CAPITAL REQUIREMENTS (AMENDMENT) (EU EXIT) REGULATIONS 2019

Alison Thewliss Excerpts

Monday 7th October 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Bailey. I very much agree with what the hon. Member for Stalybridge and Hyde said; the SNP shares the official Opposition’s suspicions about areas related to the Financial Services (Implementation of Legislation) Bill, which—as hon. Members will remember—did not even reach Report.

The regulations flag up the fact that this will be an ongoing issue. As the EU continues to make changes, we will have to make changes here to get any type of equivalence with it. I remind the Minister that equivalence determinations are akin to building a house on sand: they are very much at the discretion of the Commission and can be withdrawn at very short notice. If we do not match the EU’s regulations, that equivalence may end up being withdrawn, to the detriment of our financial services industry in the UK—particularly in Scotland, which did not vote for this but is being left to deal with the consequences and chaos that result from it. The Minister said that the regulations reflect a new piece of EU legislation that has recently become applicable. I suppose that that is part of the chaos that we now face: the EU is moving on without us, and we are left picking up the pieces.

On the financial services Bill and the suspicions of the hon. Gentleman, I must ask the Minister: are the regulations a workaround for the Bill? Are they a means of escaping the scrutiny and the amendments that I supported for the greater regulation that we need?

Will the Minister tell us more about the powers that are going to the FCA and the PRA and away from this House? How will the House maintain scrutiny of those institutions and of the rules and regulations? There will be a need for adaptation and change; how will he make sure that the House is given a full part to play—not just a statement or an update—in administering the regulations in the years ahead?

This all highlights our lack of voice and influence in future EU reforms. We will be abiding by the rules, because otherwise we will lose the opportunities for our financial services market, but we will not necessarily have influence in making them—in areas in which for many years we have had the advantage because we have a large majority in the types of industry that will be affected. We will end up in a weaker situation than we are in at the moment, particularly in a no-deal Brexit in which we cannot guarantee that we will have the equivalence or access to markets that we require.

Further to that sense of weakness, we have yet to see from this Government a full picture of what the financial services framework will look like. I have asked for that on all the Committees that I have been on, because we need to know what the framework will look like. This is being done with a hasty, piecemeal approach. We are being asked to come here not quite at the last minute, as the Minister pointed out, but with 24 days to go till Brexit, when we may end up with no deal. There are Committees sitting all the way along this corridor this afternoon and later this evening to get these last-minute preparations done, but we do not know what the picture will look like in the year ahead.

To give some degree of stability in planning to the organisations, institutions and people in the financial services industry, I urge the Minister to bring forward some kind of clear framework so that we can see where we are going. This piecemeal approach, this last-minute chaos of bringing things forward, this move towards more Brexit red tape rather than less, as I am sure the Brexiteers would want—none of it is adequate or particularly seemly. I urge the Minister to do a lot better on this, because it is absolute chaos.

Oral Answers to Questions

Alison Thewliss Excerpts

Tuesday 1st October 2019 Commons Chamber

[Mr Speaker]

Order. We must speed up.

[Alison Thewliss (Glasgow Central) (SNP)]

4. What recent assessment he has made of the effect of his fiscal policies on living standards.

[The Chancellor of the Exchequer (Sajid Javid)]

The recent spending round has delivered the fastest real growth in day-to-day spending in 15 years, targeting additional money on the people’s priorities of healthcare, education and tackling crime. We will publish alongside the next Budget an analysis of how these spending changes are distributed.

[Alison Thewliss]

We on the SNP Benches welcome the Chancellor’s announcement on his pretendy living wage, because we have been calling for it for four years, but his promises still fall 5p short of the London living wage today, never mind in 2024. A 16-year-old today would have to wait five years to be entitled to it. Will he end the state-sanctioned age discrimination of his pretendy living wage, so that all people, regardless of age, can receive a fair day’s pay for a fair day’s work?

[Sajid Javid]

I welcome the hon. Lady’s support. It was this Government who introduced a national living wage in 2016. It was this Government who increased the rate, as recently as April this year. The announcement that we have made, which I will have more to say about later, will help to end—actually will end—low pay for good in our great country.

No-deal Brexit: Short Positions against the Pound

Alison Thewliss Excerpts

Monday 30th September 2019 Commons Chamber

[Mr Clarke]

Of course, I entirely agree with my right hon. Friend. We heard the danger set out last week. I thought that the prospect of a three-day week was bad; well, the Opposition have decided to split the difference and have a four-day week. Much of what we heard in Brighton was a recipe for business disaster and the very damage that we need to avoid and which we have spent the last nine years trying to put right.

[Alison Thewliss (Glasgow Central) (SNP)]

The pound was shorting at a two-year high in August. The Prime Minister’s sister, Rachel Johnson, has said that people

“have invested billions in shorting the pound or shorting the country in the expectation of a no-deal Brexit.”

The former Chancellor has said that

“there is only one outcome that works for them: a crash-out no-deal Brexit that sends the currency tumbling and inflation soaring.”

Frances Coppola, who the Minister was keen to quote earlier, said that at the very least there was a conflict of interest. The Prime Minister received at least £375,000 from donors associated with hedge funds during his leadership campaign, and we already know from the Jennifer Arcuri case that he is no stranger to conflicts of interest. Will the Minister launch an investigation into this whole affair, because the public need to know what is going on behind the scenes? Will he also accept that those who are already wealthy seem to have everything to gain from a no-deal Brexit but that my constituents and thousands and thousands of others across these islands are still struggling to make ends meet after a decade of austerity and it is they who have everything to lose?

[Mr Clarke]

I thank the hon. Lady for her question. We served together on the Treasury Select Committee. She speaks about her constituents. My constituents in Middlesbrough South and East Cleveland could not by any metric be described as wealthy and they enthusiastically support the idea of our delivering on our manifesto commitment—and indeed on the referendum result—to leave the European Union. The Government’s position on no deal is very clear: we want a good deal, a fair deal, that does not leave this country as a rule taker in perpetuity. If we secure a deal, my point, very simply, to the Scottish National party would be: if they want to avoid no deal, they should vote for the deal we bring back.

Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019

Alison Thewliss Excerpts

Monday 9th September 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Sir Edward.

I agree very much with the hon. Member for Stalybridge and Hyde. This is chaos. It should not be happening that we are in this room again, with hours to go before Parliament is prorogued, to correct mistakes that we were assured would already have been picked up. The last time that we were in this room discussing similar business, the Minister said, “Oh, these things happen. Errors happen when drafting legislation,” yet here we are again, closer and closer still to another Brexit deadline, with a raft of things that the Government have not got quite right. How were these errors identified? Is it just that the Treasury had slightly more time to mark its own homework, so it was able to go through the measures and find what it had previously missed, or were the errors brought to the Department’s attention by some other means? It would be interesting to know if they were picked up by external organisations, which realised that what had been put in front of them would not actually work or was not fit for purpose.

It is interesting to look at all these things. I am still not quite sure that we have seen the end of all the statutory instruments, with Prorogation coming up tonight. Hon. Members may not have been here for business questions on Thursday, when the hon. Member for Walsall South (Valerie Vaz) asked what would happen about statutory instruments, because they do not fall in the same way as legislation falls with Prorogation. The Leader of the House said:

“On the ability to leave on 31 October, all the legislation that is needed is in place. We have 580 statutory instruments to make sure it will all happen smoothly. That is all done. It is ready. It is prepared. Her Majesty’s Government have been a model of efficiency and efficacy in preparing this. My right hon. Friend the Chancellor of the Duchy of Lancaster is perhaps one of the most impressive administrative Ministers this country has ever seen.”—[Official Report, 5 September 2019; Vol. 664, c. 394.]

But we have all these corrections—pages and pages of corrections to statutory instruments that the Minister has already laid and the House approved in good faith because we were told that it was the right and appropriate thing to do. Despite the Opposition’s protestations that we needed to look at them in greater detail, that we needed more time and that the process needed to be better, this is what we have. The Government cannot say that they were not warned.

To pick up just one concern, relating to the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, this instrument would appear to suggest that the UK share trading obligations can be met through trades of UK systemic internalisers but not of EU systemic internalisers. Is there a risk of reduced regulation? My concern has always been that we cannot have less regulation as we come out of the EU. Since the financial crash, more regulation and more safety has been put in place in the system. We cannot end up with less robust systems in place in any of these areas.

The Minister talked about fixing deficiencies in new technical standards as they come from the EU. Perhaps he can tell us in a bit more detail what that process will look like. Will we forever be scrambling to catch up with the EU as we make regulations and become rule takers? I am sure all the Brexiteers in the room would rail against that. We will be trying to fix all these deficiencies in the desperate attempt to continue to have a functioning financial services industry in this country. We will continually be trailing behind the EU and trying to patch up our systems, rather than being the integral part of building the systems that we once were. That looks to me like how this will be.

Will the Minister give further detail about the PRA and an appropriate date? Does he have an appropriate date in mind. April was suggested in earlier drafts of the legislation, when we thought we would leave in March. What will the date be if there is a no-deal Brexit at the end of next month?

This whole process has been, as I think the Minister said previously, sub-optimal. It continues to be sub-optimal. We will rue some of the decisions we have come to. There is a huge financial services sector in Scotland—in Glasgow—that does a huge amount of skilled work and gives people good, high-quality jobs. If it is harder for those people in those jobs in Glasgow, Edinburgh and everywhere else to do the work they have so diligently been doing, it will be to the cost of all of us. I will do all I can to see that that does not happen.

High-income Child Benefit Charge

Alison Thewliss Excerpts

Tuesday 3rd September 2019 Westminster Hall

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to serve with you in the chair, Mr Hollobone. I thank the hon. Member for South Thanet (Craig Mackinlay) for bringing this debate on an important issue that highlights a real gap between the Government’s intention and their delivery, which is failing a lot of people. He laid out the limitations of the policy, which was headline-grabbing but has proven to be almost entirely ineffective and bureaucratic. It takes a benefit that ought to be one of the simplest—child benefit, paid to help children as an important universal benefit—and whittles away at it until it becomes a complex bureaucratic system that people will find difficult to access.

Organisations such as the Women’s Budget Group have long argued that the UK Government’s approach to balancing the books is gendered and does not stand up to the most rudimental scrutiny from an equality perspective. This policy is a key example of that. Budgets and spending reviews come and go, but we are yet to see any real strategic direction in tackling gender inequality. The hon. Member for South Thanet mentioned that it removes the independence of individuals in the tax system. In doing so, it sets the scene for universal credit, which also removes independence by treating people as a household rather than individuals, and damages women’s financial ability in a relationship. In many cases, women are left in the grips of financial coercive control, and they do not have the financial ability to get out of an abusive relationship.

Looking at this policy, it is no surprise that women, particularly mothers, are disproportionately affected. The UK Government have failed to make it clear to stay-at-home mums that even if they are not eligible to receive child benefit, they should still claim it and subsequently fill in a self-assessment tax return and pay the money back, in order to receive those national insurance contributions. This is not an intuitive process; in fact, it is quite the opposite. Self-assessment is complex and stressful. As the hon. Member for Strangford (Jim Shannon) said, people get lost in the complexity of the system. They are worried about getting it wrong, and they might have to get accountants involved. That should not be the case for something as simple and basic as child benefit—the money should follow the child.

When I was elected, I knew vaguely about the child benefit process. I panicked, phoned up and cancelled the child benefit I had previously received when I was a local government councillor earning considerably less than I do now. If MPs are led to panic, what chance does anyone else have? It is absurdly convoluted and beyond the reasonable expectation that most people would have of such a system. It is a very concerning prospect that this policy could store up significant problems for the future, as the hon. Member for South Thanet set out. Many of my constituents are suffering now from previous derelictions of duty in long-term pension planning. We have all heard horror stories of the Women Against State Pension Inequality Campaign; women were not told that their pensions had changed until 14 years after the policy was introduced. There is every chance that a new generation of women will run into similar problems.

The child benefit form that is issued to parents is not particularly simple. It includes a statement that claiming child benefit can help to protect someone’s state pension, but it is not clear enough what that actually means and what the future implications will be. The Treasury believes that 200,000 parents may be affected. It fails to make it clear that a non-working parent—usually the mother—should be the one to fill out the benefit form in order to build up those credits. It has been suggested that an easy short-term fix would be to change the form, but we need to look at long-term solutions. Would the Minister consider a review of the policy in the round, to actively look for cases of error where people may have unknowingly built up a gap in their pension contributions? We need to alert those affected. The Government have a duty to make sure that people get the money back, because they have not been clear enough.

It has been suggested that a claim should be triggered automatically when a birth is registered; that may be worth exploring in more detail. Will the Minister make an interim change to the wording on the form, and order a longer term review of this whole bourach of a process? Most parents will say that when they have a newborn baby in their arms, the last thing they want to do is fill in an extensive form about incomes. Of course, incomes will change—sometimes dramatically—over the course of a child’s life. Those kinds of things have happened again and again, and now we have the effect on the economy of the chaos of Brexit coming in.

As I mentioned, it is a distressing thought, but the reality for many women is that their partners seek to exercise financial control over them. That small amount of money can be incredibly important to a woman making plans to leave an abusive relationship, so child benefit must not be removed by making it more difficult to access. The higher earning person in that household—often the father—may say, “Don’t you worry about it; you stay at home and I’ll earn the money. You don’t need to worry about this”, which removes the woman’s chance of being financially independent. The notion that a woman has to know her partner’s intimate financial details is quite unusual. My husband and I have separate bank accounts. I have no idea what he earns, but I was expected to phone up and give intimate details to someone over the phone. That will be all the more difficult for a woman in a situation of financial coercive control, and it will give the male parent a huge amount of control.

The Minister must look at this in significant detail. He must try to assess the issues and put them right before we end up with another situation like that of the WASPI women. We cannot have another situation in which women are disproportionately affected by an ill-thought-through Government policy from Westminster.

--- Later in debate ---

[Jesse Norman]

The judgment made in 2013 was that it was appropriate to claw back some of the money paid to people on higher incomes and that everyone should make a fair contribution to removing the deficit while supporting those on the lowest incomes. I think that was the right judgment. Of course, for a minority of claimants where either they or their partner earn more than £50,000 in adjusted net income, there is a requirement to pay the tax charge or to opt out of receiving child benefit payments and therefore not pay the charge.

It is a fair criticism, made eloquently by my hon. Friend the Member for South Thanet and others from across the House, that the charge does not take into account overall household incomes, so it is possible—and it does happen—that a single parent earning more than £50,000 is liable to the charge while a couple each earning up to £50,000 is not. That is because, as he said, the charge is a tax, calculated in accordance with the principles of individual taxation at the individual level alongside other tax policy. Here we have one of those difficult decisions for the Government about what is the right thing to do. The judgment made in 2013 was that it was better to take that approach than to base a charge on household incomes, because that would require HMRC to assess annually both household composition and the incomes of everyone in the 8 million or so households eligible for child benefit, which would effectively introduce a new means test, creating a substantial administrative burden on both the state and families. That is the dilemma.

The effect of the charge is to introduce a high marginal tax rate. That is an unattractive aspect of the policy; we should be clear about that. If I may say so, it is not a salutary lesson in how not to withdraw a benefit, because the alternatives of not levying the charge at all or levying it on a cliff edge rather than by gradual withdrawal are worse. It is open to others to take the view that one of the alternatives is better, and my hon. Friend may do so, but not subject to the fiscal constraints in which we have operated.

A series of questions were raised about HMRC communications. As my hon. Friend recognised, the Revenue and Customs took considerable steps to raise awareness of the higher income child benefit charge. It wrote to about 800,000 affected families when the charge was introduced. It also ran a high-profile advertising media campaign and included a prominent message about the charge in 2 million letters to pay-as-you-earn-only higher rate taxpayers. There was a considerable communication process.

Today, to respond to the question from the hon. Member for Strangford, information on the charge is included in packs for new parents telling them how to claim child benefit. The front page of the child benefit application form includes a prominent message about the charge to help people make a decision on whether they should claim and be paid child benefit, about the importance of claiming even if they do not receive payments, and about the important issue of eligibility, which was rightly highlighted in the debate. Guidelines are available online formally through gov.uk and through innumerable organisations and groups.

As my hon. Friend the Member for South Thanet mentioned, individuals who pay the charge need to make a self-assessment tax return and may face a failure to notify penalty if they do not. I think he will know that HMRC announced a review of cases where a failure to notify penalty was issued for three tax years. It reviewed 35,000 cases and responded by reviewing the amount for over 6,000 people.

There are many other points to cover in the short time that remains. My hon. Friend said that 500,000 people have been forced into self-assessment. I am happy to write to him on that. As he will be aware, the current number paying the charge through tax returns is 293,000. Of course, there are some 40 million people in pay-as-you-earn. He also said that the charge has dragged 1.2 million people into the system. I am not quite sure about that, but if he wants to contact me, I will be happy to assist him further.

The hon. Member for Glasgow Central said that the charge is a gendered policy. I do not think that is true at all, and many other aspects of Government policy do not reflect anything like that position, as she will be aware. For example, there is extensive work in supporting women as entrepreneurs and women in business.

[Alison Thewliss]

Will the Minister give way?

[Jesse Norman]

I really cannot; I have two seconds left.

The hon. Member for Oxford East mentioned fiscal drag. That is an important issue, but I do not think she is right that the charge has removed the universal nature of child benefit; it merely allows for a charge against it.

Oral Answers to Questions

Alison Thewliss Excerpts

Tuesday 2nd July 2019 Commons Chamber

[Mr Hammond]

Yes. This is a huge commitment, but it is the right commitment to make. The Committee on Climate Change recommended that the Treasury should undertake a review of the funding and financing mechanisms to ensure that this huge undertaking can be funded, and that it will be funded in a way that is fair to families, households and businesses across the UK, which is exactly what we will do.

[Alison Thewliss (Glasgow Central) (SNP)]

The “All Kids Count” report, on the impact of the two-child limit after two years, was published last week by the Church of England, the Child Poverty Action Group, Women’s Aid, Turn2us and the Refugee Council. The report illustrates the devastating impact of the two-child policy, particularly on working families who are unable to compensate for the £2,780 a year cut by working longer hours. Before the Chancellor leaves office, will he scrap the two-child policy and its devastating impact on families?

[Elizabeth Truss]

The universal credit policy has been designed to make sure that people who are being supported by the Government are in a similar position to families who have to make their own financial decisions based on the wages they earn every week.

Social Mobility: Treasury Reform

Alison Thewliss Excerpts

Tuesday 11th June 2019 Westminster Hall

[Justine Greening]

I agree. I am setting out how to fix the underlying problem of why we are underinvesting in people in our country and their potential. That starts with the Treasury. In my view, the Treasury has a twofold problem—first, how it operates across Government and, secondly, its policy approach.

On how it operates, it starts going wrong with the Treasury—UK plc’s finance department—having its own separate strategy from the Prime Minister, the chief executive. We have seen this down the years. It is traditional to see Chancellors at loggerheads with their Prime Ministers. We would never see a finance director able to countermand the CEO and undermine their strategy in any other organisation, yet that is exactly what we see, year to year and day to day. It has happened under Governments of every colour with the Treasury, as it is currently set up. Time and again, we end up with a Prime Minister, who is meant to be running the country, with one strategy, and a Chancellor with a different one, and both at loggerheads and going nowhere fast. It is no wonder that Prime Ministers do not get to deliver their strategies when the finance Department has an entirely separate one.

Parliament has a Budget speech every single year; it is essentially the Government’s strategy statement to Parliament and MPs for the year. It is not, however, the Prime Minister who delivers the strategy statement; it is the Chancellor. That does not make sense at all. Of course, these Budget statements are traditionally packed with politically driven, willy-waving, “look-at-me” projects for the Chancellor. Most are not even Treasury ideas. The best ideas are hoovered up from every other Secretary of State running Departments across Government, and they are generally not even the Treasury’s. Worst of all, most of these excellent policy announcements—for example, the one that we made a couple of years ago on vocational education and T-levels—are held up in order to wait for the Chancellor to announce them in a Budget statement. That is entirely dysfunctional, and it has to stop.

We should abolish the Budget statement in its current form, as delivered by the Chancellor. By all means, let us downgrade it and have it as a very important, but functional, annual presentation of the nation’s finances. Why do we not replace it with a Queen’s Speech update? This could be a proper strategy speech for Parliament every year, delivered by the Prime Minister. There is no reason why a Queen’s Speech update—a strategy speech—could not introduce a Finance Bill. I have listened to enough Chancellors effectively introduce other Departments’ Bills on social care and all sorts of things over the years. There is no reason why a Prime Minister giving an annual update on the Queen’s Speech progress could not set out the key terms of a Finance Bill. The Chancellor could fill in the details later.

I will move on to the spending review, which is also a hugely dysfunctional process—that is assuming it happens, which I will come to in a second. The spending review is essentially a strategy process for the Government, yet it is not led by No. 10 and the Prime Minister; it is led by the Chancellor and a finance Department that potentially micro-manages a wholly separate strategy from that of the Prime Minister of this country. Through this process, the Treasury has other Departments totally over a barrel. I think there would be less of a problem with how spending reviews are approached if the Treasury actually approached them effectively, but it does not. Right now, the UK has budgets set to 2020, which is next year. The country has no budgets in place for any of its spend after next year, which is wholly unacceptable.

Look at how this plays out on the ground. Last week I was up in Bradford to meet the opportunity area team, who are doing some absolutely fantastic work on the ground by connecting improvements in schools, businesses, the local authority and communities. This is a long-term—probably a decade-long—project to get structural change in a community that has bags of potential but needs its schools to do better and its businesses to connect with and develop the talent coming out of those schools. However, the team does not even have a budget after next year. How can we expect to get long-term change in our country, if budgets do not even extend beyond the next 12 months? It is entirely disconnected from the real world of how change happens on the ground. I have talked about opportunity areas, but it is writ large across virtually every single Government-delivered project that is happening on the ground to change things and improve lives.

The Treasury has just cancelled the spending review. From what I read in the papers, we will simply be rolling budgets forwards. At such a crucial time, I cannot think of a less strategic way to manage the UK’s public finances and invest in the future.

[Alison Thewliss (Glasgow Central) (SNP)]

The right hon. Lady is making a compelling point on longer budgets. Does she agree that short-term budgets cause huge uncertainty for the responsibilities of devolved Administrations, who rely on knowing when the Budget will come and what the spending will be?

[Justine Greening]

Indeed I do. Of course, not being able to plan ahead is a hugely inefficient way to manage resources. We spend efficiently when we can get long-term deals from suppliers and contractors, and when we can plan into the future. The inability of any of us to do this is absolutely an inefficient, sub-optimal way to manage finances. If we were to have the spending review, it would be a three-year spending review, but even a three-year or five-year spending review is not long term for a country. The companies that I spent 15 years working in did three-year to five-year spending reviews, but they were not Britain, which needs to invest for the long term.

How on earth are we going to invest long term in people and unlock social mobility if we will not even look beyond the next two or three years? If we will not even look beyond the next 12 months, it is absolutely impossible. This is a failing strategy, and a functioning department or ministry of finance should know that. The fact that the Treasury does not know that tells us everything about why it is not fit for purpose and should, as it stands today, be abolished.

The way in which that failing extends, operates and works on policy in practice—I speak as a former Secretary of State who ran three spending Departments—is that unless a departmental policy area is demonstrably and critically failing on the ground, the Treasury’s attitude is to turn a blind eye and hope that it all gets better. The Treasury’s technical explanation for this is that it hopes that that will drive efficiencies; that the system will have to work harder and deliver the same for less money. That might be true in some cases, but we are set up to fail because the Treasury has no way of understanding when that point has been long passed, and we do not have enough resources to deliver the Government’s plan—possibly the Prime Minister’s plan, but often it is the Chancellor’s plan.

Problems are not fixed early and are simply left. By the time the Treasury finally understands that it is a crisis, it is more expensive to fix it. Alongside a total lack of long-term planning, the Treasury does not fix problems early, which is hugely expensive. Departments’ spending—be it on prisons, schools, healthcare, local government or children’s and adults’ services—ends up in crisis, needing last-minute funding. That is a hugely expensive way to run the nation’s finances. Most importantly, it leads to real hardship on the ground, which is the exact opposite of what Governments of all colours try to achieve.

In my area of education, it was blindingly clear in early 2017 that, although the schools funding formula was broadly the right approach—levelling up schools that had traditionally been underfunded—more money needed to go through the formula, and the money should have come from the Treasury. That was clear to me from talking to colleagues and MPs in the House, and from talking and listening to teachers and parents, yet it was only after the election that we could take any action on that obvious problem. In fact, as everyone knows, I ended up doing my own mini-budget to release £1.3 billion to put into frontline funding. One might have expected that the Treasury would welcome a Secretary of State doing its job for it, but I had to haggle to get that agreement through the Treasury and be able to announce it. I fear that the Treasury yet again is making a similar mistake on school funding and repeating the process.

Reviews are another classic Treasury ruse. The recent Augar review managed to waste well over a year coming up with obvious conclusions about additional funding for further education, but no doubt the Treasury is delighted that it can kick the issue into the long grass for another 12 to 18 months. However, if the substance of the point is that FE needs additional funding, the Treasury has not done young people in the FE system any favours by turning its face away from the need to fund the system properly. It simply cannot be allowed to continue operating in this way.

I have talked about my experience of how the Treasury interacts with other Departments, but what about its policies? It should be managing the nation’s finances to maximise long-term value by unlocking the potential of its most crucial, precious resource—its people. It should set taxation and public investment policy to deliver that strategy for the long term. That is how to reduce the deficit sustainably. It needs to be a finance Department with policies to tackle weak access to opportunity.

For example, how do we recapitalise a generation of young people who do not have access to capital and therefore are not only disconnected from the fact that Britain is a capitalist society but cannot access opportunity? The Government and Parliament decided that they are willing to give young people access to capital if they want one kind of opportunity—a degree—but other opportunities are a wholly different matter. If young people want resources to move across the country to get the apprenticeship opportunity that they really want, to start a business, to put down a deposit on a house, or to rent a place somewhere where they can get on with their career, we do not capitalise them to do that. We should be doing that, and a functioning Treasury would look at those sorts of strategic measures to unlock a structural change in access to opportunity and social mobility in our country.

My hon. Friend the Member for Mid Worcestershire (Nigel Huddleston) asked a good question about the leadership candidates. At the moment, we are hearing only simple, tactical taxation suggestions that, frankly, would not strategically or structurally shift the dial on social mobility.

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Robertson.

To my shock and surprise, I suppose, I agreed with an awful lot of what the right hon. Member for Putney (Justine Greening) said. It is just a shame that her Government have no intention of doing a lot of the things that she spoke about. There is no evidence that they will do any of those things, despite her best efforts. In many cases, indeed, what the Government have done to people across these islands is quite the opposite.

The right hon. Lady spoke about the Treasury running a separate policy to the Prime Minister and about the need for investment in the long-term rather than only year to year. I agree wholeheartedly with such things, which need to see change. Again, however, the Government seem intent on having reviews that go nowhere and on other delaying tactics, and not on investing in that long term. As I suggested in my intervention, that has a knock-on effect on the Scottish Government and their ability to do the things that they want to get on with and do.

Ongoing uncertainty about budgets, the wait or lag times between what the UK Government announce and their Budget, and then what the Scottish Government have to do with that money and the implications of the Barnett formula—whether things go up or down the UK—all determine what is left for the Scottish Government to spend. That adds to the unpredictability of the Scottish budget and the priorities within that, because the priorities of the Scottish Government are not necessarily anywhere near those of the UK Government, who set the budgets and determine how the money will flow. A huge amount therefore needs to change in how things are done in the UK. Unfortunately, however, I do not see things changing anytime soon.

The Social Mobility Commission’s “State of the Nation” reports provide a further damning indictment of the UK Government. The commission has found that social mobility has stagnated over the past four years at virtually all stages from birth to work. That is not a huge surprise to anyone, because poor social mobility has a close relationship with income inequality, an indicator that the UK has consistently failed to improve. The UK is the fifth most unequal county in Europe, according to the Institute for Public Policy Research.

Income inequality as an issue is of course not exclusive to the UK. Global trends point to inherited wealth increasing faster than earned income. Sustained efforts are required to get rid of the sticky floor, which makes it incredibly difficult for people to climb out of poverty. The OECD estimates that it will take five generations for children in poverty in the UK to reach the average income—that is a sobering statistic—and gives no prospect of things changing soon.

I have raised some of the issues surrounding the tax system before in this place. The tax system in the UK is simply not fit to tackle big issues such as income inequality and social mobility. It is unwieldy, unnecessarily complex and full of holes to hide in. This UK Government have provided a catalogue of tax reliefs for those who are already wealthy. A report by the Tax Justice Network illustrates that well. It found that wealthy families substantially reduce inheritance tax obligations by invoking tax reliefs on the value of agricultural and business property. Last year, the combined cost of that particular tax relief was £930 million—equivalent to the cost of employing 23,000 NHS nurses. In fact, £930 million can buy a lot of things—it is nearly the cost of expected savings to Government of the universal credit two-child limit. It is extremely telling that this Government prioritise tax breaks for the very wealthy while simultaneously cutting support for children at the lowest end of the income scale—those who need it the very most.

The hon. Member for Strangford (Jim Shannon) was absolutely correct to point out the gender gap in social mobility, and the gap for black and minority ethnic communities. That is writ large in the statistics and in the people I see at my surgeries. He was correct that, when done right, tax credits are a great boost to many people and that those wishing to better themselves within the bizarre structure that the UK Government have put together have lost out.

In my own family, my Papa Thewliss studied, went to night school and did the best he could for his family. In essence, that is part of the reason why I am here today—my grandparents were willing to put that investment into their children, so that my parents could be the first in their families to go to university, and so I am here today. On Saturday, my gran turns 99, and it is some satisfaction that she sees what has happened in her family to get me here.

The structure has to be in place for such social mobility to happen, however. University has to be affordable and apprenticeships have to be supported and achievable. That is not always available for too many people. The points that the hon. Member for Strangford made about the accessibility of apprenticeships and other things, and that the right hon. Lady made about people being able to travel to reach those apprenticeships, are important. It is also important that apprentices can earn a real living wage, because the minimum that apprentices are entitled to is a pittance. We cannot expect people to put their lives on hold for the pittance of an apprenticeship wage. More support needs to be put into real living costs, because apprentices have bills to pay and families to support, and that needs to be part of the package.

The social contract has been ripped up for the people who need it most. Last month’s report by Philip Alston, the UN special rapporteur, stated that austerity has decimated the lives of many people and actively pushed them into poverty. The UK Government have said that that kind of fiscal discipline is vital to reduce the deficit and build a strong economy, but that need for fiscal discipline evaporates completely when it comes to tax breaks for the wealthy, spending billions of pounds on Brexit preparations or putting nuclear weapons on the Clyde.

It is not difficult to draw the conclusion that the cuts were never about reducing the deficit and are ideologically driven. We are seeing even more blatant rhetoric coming from the Tory leadership race, in which the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) has promised a huge cut in income tax for the highest earners if he is elected. The Fraser of Allander Institute at the University of Strathclyde in my constituency has hinted at the impact that that will have on the Scottish budget. Because of the devolution of income tax, the tax cut would not apply in Scotland, but the resulting budget cuts would. To pay for it, national insurance would increase, which will have an impact because it is reserved—Scotland has no control over national insurance. We would lose out on the budget because of that policy, and national insurance contributions for people in Scotland would increase.

If I had the opportunity to give an extra £6,000 a year to one group of people, it would not be those earning over £80,000 a year. It would be some of the families rendered destitute by the hostile environment policy, for whom my office has to source school uniforms, food bank vouchers and Christmas presents, year in year out in some cases; or the women who are victims of domestic abuse, who have to declare that their third child was born as a result of rape just to put food on the table; or people with disabilities, who have to be hauled through a degrading and inhumane assessment system at the risk of being threatened with sanctions. Those are the people in society who desperately who need a break and to receive that £6,000. That is a choice that leadership candidates are putting forward as something they would bring in to Government if selected.

My colleagues on the SNP Benches and I have consistently called for devolution of all welfare powers, inheritance tax and other taxes, so that the Scottish Government can get on with the job of tackling income inequality. We have created the first Scottish income tax system, which is the fairest in the UK. The system has meant that 55% of Scots pay less tax, while raising £68 million for public services. The report I referred to by the Social Mobility Commission, which was so damning of the UK Government, congratulated the Scottish Government on the work they have been doing to increase social mobility. The report says that Scotland is going against the UK trend and becoming more socially mobile.

I urge the right hon. Member for Putney to look at what Scotland is doing in that regard. A person’s socio-economic status is now less likely to be determined by their parents’ socio-economic status. The likelihood of being in a professional job for those from a working-class background compared with those from a professional background has narrowed over the past four years, from 28 percentage points in 2014 to 23 percentage points. The Scottish Government have tried to tackle the issue of people from different socio-economic backgrounds getting into university. A huge amount of work has been done to switch that trend.

I give credit to businesses, as the right hon. Lady did, that are involved in that kind of initiative. I visited Zurich in my constituency, which is taking more people straight from school into the insurance sector. It recognises that having a degree is not necessarily what it needs in its business—it wants a rounded range of skills for a better business. It has found it hugely beneficial to bring people in from school.

[Justine Greening]

I am sure the hon. Lady will be pleased to hear that Standard Life Aberdeen is also very much walking the walk, and genuinely making an impact that goes well beyond its employees and into the wider community.

[Alison Thewliss]

I agree that there are great examples of businesses right across Scotland—I could stand here all day talking about them. It is good that Standard Life Aberdeen is doing that and that more businesses recognise that including a degree on job adverts and applications is not necessary in many cases. By removing that and looking much more widely at the range of skills that people can offer, rather than what degree they do or do not have, social mobility will increase, so that is to be commended.

The Scottish Government are pursuing an inclusive growth agenda and view tackling inequality and growing the economy as two sides of the same coin. I am sure that the right hon. Lady would agree with that, given her speech. It is important to think about the type of society that we are creating with economic policies, and to consider what the point of growth is, if it is built on the backs of the most vulnerable. The Scottish Government have invested in decreasing child poverty, with an ambitious target to reduce it to 10% by 2030. They have introduced a legal requirement on public sector bodies aimed at reducing socio-economic disadvantage. Fundamentally, the Scottish Government oppose Brexit, which continues to threaten hard-fought steps towards reducing inequalities.

The right hon. Lady laid out the dysfunction of the British state in great detail. That is what we see from Scotland. Increasingly, people in Scotland do not believe that the British state will work for them. We have tried, we have waited and we have looked for changes, but they have not come. In fact, from the Scottish perspective we can only see things getting worse. We have asked for more powers, so that Scotland can try to tackle these things, but we do not yet have the full levers of powers that we would have as an independent nation in which we could tackle inequality head-on, using the full range of powers of an independent country. Time and again, the UK Government have abdicated their responsibility to the most vulnerable people. If they cannot do their job, they should allow Scotland the powers to do it instead.

--- Later in debate ---

[The Financial Secretary to the Treasury (Jesse Norman)]

It is a pleasure to serve under your chairmanship, Mr Robertson, and I am grateful for the opportunity to make my parliamentary debut as Financial Secretary to the Treasury and Paymaster General by discussing social mobility, which is an issue of great importance to the House, as today’s interesting debate has demonstrated. I have a certain degree of nerves, however, because if in my first debate a former senior Treasury Minister contemplates the abolition of the Treasury, I shudder slightly to think what my second debate may lead to, but I will take it for what it is.

I thank my right hon. Friend the Member for Putney (Justine Greening) for her fascinating and thought-provoking contribution, and I congratulate her on securing this debate. A Putney debate on social mobility is becoming an important part of the Treasury calendar—perhaps it should be counted as a fiscal event, along with other events of more familiar coinage. I very much congratulate her on her long-standing commitment to improving the life chances of people from disadvantaged backgrounds. That was a hallmark of her time in government, and I respect and applaud her tenacity in pursuing the issue now, as well as her work on social mobility more widely, which includes the social mobility pledge that she highlighted in her speech.

If I may, Mr Robertson, I will briefly canter through some facts about what the Government are doing in this area, and then come to the contributions that have been made, in particular that from my right hon. Friend. The Treasury’s record on social mobility is a good one. There may be plenty of work to do across Government, but the Treasury has had 35 new apprentices in the last financial year, and it offers internships and insight days to students from diverse backgrounds. It was ranked 34th on the Social Mobility Foundation employer survey last year. The Treasury is rightly seeking to make headway in this area, as should the Government as a whole.

The wider point is that social mobility is a force not just for social progress but, as has been highlighted, for economic progress. If one were to use philosophical terms, we should seek to create not merely negative freedom but positive freedom. We need not just relief from the things that constrict and impede human potential but active empowerment and support for people from every background in this country. Supporting social mobility is not only right but it is in the public interest, as it means that our culture, national conversation, politics and economics will benefit from the widest possible range and diversity of voices. It is also wise in a more directly economic sense because, as the global economy’s centre of gravity moves eastwards in the 21st century, the UK’s strength will lie in not merely the size but above all the quality of its workforce. Social capital and investment in human capital is vital to those things. It is therefore in our national interest to encourage and nurture people to achieve their best, because we need their talents and skills.

The Government’s record is a good one. They have achieved higher employment in every region of the UK, and introduced and increased the national living wage. They have taken millions of the lowest paid out of income tax altogether. That can, of course, only be a staging post, and the Social Mobility Commission’s report, published at the end of April, demonstrates that there is plenty of work still to be done. Importantly, however, we understand the magnitude of the task.

For many people, the yardstick for social mobility is home ownership, and as a result of Government policy, 80% of first-time buyers pay no stamp duty at all—that is one reason why the number of first-time buyers is reaching its highest level for 11 years. The Government have also made a real impact in education, which was in part due to my right hon. Friend’s time in government. A combination of the free schools programme and a reformed curriculum has narrowed the attainment gap between disadvantaged pupils and others at every stage, from early years to secondary school. Ninety-five per cent. of all early years settings are now rated good or outstanding. That is up from 68% in 2010 and means that a record proportion of children start year 1 with a good level of development.

The Government have backed schools with £1.3 billion of extra investment and protected the pupil premium, with 1.9 million more children in good and outstanding schools. However, that funding will not get to the heart of improving social mobility unless we also tackle geographical inequalities. That is why, as my right hon. Friend rightly highlighted, it is important to make school funding fairer and more consistent.

The Department for Education provides roughly £25 million every year through the national funding formula to assist the smallest and most remote schools, and in the last Budget it was announced that rural primary schools would benefit from a £200 million programme for fast and reliable internet access across the country. The apprenticeship funding model is designed to support individuals from disadvantaged areas, by providing cash payments to providers for training apprentices who live in the top 27% of deprived areas. The Government have awarded the first 11 Institutes of Technology across England, so that even more students can access an excellent technical education.

My county of Herefordshire is something of a social mobility cold spot, and I am particularly grateful to my right hon. Friend as she was Secretary of State when the Department for Education approved the New Model in Technology and Engineering in my constituency. That was the first new university in this country for 40 years, and it is a specialist tech and engineering institution that focuses specifically on a 50:50 gender balance, open access, and the kind of empowerment that is characteristic of social mobility around the country. It will make a huge difference not only in Herefordshire, where social mobility is much lower than it should be, but elsewhere around our nation.

The Government have invested in 12 coastal, urban and rural opportunity areas, where young people face entrenched challenges, to bring together local and national partners to work with local communities and bring about lasting change. Education must ultimately equip young people to make a successful transition into employment and life as a whole. Employment is obviously important, and people should have choices as they reach adulthood. That is why technical education is so important. The transformation is now under way through T-levels, which will mean that young people have the knowledge to get the highly-skilled, well-paid jobs of the future, and through continuing work on the apprenticeship programme, which will try to create more diverse opportunities; over 1.7 million people have started apprenticeships since 2015. As my right hon. Friend will be aware, in higher education we have record rates of disadvantaged 18-year-olds getting into university. There has been an increase in the take-up of degree apprenticeships, and we have been specifically encouraging bids to improve access to degree apprenticeships for disadvantaged and under-represented groups.

Skills remain of vital importance later in life, particularly in a 21st century in which people will be regularly re-skilling and re-educating themselves. The Government fully fund all adults to take English and maths to level 2, and from 2020 they will be funding basic digital skills. They are also establishing a national retraining scheme to support those in work, including the self-employed, to develop the skills that they will need to thrive in the new economy. To that end, the Government have pledged £100 million in funding to get the scheme up and running.

Let me pick up some of the questions raised by Members in the debate. The hon. Member for Strangford (Jim Shannon) rightly stressed the importance of sexual equality across social mobility and highlighted the complexity of the benefits system as a potential impediment to change. He is absolutely right about both those points. He may have misread the proposals in the Augar review. It is an independent report the purpose of which is not to diminish social mobility but to enhance it; it needs to be read as a whole. If the hon. Gentleman looks at the members of the panel who commissioned the report, he will see that they are all deeply committed to improving social mobility, not just through this report but in their wider lives and work.

The hon. Member for Glasgow Central (Alison Thewliss) gave a more combative speech. I remind her that the Treasury is the product of cross-party evolution; whatever its weaknesses, they are the product of historical processes. It may require radical change—I will come to that question later—but the suggestion that it is not an institution with its own ethos that has developed over many years and generations is one that any Treasury Minister would contest. If the Scottish Government are unhappy with the fiscal arrangements that they have with the UK as a whole, it is up to them to raise taxes themselves, using the new tax powers they have, and to spend that money as they see fit.

The hon. Lady was dismissive of the Government as regards inequality in different ways, including in education. I remind her that Scottish higher education policy has been regularly criticised for being regressive, that Scottish schools performed worse than ever in the Programme for International Student Assessment scores for 2016 and that it may be worth her while looking at the Scottish Government’s own record before raising these issues more widely.

[Alison Thewliss]

The Minister is quite wrong in what he says; I ask him to correct the record, or at least to show his working. For the first time, more than 30% of pupils left school last year with a minimum of five Higher passes at a higher level, which is up from 22.2% in 2009 and 2010. The gap between those in the most and least deprived areas achieving a pass at higher level has reduced for the eighth successive year. The Scottish Government have made huge progress on education, in vast contrast to what is happening in England.

[Jesse Norman]

The hon. Lady misunderstood what I said. I said that the Scottish Government had been regularly criticised for having a regressive higher education policy. There is some evidence for that.

[Alison Thewliss]

That is not true.

[Jesse Norman]

It certainly has been; if the hon. Lady looks at the record, she can see that. I also pointed out that Scottish schools had performed worse than ever before in the PISA rankings in 2016. She can check that; it is an objective fact, not a matter for debate. She is entitled to her views, but not to the facts.

The Opposition spokesperson, the hon. Member for East Ham—I apologise, I mean the hon. Member for West Ham (Lyn Brown); I am sure many footballers will not thank me for that. The hon. Lady mentioned table tennis tables; having been a director of the Roundhouse in London for many years, I know the value of local social involvement and engagement. I agree with it, and the Government have invested significantly in it. She seems to have forgotten that the Government will have spent almost £6 billion in 2019-20 on childcare, which is a record amount. They have doubled the amount of free childcare available for working parents of three and four-year-olds to 30 hours. The Government have a tremendous record in this area in many ways. I am glad she mentioned table tennis tables; I was playing at a free table tennis table, provided through public funding, only last weekend, in the village of Little Dewchurch in my constituency.

Mortgage Prisoners

Alison Thewliss Excerpts

Thursday 6th June 2019 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

I thank the hon. Member for Stirling (Stephen Kerr) for setting out the situation that so many people face, with no recourse in the system. One of the first cases that I took on as an MP and, I regret, was unable to resolve was that of a former Northern Rock mortgage holder. It was incredibly difficult to get anywhere with the case, because I hit a wall all the way through it. That seems to have been the experience of many Members who have spoken today. The Government must look urgently at that lack of any means to resolve the situation, because without any recourse, nobody will be able to get out of this situation and get their lives back on track.

I pay tribute to the hon. Members for Dover (Charlie Elphicke) and for East Lothian (Martin Whitfield) for bringing this debate to the Chamber and to all those who have contributed. I note the work of the Treasury Committee, which I will be joining soon; its members can look forward to that. The APPGs on fair business banking and on mortgage prisoners have also done a huge amount of work in this area.

The examples given by the hon. Member for Dover show the scandal of this situation, the deep and real web that has been created and the need for the Government to act. There is no doubt that irresponsible borrowing occurred in the early 2000s, with people taking out loans that they could hardly afford. The starkest example of mortgage prisoners is those who were let down during the 2008 financial crash, but we cannot forget the role of the banks, which offered people higher and higher loans with fewer checks and balances and led customers into a sense of security that nothing could go wrong. The hon. Member for Thirsk and Malton (Kevin Hollinrake) set out how those who caused that problem began to compound the issue further down the line.

One hundred per cent. loan-to-value mortgages were not unusual, and sometimes even higher value loans were offered for home improvements or debt consolidation, which seems unthinkable now, knowing what we know in a post-2008 landscape. A primary example was Northern Rock’s Together mortgage, which was offered to customers covering between 95% and 125% of the value of their home. When the regulations were tightened after the crash, many people were trapped with higher loans and higher-than-average interest rate payments. The self-same banks that lent them higher amounts than they could afford then refused to give them smaller loans because they failed the lending criteria for borrowing.

Those people were forced to keep their current mortgage and to pay lenders the standard variable rate, which was between 2% and 5% higher they would have paid on a market-leading mortgage. This does not sound like a high percentage, but even if people took out a mortgage of £100,000—much lower than the UK average, including in Scotland—in 2008 before the crash, it is conceivable that they could have paid between £2,000 and £5,000 a year on top of what they would have paid on a normal competitive-rate mortgage. Over 11 years, a bank could have been paid between £22,000 and £55,000 more by exactly the same customers who were told that they could not afford a cheaper mortgage. The hon. Member for Bethnal Green and Bow (Rushanara Ali) laid that out quite well. Even on the most conservative estimates, we are dealing with substantial and possibly life-changing amounts of money, which could have gone some way to paying off the balance of a mortgage.

It is clear that this lack of access to competitive financial products is bad for individual customers, but there is clearly also a wider negative macroeconomic effect. Hon. Members have mentioned the issues for business customers as well. Businesses going bust is of course bad for the economy, but businesses being forced to go bust is an even wider concern. The hon. Member for Camborne and Redruth (George Eustice) mentioned commercial repossessions, and it is a really deep worry that those in the commercial sector do not have the same rights as those in the consumer sector.

The hon. Member for Thirsk and Malton talked about what is fair and reasonable, and the gaps in business lending. The Government really ought to look into closing these gaps and loopholes to give business customers the reassurance that, when they want to take out a loan, they will not lose everything. The risk of losing everything, as so many people have done in these circumstances, does not give people the confidence to start up small businesses, and it will put others off. It has certainly had a life-changing impact on those who have suffered as a result so far.

When interest rates were slashed to 0.5% by the Bank of England in the aftermath of the 2008 crash to encourage borrowing, the effect this mechanism had on the wider economy was hampered by banks not passing on the cuts in interest rates to their customers. The economy could have been a bit more resilient if the economic levers were able to work in the way intended, so it is vital that we correct this for the future of our economy and make sure that such gaps do not emerge should this ever happen again.

The regulatory tightening following the financial crash is of course to be welcomed and the mortgage credit directive’s affordability checks protect the market from irresponsible lending, but we should not throw the baby out with the bathwater. Regulation should provide a framework for improving consumers’ experiences and for increasing competition in the market, not tying consumers to one onerous regime of payments.

The FCA has committed to changing its interpretation of the mortgage credit directive to a relative test rather than an absolute one, which will be helpful and is to be welcomed. However, as others have mentioned, its own analysis suggests that this help will be extended to only 20,000 of the at least 150,000 people who have been identified. I understand that some lenders are outwith the regulatory remit of the FCA, and the Government should be looking at extending its remit so it is better able to address this issue. The phenomenon of mortgage prisoners has been wrongly looked on as a legacy issue, but it actually provides a very real threat for the future.

The UK Government must change regulations to stop vulture firms exploiting people to make a quick profit. The regulatory framework at present means that, instead of being able to switch to a better deal, UK mortgage prisoners had their loans sold to vulture firms looking to make such a profit. As hon. Members have mentioned, that has had a very real impact on those trapped within that system, and it is of course the customers who lose out. These firms pack up, move on and do something else, in a very shady way quite often. As Members have said, the practice in relation to SME loans has also forced many into bankruptcy. My hon. and learned Friend the Member for Edinburgh South West (Joanna Cherry) has on a number of occasions raised the cases of her constituents who have been affected.

As we have heard, many of the mortgages have been sold to a subsidiary of the US equity firm Cerberus, Landmark Mortgages. The BBC website states:

“BBC Panorama has discovered Cerberus told the government it was planning to offer homeowners better mortgage deals before its £13bn purchase of former Northern Rock mortgages in 2016. But the company hasn’t provided any new mortgages and 65,000 homeowners are still trapped on high interest rates.”

Cerberus denies that allegation, but it seems pretty clear from the evidence given that that is exactly what took place.

The hon. Member for Hazel Grove (Mr Wragg) laid out well the difficulties faced by his constituents in getting justice through legal aid and other means. This is not a criminal issue, but it is within the civil court system and there is a problem getting any redress—that goes to the other point raised about redress within the system. If someone cannot get legal aid for this issue, and they have no money because they have become bankrupt as a result of the system, how can they go about seeking justice?

The SNP agrees with the all-party group on fair business banking and finance that:

“The practice of selling mortgage books to lenders who are unregulated and/or do not offer new business ought to be stopped.”

We also support its demand for an independent tribunal service, so that customers who have been treated unfairly by Cerberus, or any other firm, can more easily secure the service they deserve—particularly giving recourse to support in cases where people have been subject to the strong-arm tactics described by hon. Members.

Mortgage prisoners are not a phenomenon that is restricted to the 2008 era, and there are a growing number of mortgage prisoners today. With house prices increasing faster than wage growth, there is a trend of creeping back towards those higher loan-to-value mortgages in the market, which is storing up problems for the future. We must learn from the mistakes made in 2008, and stop that in its tracks before more people become trapped.

As well as taking regulatory steps to free mortgage prisoners who are currently in a difficult situation, action must be taken to ensure that existing mortgage customers do not find themselves in a similar position. Tesco Bank, which has substantial operations in my constituency, recently announced its intention to sell its mortgage portfolio, citing “challenging market conditions” that have constrained its opportunities to grow profitably. I was happy to sign a letter that was organised by the hon. Member for Feltham and Heston (Seema Malhotra), but in its response Tesco gave no real concrete assurances that those mortgages will be sold to active lenders, and said that things are at an early stage. That leaves many of its customers at risk of being stuck with the same kind of deal that they cannot switch out of. We must do what we can to discourage and disincentivise companies from contributing to what is a failure in the market. I will meet representatives from Tesco Bank soon and put those concerns to them in person. I am worried for customers who currently have mortgages. Many of us in this room will have mortgages, and we cannot say for certain that the mortgages we have today will be the ones we will have tomorrow or in a few years’ time.

As we head through the chaos of Brexit, and potentially to a catastrophic no-deal scenario later in the year, the wider context could not be more serious. The livelihoods of many across these islands could be put at risk, with the inevitable strain on people’s ability to pay their mortgage and on the wider financial system. Some have predicted that a no-deal Brexit would have a similar effect to the 2008 crash, with the difference being that the UK Government appear to be hurtling towards it almost deliberately. I see no upside to putting my constituents and the remain-voting nation of Scotland at that risk by even threatening to go for no deal, never mind enthusing about it as some Tory leadership candidates have been doing.

I and my SNP colleagues have repeatedly called on the UK Government and the Minister to undertake a strategic review of the culture within the banking and financial services industry. For mortgages, the sector should focus on providing patient, long-term investment that supports the economy and promotes productivity, not just making a quick buck. The measures taken following the crash must not be unwound due either to Brexit or to other things in the economy, and we need to see what the protections will be for consumers—both businesses and private individuals. Those vultures who prey on the most vulnerable—the hon. Member for Thirsk and Malton more appropriately called them “vampires”—should be chased out of this industry once and for all.

Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019

Alison Thewliss Excerpts

Wednesday 22nd May 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Robertson, and a pleasure to be speaking third—I have been able to catch my breath, having come up from Westminster Hall. I share the concerns that the hon. Member for Oxford East has iterated. We on this side of the House have been almost pleading with the Government, asking, “Are you sure you are getting this right?” It gives us absolutely no pleasure today to find out that the Government have not been getting it right. They have made errors and omissions that have come to light only months and months down the line. As the right hon. Member for North Durham just mentioned, if we had been in a no-deal Brexit scenario right now, we would be finding these errors out while these things were already in operation.

I ask the Minister what assessment is being made of all the other statutory instruments that we have scrutinised in this room over the past year. How do we know further errors have not been made? What checking are the Government doing to make sure further errors will not emerge, and who is the Minister relying on to make sure that those errors are being picked up? Is it up to individual firms to find those errors and report them to the Government somehow, and if so, what does that mechanism look like? Can we advise financial services firms, consumers, or anybody else to email the Minister and let him know if they find an error?

This situation gives Members on this side of the House no confidence that things are working properly. Any notion of the withdrawal Bill coming back to the House is laughable if the Government cannot table SIs without coming back with technical amendments months later. It is a dog’s Brexit, quite frankly, and we cannot have much confidence in it. Not only that: it cannot give much confidence to those people outside the House who work in the financial sector, both here in the UK and, more widely, in Europe and the rest of the world. If we cannot get these things right now, where will that leave us as we go forward, perhaps in a no-deal scenario under a different Government? I am sure that the hon. Member for Salisbury is a great Minister, and he may keep his role in a different Government; who knows. However, as the right hon. Member for Delyn rightly pointed out, he cannot give any assurances to the House about what the future may look like.

If later in the year we end up with a hard Brexiteer Prime Minister at the helm, we have no assurance that we will not be driven over the cliff into circumstances in which we have to rely on statutory instruments passed without the greatest amount of scrutiny possible. We may end up in a scenario in which we are relying on that deficient legislative framework to make sure that our financial sector is able to operate.

[Andrew Bridgen (North West Leicestershire) (Con)]

The hon. Lady is doing a very good job of explaining the complexities of unravelling a 46-year-old union. What does she think would be the complexities of unravelling a 300-year-old Union?

[Alison Thewliss]

It certainly would not start from here. The Brexiteers have started with no plan, nothing written down, no objectives, and no sense of where they want to arrive at, without even agreement among themselves about what they want to achieve. I will take no lectures from the hon. Gentleman on how we do negotiations, because this is a complete and utter shambles. I suppose it is no accident that we can look at the figures from EY, which says that since the 2016 referendum financial services firms have voted with their wallets and moved $1 trillion of assets from the UK to the rest of the EU—to their benefit, and certainly not to ours.

The financial services industry in Scotland is looking at the situation with a sense of disbelief and horror. Representatives come and ask me what is going to happen, and I cannot tell them. The Minister cannot tell them. The Prime Minister will no doubt be out of the door in a couple of days’ time, and she cannot tell them. What kind of confidence can the industry have that there will be a stable financial regime going forward, if we cannot even get these SIs correct? The other day, the Minister could not even tell my hon. Friend the Member for Glasgow North (Patrick Grady) whether the UK would break even at any point in this process. We will lose out as a result of Brexit, and she could not say when the UK economy will start to improve after all this disruption.

A number of the changes to the SIs—described in paragraphs 7.10 to 7.13 of the explanatory memorandum —are designed to improved consumer protection and increase consumer awareness where firms are in transitional regimes. That is quite a worrying omission. Had this not been brought to light, people who might rely on those types of consumer protection would not have had them under this SI, and perhaps under others. We simply do not know. We have raised concerns that industry has brought to us, when we have been able to do so.

This SI has gone through in a very haphazard manner, which is certainly concerning. The issues and concerns have been well iterated by the Opposition, but I want to ask the Minister about the procedure and process to ensure that all the other SIs that we have wheeched through the House in no time at all are as rigorous as they should be. It is deeply unfortunate that he has had to come back and do this today. I feel very sorry for his having to do it, and for the civil servants who have had to go through the process as well, but there must be a better process than this. The corrective process should be better than this. I would say that we are heading for chaos, but we are already in chaos. It gives Scotland no confidence that this UK Government are the strong and stable environment that we were always promised they were. I seek assurances from the Minister on what is being done to address these issues.

--- Later in debate ---

[John Glen]

I am grateful for the points that Members have raised, which I will be happy to go through. The additional measures and corrections in the instrument will help to ensure that the UK’s financial services regulatory regime continues to be prepared for withdrawal from the EU in any scenario, but I recognise the context of the multiple debates we have had and the concerns expressed by multiple Members on the process that has got us to this point and how it needs further elucidation, which I will try to do now. I start by saying that we have used the provisions in the legislation and that the changes did not impact materially on any meaning of thousands of pages of legislation. We always intended and expected that this mechanism would be required in the context of that volume of SIs.

I will now try to give some more detail. In a no-deal scenario, for which any responsible Government must be prepared, EU law and regulators will not have jurisdiction in the UK, so any relevant functions will be taken on by UK authorities and UK law will apply. The hon. Member for Oxford East made reference to Andrew Bailey’s recent comments on deregulation. It is important to contextualise that the European Union (Withdrawal) Act 2018 does not give the Government power to make policy changes beyond those needed to address deficiencies arising as a result of exit.

The hon. Lady tempts me to enter into a wider discussion of the future of regulation.

All I will say on that is that I do not believe that enduring competitive advantage can be or will be achieved in any jurisdiction by deregulation. It means for the UK at the moment that, as far as possible, the same rules that apply pre-exit will apply immediately post-exit. However, it is necessary to make changes to reflect the new third-country relationship between the UK and the EU, and to transfer functions currently carried out by the EU bodies to the appropriate UK body, in the context of this provision of a no-deal scenario.

Our onshore regime will be safe and workable until we have the opportunity to consider long-term reforms to our regulatory framework. The hon. Members for Glasgow Central and for Oxford East make a fair point about the clarity of that long-term arrangement. It obviously needs urgent work by the Government to establish that.

[Alison Thewliss]

The Minister says that it will need “urgent work”. When will that “urgent work” be done?

VAT (Place of Supply of Services) (Supplies of Electronic, Telecommunications and Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 Finance Act 2011, Schedule 23 (Data-Gathering Powers) (Amendment) (EU Exit) Regulations 2019 Customs (Records) (EU Exit) Regulations 2019

Alison Thewliss Excerpts

Tuesday 14th May 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Sharma.

It seems that we are back in the land that time forgot—the land of Brexit statutory instruments, which is in a different time zone altogether if the Committee Room clock is to be believed. It feels as though the SIs we are looking at today were the Brexit SIs that the Government forgot. If they were so vital why are we dealing with them now rather than before the Government cancelled their original date for Brexit back at the end of the March? These SIs are important. They deal with the functioning of many processes that businesses find incredibly important, and overshadowing all that is what exactly the future regime envisaged by the Government looks like, and how businesses can prepare themselves and adapt for it.

As hon. Members have laid out, the first SI, on VAT and the supply of services, changes the circumstances with the mini one-stop shops—the MOSS regime. As this was introduced in January 2019 and we are now getting rid of it, we seem to be in a veritable customs VAT hokey-cokey. Electronic, telecommunication and digital services are important to the economy. I was at the ScotlandIS awards on Friday night; there are many companies working in the digital sphere doing incredibly innovative and exciting things. They need to have some degree of certainty that they will be able to do their business from Scotland—from Glasgow—and the rest of the UK in a couple of months’ time. This really gives us very little clarity.

The mini one-stop shops have gone about the business of simplifying the rules for businesses, but businesses want to continue to supply digital services. They will perhaps need to re-register in the different member states of the EU and comply with those regimes, in circumstances where, as the hon. Member for Stalybridge and Hyde said, there has been no consultation and no impact assessment.

We do not have any real idea, as Members of Parliament, how this will affect businesses and what it will cost. We do know that there is a risk of losing 47,000 jobs in Scotland with the loss of the single market. That is a huge number of jobs, and they will probably be in this type of high-skills sector. Many of the people involved in these sectors are bright young things who can travel and are very flexible. If they find that their business will be located on the other side of the English channel and carry on as now, they will most likely consider that rather than staying, which will be to the detriment of us all. I want to hear from the Minister what the impact will look like and who the Government have consulted.

I will now turn to the Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019. A no-deal Brexit—Brexit in general—was supposed to be about ripping up red tape and removing paperwork to make things simple, but this appears to be another example of how, if we end up with a no-deal Brexit, we will have more paperwork and things being far more complicated. I note that it says that overseas suppliers are liable for the import VAT on

“any consignment of goods sent into the UK in a ‘postal packet’ if the value of goods it contains is £135 or less. Overseas suppliers may discharge the liability by…registering with HMRC and accounting for import VAT…or…paying the import VAT due to the postal operator”.

All those things require additional procedures and processes. They require the people transacting to know that they have to do this and that this is an obligation on them. I would be interested to see what the regime looks like if they do not comply with what is being asked here. Will there be fines or some manner of sanction imposed on people who overlook this new process? People are being asked to do something different in the circumstances of no deal.

As the explanatory note points out,

“The definition of a ‘postal operator’ is wide—it covers any person who carries parcels from one place to another or who receives, collects, sorts or delivers parcels.”

That could be quite wide and quite significant. Some people feel that they have not been captured within this definition and therefore that they do not have to register. It would be good to get a lot more detail on when the Minister intends to bring these subsequent regulations to the House, how they will be scrutinised when they come to the House, and what consultation he intends to do to ensure that people who are affected by these regulations actually have some say on what they contain.

Yet again, there has been no formal consultation regarding this SI and it is not clear from what is set out here exactly which stakeholders the Government have engaged with. Although it says that stakeholders have been engaged with, there is no further detail on that. It is difficult for us to see the extent to which that has already been done.

The third instrument—the Customs (Records) (EU Exit) Regulations 2019—is again a replication of current EU law, but, as it is regarding many of these SIs, it is unclear what the future will look like. It is unclear whether anything will change, when further notice will come back to the House for us to decide and whether it will come back to a Committee like this. Given the uncertainty around deal or no deal, we do not know exactly when that might come either.

The Government are saying today that they want to get their withdrawal agreement done and dusted by the summer recess. Well, good for them if they can. Who knows if they will? We need to know when the Government will introduce these measures and that it will be done in a reasonable timescale, so that full consultation can be conducted and that those who need to know these things can do so.

Does the Minister have any figures on familiarisation costs, which were very much part of the financial services SIs and impact assessments, but do not seem to be, as far as I have seen, part of these Sis? Will new processes be put in place? How long will firms have to become familiar with those processes and understand them? How far ahead will the Government notify them of any new processes that they may have to follow?

The Minister said that data will have to be retained for a suitable period—perhaps three years—but again, people need to plan for and understand that process. They need more certainty. Just saying in this Committee, “A suitable period of about three years is what we intend,” is different from saying when the regulations will be introduced.

Finally, how will the Government notify all the organisations, companies and individuals who will be affected by the proposed processes? We have heard a bit about the issue of people having to register for settled status and there has been advertising about that, but if this is going to be a serious issue for businesses in the event of no deal, what will the Government’s process be for getting in touch with them? Is there a communications plan, should it be needed, if we end up without a deal? Hopefully the Minister will be able to answer some of those concerns.

[Mel Stride]

I thank the hon. Members for Stalybridge and Hyde and for Glasgow Central for their contributions. I will endeavour to go through their points.

The hon. Member for Stalybridge and Hyde made a general overarching point about the uncertainty of Brexit. I agree with him about that, which is why the Government are working so hard, including through conversations with his Front Bench, to secure a negotiated arrangement with the European Union whereby we have an orderly exit. The measures are being brought in only on the basis that, in the unlikely event of day one no deal, we will be able to switch them on by way of an appointed day order.

An important point for the Committee is that we are not rushing these measures in immediately; we have time to see how the negotiations conclude and to bring the measures into effect at the appropriate moment. That also gives us some time to address the specific point about how we propose to make sure that those affected by the measures are aware of them. Of course, we have consulted extensively on these matters with businesses across the country that are involved in imports and exports, and there is an extensive amount of information on that area on gov.uk. There was also an impact assessment that covered, among others, the two instruments that relate specifically to VAT measures, which concluded that the impact would be relatively modest.

The hon. Gentleman is also concerned about the fact that we are using secondary legislation for the measures, but we published the statutory instruments some time ago. I think I am right in saying that the instrument relating to VAT MOSS was published in January, and the other two have also been available for hon. Members to consider for a reasonable amount of time. Of course, they are also affirmative instruments, rather than negative instruments, given that they make amendments to primary legislation.

I was asked specifically why the instruments were being moved today, rather than at any other point. It is a case of making sure that we put them in place so we can switch them on through an appointed day order in the event that we come out without a deal. Of course, in theory at least, we have until the end of October to conclude our arrangements with the European Union.

The hon. Gentleman spoke about the importance, as he saw it, of regulatory alignment with the EU in the context of VAT, on which I agree with him. We have always made it clear that it is our intention and desire for VAT and other tax issues, and indeed customs measures more generally, between us and the European Union to be as closely aligned as possible, so we have a period of stability as we go forward in whatever new arrangement we end up in.

The hon. Gentleman also asked about what would happen to the UK businesses that have benefited from what I accept are considerable easements and simplifications related to the operation of VAT MOSS if we leave without a deal. We have always been clear that either they would have to register with the individual member states with whom they were transacting VAT-applicable business and digital services, or they could afford themselves of the benefits of the non-Union VAT MOSS arrangements available to those outside the European Union.

The hon. Members for Stalybridge and Hyde and for Glasgow Central both made points about the data that will need to be collected under the parcels regulations. I assure the Committee that, as I set out in my opening remarks, there will be no additional burden on business. The focus is strictly on obtaining data that is relevant to parcel collections.

[Alison Thewliss]

The Minister says that there is no additional burden to business, but is he not asking businesses to do something that they were not doing before?

[Mel Stride]

The additional burden, such as it might be, would be registering and being prepared to provide information that is already being collected. In their day-to-day transactions, those businesses already collect a large amount of information, for example on the flow of parcels, where they come from and their value. As the hon. Lady will know, for parcels with a value below £135 the responsibility for accounting for the VAT will transfer from the UK to the sender in one of the EU27 states. To rephrase my point, the additional administrative burden will be proportionate and relatively slight—that is probably a better way to describe it.

The hon. Lady asked about the penalty regime with respect to the responsibilities and obligations that will materialise under the regulations on customs transactions. The answer is that there will be no change to the regime for the businesses concerned. She spoke about consultation, which I think I have dealt with. She also observed that the changes under the VAT MOSS order relate to changes that happened as recently as January 2019. We could not have foreseen those changes, and there are no changes to primary UK legislation. As I set out in my opening speech, it makes sense to rid ourselves of that superfluous legislation, for the reasons that I gave about the potential risk that it could be used for tax avoidance purposes.

The hon. Lady mentioned the three-year period for which customs data will have to be held. Under the current European Union arrangements, however, the data is retained for four years, so the new system will be no more onerous.

Question put and agreed to.

Resolved,

That the Committee has considered the Value Added Tax (Place of Supply of Services) (Supplies of Electronic, Telecommunication a Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 (S.I. 2019, No. 404).

Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019

Resolved,

That the Committee has considered the Finance Act 2011, Schedule 23 (Data-gathering Powers) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019, No. 397).—(Mel Stride.)

Customs (Records) (EU Exit) Regulations 2019

Resolved,

That the Committee has considered the Customs (Records) (EU Exit) Regulations 2019 (S.I. 2019, No. 113).—(Mel Stride.)