing international reform.”
It’s almost a decade since the financial crisis, and it’s easy to forget just how fevered some of the speculation was at that time, both on the direct aftermath and also on the regulatory response. “Intensive” is how Ford describes it.
“I was one of the lead negotiators on CRD IV (the Capital Requirements Directive containing prudential rules for banks and investment firms), and the Recovery and Resolution Directive, and one of the advantages of being an MEP is that you get very into the detail of the issues that you are negotiating.”
That attention to regulatory detail remains, and Ford is well aware of issues close to home for life insurance actuaries. “The EU is not perfect and sometimes that ‘cut and paste’, ‘one size fits all’ approach does hamper our own economy. There’s a frustration with the Solvency II rules, in effect dissuading investment in many infrastructure bonds. A lot of those bonds will carry a BBB rating, and of course the rating is obviously linked to the probability of default but often those infrastructure bonds have a higher recovery than if you had a different sort of BBB bond. I wasn’t completely convinced that it reflected the probability of loss.”
Having seen some of the benefits of infrastructure investment elsewhere, how does she feel the UK is currently positioned? “I’ve been quite pleased under the change of government with a bit more foot on the accelerator for some of the infrastructure that we’ve needed in my part of the world, unlocking the money for the A14 improvement.” However, Ford is keen that we don’t take too narrow a view of what we mean by infrastructure. “It’s also the pledge for money for science and research. As an MEP I led the negotiations for the EU fund for science and research. That’s what I would say is the ‘knowledge infrastructure’ – investing in the knowledge that will drive the economy. It’s been good to see the new prime minister has absolutely reaffirmed our commitment to funding science and research.”
As well as Cambridge University and its various scientific and pharmaceutical spin-offs, there are a number of world-class manufacturers of the more traditional sort in her locale, such as Airbus and Perkins. In fact, Ford’s Facebook page is adorned with numerous pictures of visits to manufacturers – looking a lot more comfortable and enthusiastic in a hard hat and high-vis jacket than the previous chancellor. Despite working in financial services, she seems drawn to the ‘makers’ in society.
How does she view the balance between manufacturing and services in the UK? “I think that in a modern competitive economy, one needs both. If you sell an MRI scanner, you sell it with the ongoing services contract. We’re in the middle of a digital revolution that is changing the way that everything operates. What is a good and what is a service is becoming increasingly blurred – just look at your phone – which bit of your phone is a good, and which bit of it is a service?”
It’s impossible to avoid the political hot-topic of Brexit any longer. It’s obvious that Ford feels that the UK’s MEPs have an enormously important role to play. “In the next two years, the MEPs will play an absolutely crucial role in trying to facilitate as smooth a negotiation as possible.
“What I’ve seen, and I think different MEPs have different experience, is that I’ve been able to work with many different sectors of the UK economy and hear their concerns and help them to put a case, clearly, of what they would like a post-Brexit relationship to be. Those are being fed into some incredibly detailed work that’s now happening in Whitehall. But also over here, in Brussels, detailed work is starting to ramp up as well.”
She sees the extent of the criticism of lack of visibility of the UK’s bargaining position as a little unfair, and not necessarily helpful. “I think it is incredibly important that one looks at the detail, that this is 40 years’ worth of trading relationships that need to be considered, and I think we need to be working together as one country to help support the prime minister and her team in negotiations with the other 27 countries and not constantly bickering about the detail of it. Otherwise, we won’t be as well prepared as we need to be. If, every time the prime minister makes a statement about the direction of travel, she gets criticised back at home, then it will undermine her negotiating position, so we need to support that.”
Of those other 27 countries, one has the main land border with the UK, namely Ireland. As it happens, Ford was born in Northern Ireland and spent her early years there, so she is not blind to the particular issues. “The prime minister has been very clear she wants to have a deal that supports all parts of the UK, and has been clear that does not involve going back to hard land borders between Ireland and Northern Ireland. However, I also would like to see if we can find a way to avoid having unnecessary customs declarations on everything crossing the English channel, which would lead to huge additional bureaucracy and paperwork. If we can continue to have a co-operative relationship, which means that we recognise each other’s market surveillance networks and inspections and so on, then that may mean we can continue to have barrier-free trade in goods as well, across all of Europe.”
Might we expect our financial services firms to see some sort of deal for continued access for their products? Ford is not so sure. “I didn’t say ‘I expect’, I said that ‘I’d like to see’. This negotiation is exceptionally challenging. There are many different national politics going on at the same time. I believe that both the UK and the rest of Europe will be best served if we can find pragmatic solutions, but I don’t underestimate how challenging it is, and that’s precisely why I campaigned for ‘remain’. But having got to where we are, do we need to try to find practical and co-operative ways forward? Absolutely. We’re leaving it now and we want to see if we can find a way forward that minimises the risk of economic fall-out, on both sides of the Channel, and indeed on both sides of the Ireland-Northern Ireland border, if at all possible.”
Specifically on regulatory matters, continued collaborative spirit offers the best chance of success, for both the UK and EU. “We are going to need a new way, post-Brexit, to be engaged in that international dialogue on international regulation, and that is why I think the international regulatory co-operation discussion is so important.”
It’s worth noting that the UK’s positive influence within the EU is well recognised by Ford’s fellow MEPs. “Many of my colleagues have said that they wish to continue to co-operate with the UK going forward, so while we will no longer be in the single market as we know it today, what is the relationship going to be and what will be the ongoing co-operation? Many of my European colleagues have valued the UK contribution.
“I think that even in banking, Basel sets broad parameters, and they get interpreted at a more regional level, and it will be important for the UK to have an ongoing dialogue about how any review of Basel is implemented locally, and by locally I mean across Europe. And I think it’s in the interests of the rest of the EU to ensure they have an ongoing regulatory dialogue with the UK too.”
Although actuaries will primarily be concerned about the future regulation of financial services and markets, analogous issues occur in many industries. Ford believes it is just as important in goods sectors as in financial sectors.
“When I talk to the automotive manufacturers, they want to make sure that they won’t have conflicting regulations, that they will have common standards on issues like emissions and safety as far as possible and that there will be a mutual recognition of each other’s Type Approval process. And that to me is very similar to the whole discussion on what’s happening with regulatory co-operation of financial services and wanting to have a passport going forward.”
However, doesn’t such a collaborative approach undermine the stated desire of Brexiters to have our own regulations? This is too simplistic for Ford. “Ideally, one would want to be more sophisticated in the way that you approach that. Taking back control on regulation was a significant part of the Brexit vote – the one-size-fits-all approach often does not fit the UK. But often we find that we have similar regulatory aims as the rest of Europe, and this is why I say we should aim for a regulatory co-operation model which allows us to work together, consult each other, take into account each other’s views and impacts of any regulatory initiatives, but also respect the right to regulate separately.”
Another key issue for Brexit supporters is immigration. Again, the issues being faced by the financial sector are mirrored in a number of other areas. “It’s not just financial services that are concerned about access to talent. It’s extremely important in science and research, and it’s extraordinarily important in large parts of the manufacturing base. If you are a significant advanced manufacturing company you will be moving key staff around different geographical locations and you need your staff to be flexible. I think that is part of the modern competitive economy. I’m possibly more concerned in areas where staff get paid less. It’s important for the creative industries – the UK is a centre of creative talent, and that’s one of our fastest growing sectors. Ensuring that we are still open and seen to be open to talent is really important.”
When formulating a negotiating position, it’s important to understand your counterpart. In Ford’s lecture, she points out that we need to understand why certain principles are held so deeply within the EU. For example, freedom of movement is so important to the ex-Communist states precisely because travel was so difficult, if not impossible, during the Communist era. That can be hard to truly grasp in countries used to relatively unrestricted travel.
It’s also important to understand the character of the individuals you are dealing with. Many actuaries will be familiar with Michel Barnier in his role as European commissioner for Internal Market and Services where he was pilloried for supposedly trying to ‘impose Solvency II on UK pension schemes’.
Barnier will be the EU’s chief Brexit negotiator. Ford has some personal insight which provides grounds for optimism: “I know Michel Barnier to be a very detailed person. I know that he worked very hard to help the UK find a solution on the Recovery and Resolution Directive, which meant that we wouldn’t need to have our banks pay into a European-wide recovery fund but instead would count the banking levy towards that. So he’s found bespoke solutions for the UK in the past.
“He needs to find a solution that works for the 27 other member states, and that is his mandate here, but if you go to him with options, he will look at them, and he will also respect democracy.”
It may not be Barnier that’s a block to negotiations then, but is there therefore a danger that one of the 27 nations finds advantage for themselves in trying to obstruct something that maybe the vast majority of the remaining members are in favour of? “It’s important that we make our case not only to Michel Barnier but to other politicians across Europe too. As I said, it’s an extremely challenging negotiation!”
Where does Ford think actuaries can have a positive influence, on Brexit or more widely? “I think that we are at a time in politics where, rightly or wrongly, there’s been less trust in so-called experts. But at the same point, people are interested in factual evidence. So if you are looking at facts and evidence, and presenting evidence, then keep going.
“I’ve been really impressed working with your organisation over the past months about how forward looking you are. You do analysis of risks and of different options and you’re looking very long term. Analysing the maths behind the risks in complex situations is helpful. So, I would encourage those looking at long-term risks and opportunities to voice them.”
And with that she’s off, with a cheery “I really do have to hop along or I’ll miss the vote!” as she rushes to the next urgent piece of European Parliamentary business.
Ford’s autumn lecture for the IFoA is available to view online at www.actuaries.org.uk/autumn-lecture, where she sets out her views