Amendment of the Law

Andrea Leadsom Excerpts

Thursday 19th March 2015 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I thank hon. Members on both sides of the Chamber for their contributions this afternoon. For some, it will have been their last contribution in the Chamber. I congratulate them on choosing such an important final debate.

The truth is that everybody wants economic growth and greater employment. No Government in the world say that they want less growth and fewer jobs. However, there is a big difference between talking about something and achieving it. This Government are proud of our achievements: the fastest growth of any major advanced economy in the world, employment at a record high, unemployment at a record low, rising living standards, a falling deficit and the return of national optimism. And we have done all that within five years of the worst ever peacetime recession, which was caused not only by the financial crisis, but by the spending of the Labour party from 2001 onwards.

There have been some very good contributions this afternoon. The hon. Member for West Bromwich West (Mr Bailey) raised the sale of the student loan book. I can tell him that the first tranche is expected to be sold by the end of 2015-16 and that over a five-year period the sales are expected to generate between £10 billion and £15 billion in revenues.

The hon. Member for Halton (Derek Twigg) spoke about living standards. Perhaps I can lay his concerns to rest by telling him what Paul Johnson of the Institute for Fiscal Studies said was

“the difference between Mr Osborne’s £900 better off and Mr Miliband’s £1,600 worse off”.

He said:

“In part the difference arises because Mr Miliband is talking about gross earnings, not net incomes. The latter allows the fuller description of what has happened to household living standards.”

It is important for all Members to understand the reality of how our economy is performing.

[Ed Balls]

Will the hon. Lady confirm that on the statistical measure she has just cited, between the first quarter of 2010 and the first quarter of this year—from the beginning to the end of the Parliament—living standards have fallen not risen?

[Andrea Leadsom]

The right hon. Gentleman will realise that I have just quoted Paul Johnson of the IFS. I stand by what the IFS has said, which is that, from 2010 to 2015, the average household is £900 better off.

My right hon. Friend the Member for Boston and Skegness (Mark Simmonds) welcomed the fall in unemployment, the many who have been taken out of tax, and the fuel duty freeze, which has been great for his constituents. My hon. Friend the Member for Dudley South (Chris Kelly) spoke about the fact that Dudley is full of hard-working people, and said how our support for businesses has helped them. He will certainly be missed in this place.

The hon. Member for Luton North (Kelvin Hopkins) criticised many of the coalition’s cuts but did not say how he would sort out the huge financial mess left by the Labour party in 2010. My hon. Friend the Member for North Warwickshire (Dan Byles) gave impressive figures for improvements in his constituency, not just to the local economy but also to local public services. As he pointed out, a strong economy means that we can pay for excellent public services. I wish him every success in his career when he leaves this place.

The hon. Member for Clwyd South (Susan Elan Jones) welcomed the increase in personal allowances and the rise in gift aid for charity cash collections. I join her in congratulating Giggles and Games in her constituency on its prize for a thriving business. My hon. Friend the Member for South Norfolk (Mr Bacon) raised the important issue of housing. He welcomed the Budget creating 20 housing zones, and made important suggestions about the need to improve housing supply, including through self-build. The hon. Member for Hackney South and Shoreditch (Meg Hillier) talked about problems of poverty in her constituency, but acknowledged that the route out of poverty is work. She should welcome the fact that the total claimant count in her constituency is down by 39% since 2010. She also raised the issue of real-time data for credit reference agencies. The FCA is continuing to focus on achieving real-time data sharing, and significant progress is being made.

My hon. Friend the Member for Brentford and Isleworth (Mary Macleod) pointed out the economic benefits to her constituency of regeneration and making work pay, as well as the business rate reliefs for her high street and support for the creative industries. She highlights the urgent need for faster broadband and more new housing, and I agree with her about that. The hon. Member for Stockton North (Alex Cunningham) challenged the quality of the jobs available, so I am sure he will be pleased to know that since Q1 2010, more than 70% of the increase in employment has come from full-time workers, two thirds of whom have been in high-skilled occupations, and that the claimant count in his constituency is down by 25% since May 2010.

[Alex Cunningham]

I welcome any jobs that are created in my constituency, but the statistics I referred to showed that hundreds of people have disappeared from the jobseeker’s allowance lists. Nobody knows where they have gone and whether they have died, left the country or something else. Is there any explanation for where those hundreds of people missing from the JSA lists have gone?

[Andrea Leadsom]

That is an extremely interesting question and the hon. Gentleman may well want to follow it up as the representative for his constituency. It is not something that I can answer at the Dispatch Box.

My hon. Friend the Member for Ealing Central and Acton (Angie Bray) welcomed the review of business rates and pointed out their importance, particularly for businesses in her constituency that are competing with online companies. She also pointed out the need for urgent action on superfast broadband for business, and welcomed the measures in the Budget.

The hon. Member for Birmingham, Selly Oak (Steve McCabe) welcomed the penny off a pint and the freeze in fuel duty, but said that the Chancellor ignored the NHS. In truth, the Government have chosen to protect the NHS through this tough period and have now committed to much greater support for mentally ill people. I would dearly love to hear the Opposition just once welcome this vital investment, which will do so much to help people struggling with poor mental health, rather than just ignoring it. My hon. Friend the Member for Northampton South (Mr Binley) told us about the choices that his grandmother gave us all—either earn more or spend less when in difficulty—and I am delighted to hear she would have been pleased with the Budget. I congratulate him on his long-standing support for small and medium-sized businesses and put on the record how much I have enjoyed being his constituency neighbour in the lovely country of Northamptonshire.

The hon. Member for Angus (Mr Weir) talked about the problem of the last bank in town, which I am very sympathetic to, but he might be reassured to know that I have held round tables, including with the Secretary of State for Business, Innovation and Skills, talking to banks about the need for smart ATMs that take in, as well as give out, cash and discussing improvements to post offices, including longer hours and upgrading security at counters for business banking, and we hope there will be a protocol for bank closures in the future. I am happy to talk to him separately about the matter. My hon. Friend the Member for North Dorset (Mr Walter), in his encore speech as a retiring Member, warmly supported the Budget and gave a considered assessment of the measures in it. It was an excellent swansong, and I wish him a successful and peaceful retirement.

[Mr Bacon]

Before my hon. Friend moves on entirely from the point about bank closures, will she accept that it is not just about protocol but about sharing resources, possibly between commercial banks and institutions such as the Post Office, so that instead of closures we have facilities that work for local people in very rural areas such as South Norfolk?

[Andrea Leadsom]

I agree absolutely with my hon. Friend and assure him that that is precisely the point that the Secretary of State and I have been taking up with the banks.

The right hon. Member for Knowsley (Mr Howarth) might recall that I had the privilege of standing as a candidate in 2005 for Knowsley South against Eddie O’Hara. I am delighted that he welcomed the Help to Buy ISA and urge him to promote it to his local first-time buyers. It will be flexible for those on low incomes and will give a Government contribution of up to £3,000 towards a deposit for a new home.

[Mr George Howarth]

The Minister has quoted me out of context. I was making the point that we keep trying to subsidise owner-occupation by one means or another, none of which contributes to building new houses.

[Andrea Leadsom]

I apologise if I misunderstood the right hon. Gentleman’s comment. Nevertheless, Help to Buy will provide support for young people in his constituency looking to get on the housing ladder.

My right hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) gave an interesting insight into her experience as an economics teacher, particularly in respect of the terrible time of our exit from the ERM. I was working in a dealing room then, and like her I have always thought that financial stability is key to our security, our jobs and our future. As she knows, I agree totally with her about the vital importance of interventions to support the mental health of children, mums and babies in the perinatal period, and I thoroughly congratulate her on her work in that area.

On the hon. Member for Easington (Grahame M. Morris), the best I can say is that I agree with my hon. Friend the Member for Daventry (Chris Heaton-Harris). Although I disagree with what the hon. Gentleman said, he is too courteous for me to pick a fight with him about it. I agree with my hon. Friend the Member for Daventry on two other points—first, that Northampton Saints are an excellent rugby team, and secondly, that it is people and businesses across the UK that, through their hard work and aspiration, deserve the credit for our economic recovery.

Finally, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) talked about the biggest increase in self-employment in 40 years, and then somehow suggested it was a bad thing. I hope her aspiring new business owners were listening. In truth, under this Government, the richest 20% of households are contributing in cash terms over four times more than the poorest 20%.

[Debbie Abrahams]

For clarity, I said that although some people might want to adopt the lifestyle, it had to be recognised that the average salary of people who are self-employed is about £10,000.

[Andrea Leadsom]

I am glad that the hon. Lady has clarified what she meant.

I would like to tackle head-on the lazy idea held by many Labour Members that when a country grows, it is the Government who do the running. It is not the Government; it is businesses and hard-working individuals.

In this Budget, as in all previous fiscal statements, this Government have demonstrated our pro-business, pro-growth credentials. That means more tax credits for key sectors, whether they be energy-intensive heavy industries or creative industries maintaining Britain’s status as a cultural centre of the world. It means further action to stimulate investment in the North sea through investments and tax cuts, and a long-term strategy for superfast broadband, enabling the next step in the technological revolution.

Yesterday, my right hon. Friend the Chancellor announced that next April we will abolish national insurance altogether for employing a young apprentice. We will be holding a major review of business rates, reflecting the fact that the old system needs to be reviewed so that it works better to support aspiring business owners in our country. He announced the abolition of class 2 national insurance contributions for the self- employed, and the abolition of the annual tax return altogether. I can tell you, Madam Deputy Speaker, that I had phone calls to my office from two constituents, one of whom said that the Government’s Help to Buy ISA will persuade them to vote for me, while the other said that the abolition of the annual tax return will encourage them to do the same. On the basis of my own small opinion poll, this is already making a difference.

[Meg Hillier]

The Minister raises the important issue of national insurance contributions. Will she highlight for many of the self-employed people in my constituency what that will mean for their pensions?

[Andrea Leadsom]

We are consulting on that, and further information will come out in due course.

To help the food, drink and hospitality industry, we are freezing wine duty, cutting beer duty by a penny a pint, and cutting duty on cider, Scotch whisky and other spirits by 2%. To help any business that depends on a car, a truck or a van—or even a pink bus—we are cancelling the fuel duty increase scheduled for September. This is the longest duty freeze in over 20 years, saving someone filling up a Ford transit van £15 at the pumps every time they fill the tank. To help our businesses expand internationally, we are putting ourselves forward to be a founding member of the Asian Infrastructure Investment Bank, and we are doubling our support for British exporters to China. These are all vital steps to improve Britain’s ability to export and to support those businesses that are returning Britain’s economy to health.

This is a Budget that helps businesses from a Government who understand businesses. This is a Budget that will help secure Britain’s economic future for years to come. This is a Budget that will deliver prosperity for all, and I commend it to the House.

Ordered, That the debate be now adjourned.—(Mr Vara.)

Debate to be resumed tomorrow.

Financial Inclusion

Andrea Leadsom Excerpts

Tuesday 17th March 2015 Westminster Hall

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I agree with everything that my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd) said. I am grateful to him for securing the debate on this important subject. He referred to the Financial Inclusion Commission’s report, which is an important piece of work that I am extremely interested in.

I hope to be able to give my hon. Friend an overview of the many things the Government have done that show that we have been absolutely committed to trying to improve the plight of the financially vulnerable. We see financial inclusion in two parts. First, it has to enable people. Secondly, it has to empower them. Enabling means making sure that people have the tools to manage and save their money, using services such as bank accounts. Empowering means equipping people with the skills and knowledge to make the right financial decisions. The Government have taken significant steps in pursuing that agenda.

First, on basic bank accounts, as my hon. Friend pointed out, independent research published last year showed that about 1.9 million adults in the UK were without a bank account. Of course, there are also many who have bank accounts but cannot use them because fees have been so racked up that they cannot afford to pay. Therefore, in December the Government secured a landmark deal with the major banks, which will end fees for failed payments as well as ensure access to banking facilities for all. We held extensive negotiations with the banking industry to bring basic bank accounts up to scratch.

The result is that the nine major high street banks and building societies have agreed to offer a better deal for customers. Truly fee-free accounts will be available to anyone who does not already have a bank account or who cannot use their existing account owing to financial difficulties.

Once someone has a bank account and can begin to manage their finances, other issues automatically become important. Such issues include physical access to banking: a branch or free-to-use ATM near work or home. In terms of the Post Office and rural access to banking, while we appreciate that all banks must balance customer interests with market competition and other commercial factors, alongside the Secretary of State for Business, Innovation and Skills, I have chaired a series of round tables with senior representatives from UK banks and building societies at which we challenged industry to explore how we could improve customers’ access to banking services. We have looked at how to increase awareness of the services provided through the Post Office’s extensive network, which will ensure that essential banking facilities are available in as many communities as possible.

Customers can withdraw money, deposit cash and cheques and check balances at all 11,700 post office branches in the UK. The Government have committed almost £2 billion to protect and modernise the post office network. I recently met senior people from the Post Office to discuss how they could improve things further, with longer opening hours and better security in post offices for those wanting to deposit cash. It is vital in relation to access to finance that the post office network should become part of the solution.

We have also made crucial progress on ATM provision. The number of free-to-use ATMs is at an all-time high, with 97% of withdrawals being made free of charge. However, it is often the most disadvantaged communities that cannot get access to free-to-use ATMs, so the Government are working closely with the LINK network’s financial inclusion programme to subsidise free-to-use cashpoints in more than 1,400 remote and deprived areas across the UK. Importantly, members of the public can nominate their own area. My round tables with bankers have opened up positive discussions and looked at what greater functionality ATMs could provide over and above cash withdrawals and balance inquiry services.

Of course, however, we realise that bank accounts are only one of several ways of furthering financial inclusion, and that credit unions also play a key role in providing financial services to more than 1 million customers across Britain. We would like that to double or treble, so we have taken significant action to ensure that credit unions go from strength to strength. Last summer, I issued a call for evidence on credit unions, asking for views about their future and what more the Government could do to support the development of the movement. We have committed to using the responses to the call for evidence when considering legislative amendments for the next Parliament. On 1 April last year, we raised the interest rate cap on British credit unions from 2% to 3% per month, to enable credit unions to become more sustainable over the long term. As my hon. Friend said, we have committed £38 million to the credit union expansion project, with the clear aim of helping credit unions to modernise, be sustainable and expand to meet demand.

Similarly, community development finance institutions provide finance to under-served markets and are another important tool in reaching out to the financially excluded. In 2012 the Government created a £60 million fund for CDFIs to lend to businesses from deprived areas and disadvantaged groups, and in February they commissioned a report exploring how the CDFI sector can operate more sustainably. That will provide more evidence about the sector and, building on that, we hope that CDFIs will be able to help even more viable smaller businesses and consumers to gain access to the finance they desperately need.

As has been mentioned, the Government have also taken steps to tackle those who prey on the financially excluded and make the problem worse. I know that in some circumstances short-term loans provide a needed service to people who need money quickly; but customers must be protected from poor or even predatory practice in those markets, which is why we have fundamentally reformed the regulation of consumer credit to deliver a market that helps with customers’ needs. Last year, we transferred responsibility for regulating consumer credit from the Office of Fair Trading to the Financial Conduct Authority. The FCA has introduced tough new rules in both the payday and debt management sectors to improve consumer protection, and has far greater powers than the OFT did to punish breaches of those rules.

The hon. Member for Chippenham (Duncan Hames) and my hon. Friend the Member for Ruislip, Northwood and Pinner asked about whether greater consideration should be given to individuals’ debt repayments. I can inform them that the FCA requires those collecting consumer credit debts to leave a subsistence balance in a consumer’s bank account to enable them to continue to pay for essentials, including food, energy and rent. I consider that essential and have recently written to the FCA on that very point. In addition, we have passed legislation that places a duty on the FCA to cap the total cost of payday loans. That came into force on 2 January.

My hon. Friend is right to talk of the massive contribution that financial innovation can make, particularly for those who are financially vulnerable. Ideas such as mobile payments, which mean that instead of hanging on for ages with a customer service unit, waiting for an answer, people can simply ping cash using a mobile number, are important for all of us, but particularly for the financially vulnerable. Being able to make remittances at the press of a button is incredibly valuable for people with family overseas; and many other innovations in the FinTech sphere will help financially vulnerable people. The present Government have done more than any other to support financial innovation. I am sure that my hon. Friend will want to hear what more we are doing, at the Budget tomorrow; he will be delighted.

The second part of financial inclusion is empowering consumers so that they have a better understanding of financial services and what is available to them, so I want to talk about financial education—how we help people to make the best of financial tools and ensure that future generations will be financially literate. By establishing the Money Advice Service in 2011 we have ensured that consumers have access to free money advice. There is always somewhere for vulnerable consumers to turn. We have also committed to supporting new pensions freedoms through free and impartial guidance from Pension Wise, to help people make informed and confident decisions about how they use their pension savings in retirement.

Not only can education initiatives help to solve a problem now; they can help to prevent future problems. In September 2014, we made financial literacy a compulsory part of the national curriculum. As part of the citizenship course for 11 to 16-year-olds, pupils will learn about the importance of budgeting, sound management of money, and credit and debt, as well as understanding different financial services and products. For younger children, the Government are working with the Archbishop of Canterbury’s credit union taskforce, to fund a project called LifeSavers, which will go into primary schools and teach young people good financial habits. It will also introduce them to credit unions, which, as hon. Members will know, have a clear steer to help with saving as well as borrowing.

I am sure that my hon. Friend will appreciate that financial inclusion is a complex issue. I absolutely assure him that I will ensure that the Government put the consumer at the heart of financial policy and that we are looking to create a financial sector that is truly inclusive for the next generation. I am personally committed to that agenda, and assure my hon. Friend and the hon. Member for Chippenham that, given the opportunity, we will put financial inclusion at the heart of the next Government’s agenda. Once again, I thank my hon. Friend for raising these important issues in what has been an excellent debate.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 10th March 2015 Commons Chamber

[Jessica Morden (Newport East) (Lab)]

2. What proportion of recipients of tax credits are in employment.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

In total, 4.5 million households are in receipt of tax credits, and 71% of them are in employment. The Government believe it is right to provide additional support to those in need through the benefits system, but we have been clear throughout that we want to ensure that people are better off in work than on benefits.

[Jessica Morden]

Will the Minister confirm that the Government’s real-terms cuts to tax credits will not only hit more people in work but hit far more women than men?

[Andrea Leadsom]

I am sure the hon. Lady shares my delight at the great news that the gender pay gap is lower than it has ever been, that there are more women in work than ever before and that 1.85 million people are in work who were not in work at the time of the last general election. That is cause for celebration. The Government have strived at every point to support women into work, whether through entrepreneurial allowances, support for women with child care or other measures.

[John Howell (Henley) (Con)]

19. Is my hon. Friend aware of the Institute for Fiscal Studies report on living standards showing that living standards are back to where they were before Labour’s great recession? Does this not help the very people she has mentioned?

[Andrea Leadsom]

Yes, my hon. Friend is exactly right. The IFS report also showed that 200,000 fewer people were in relative poverty in 2014-15 compared with 2009-10, including 100,000 children, and that since 2010 the number of children under 16 in workless households had fallen by about 390,000, taking it to the lowest level since records began. That is very good news.

[Ian Lavery (Wansbeck) (Lab)]

25. The average wage in my constituency is £450, which is £71 per week less than the national average. How can the Minister defend real-terms cuts to tax credits for these hard-working people, particularly the women, in my constituency?

[Andrea Leadsom]

The hon. Gentleman will surely be delighted at the news from the IFS and other forecasters that real wages are now rising at a higher rate than inflation, and it is thanks to our long-term economic plan that inflation is so low. We have had council tax cuts and fuel duty freezes, and we have done everything we can by raising personal tax-free allowances to enable people to benefit from a recovering economy, but we can only do it by sticking to a long-term economic plan.

[Sir Tony Baldry (Banbury) (Con)]

Am I right in thinking that universal credit will replace working tax credits and child tax credits, making 3 million households better off by an average of £177 per month and improving work incentives by allowing people to keep more of their income as they move into work?

[Andrea Leadsom]

Yes, my right hon. Friend is exactly right. Universal credit is a major reform that will transform the welfare state in Britain for the better. It will replace the current complex system of means-tested working-age benefits, including tax credits, and make 3 million households better off by on average £177 a month.

[Jack Lopresti (Filton and Bradley Stoke) (Con)]

3. What steps he is taking to invest in infrastructure.

--- Later in debate ---

[Mary Macleod (Brentford and Isleworth) (Con)]

11. What fiscal steps he has taken to support businesses.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

The Government champion business. We have cut the main rate of corporation tax to 21%, the lowest in the G7, we have allocated more than £460 billion for infrastructure projects, and we have committed to unlock up to £10 billion of business finance through the British Business Bank by 2017-18.

[Mary Macleod]

Businesses in Chiswick, Brentford, Isleworth, Osterley and Hounslow have been hugely helped by the Government through lower business rates, reduced tax, better infrastructure and two new free schools, which were announced yesterday, to help build the skills for the future. Does my hon. Friend agree that only a Conservative Government with a long-term economic plan can help make Britain the most attractive place in the world to start and grow a business?

[Andrea Leadsom]

I completely agree with my hon. Friend. She is right that we want Britain to be the best place to start and grow a business. I am delighted for her that she has 9,600 new start-ups in her constituency, which she has fought for diligently throughout this Parliament, and that, as a result of this success, unemployment is down 38% in her constituency since 2010. I was particularly delighted to pay a visit with her to one of them, My Plumber Ltd, and to meet the wonderful Ollie, who was the apprentice there in charge.

[Kevin Brennan (Cardiff West) (Lab)]

One fiscal measure that affects business a great deal is the rate of VAT, and every Conservative Government put up VAT. In 1979, they put it up from 8% to 15%; in 1991, up to 17.5%; in 1994, on fuel and power; and in 2010, VAT was raised again to 20%. So we know what they will do, but let us give them one more chance. Will the hon. Lady rule out putting up VAT if in power after May?

[Andrea Leadsom]

It is extraordinary. I wonder if the hon. Gentleman would like to admit that every Labour Government when they leave office leave unemployment higher than when they came in. That is the truth of the matter. The Government are sorting out the mess left by the Labour Government, which was the worst financial crisis in British peacetime.

[Angie Bray (Ealing Central and Acton) (Con)]

18. Does my hon. Friend agree that, thanks to our long-term economic plan, the Government have supported businesses through cutting businesses taxes? Does she further agree that the real difference between the Government and the Labour party’s approach is that while we have been cutting taxes on businesses, it wants to put them up?

[Andrea Leadsom]

Yes, my hon. Friend is exactly right. There is the risk under Labour of a return to an anti-business system that has already been recognised by people who are themselves trying to run businesses in the UK that are contributing to our economy. She has been assiduous in her constituency in supporting business. She has more than 8,000 new start-ups, and I was delighted to visit Clare and to meet the Ealing Mums in Business, who are doing everything that they can to build successful businesses from small beginnings, to talk to them about access to finance.

[Dr William McCrea (South Antrim) (DUP)]

One of the steps designed to assist businesses in Northern Ireland is the devolution of corporation tax. In light of the reneging of Sinn Fein on the introduction of welfare reform, what implications does the Minister see in the devolution of corporation tax in Northern Ireland?

[Andrea Leadsom]

As I think the hon. Gentleman will know, we will agree to devolution for Northern Ireland if it is sustainable, and if it is felt by all sides to be a sustainable proposition.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

12. What assessment he has made of recent trends in the level of youth employment.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

This Government have taken decisive action to boost youth employment. We have been a Government who are very much on the side of young people, and the results are clear: youth employment is increasing, up by 110,000 over the past year, and the number of young people claiming jobseeker’s allowance is at its lowest level since the 1970s.

[Mr Stuart]

Youth unemployment in my constituency is down by 53% since 2010. In the city of Hull, it is down by 54%. Does my hon. Friend recognise the opportunity that has been created by the growth in apprenticeships under this Government? Does she agree with the Education Committee that it would be “a mistake” for level 2 apprenticeships to be abolished for young people, as the Labour party proposes? Does she agree, on this occasion, with the TUC, which says it would be “a grave injustice”, or with the Association of Employment and Learning Providers, which says that, on apprenticeships, Labour has “got it all wrong”?

[Andrea Leadsom]

My hon. Friend is right. Under this Government we have seen over 2 million new apprenticeships, and level 2 apprenticeships are absolutely vital in giving young people a chance. Young people have shared in the success of our long-term economic plan, with the UK now having the fourth highest youth employment rate in the EU and the second highest in the G7. Very importantly, young people’s wages are also on the rise, with the latest data showing that the earnings of 18 to 21-year-olds who work full time have increased by 6% over the past three years.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

Yesterday I had an exchange with the Minister for Employment in which I made it abundantly clear that youth unemployment in my constituency continues to rise. She has said that the recent rise in youth unemployment is just “a tiny blip”. Does this Minister agree with that?

[Andrea Leadsom]

The hon. Gentleman should surely be delighted that since 2010 youth unemployment in his constituency is down by 47%, so I cannot agree with him, and that since 2010 unemployment is down by 34%. In the past 12 months, long-term unemployment is down by 38%. Surely he should be celebrating those numbers.

[Sir Edward Leigh (Gainsborough) (Con)]

13. What his policy is on the future of tax allowances related to marriage.

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[Alistair Burt (North East Bedfordshire) (Con)]

T6. Is my hon. Friend the Economic Secretary aware that in my rural constituency, businesses regard the words “long-term economic plan” with the same degree of comfort and familiarity as evensong in an Anglican church? Will she be good enough to give an assurance that, following the election, those words and the benefits that they bring will continue, not least through the expansion of broadband which is so important for rural business?

[The Economic Secretary to the Treasury (Andrea Leadsom)]

It sounds as though evensong in my right hon. Friend’s constituency is a fabulous occurrence, and hopefully not just on a Sunday. He is right to point out that this Government have sought to ensure that the benefits of the economic plan are felt right across the country and that the growth is balanced, with all three major sectors—services, construction and manufacturing —growing by 2.5% or more for the first time since records began in 1990.

--- Later in debate ---

[John Glen (Salisbury) (Con)]

When considering the allocation of LIBOR fines, will Treasury Ministers consider carefully the submission of Alabaré Christian Care in my constituency? It is seeking to construct a new veterans village in Wilton that will be transformational for veterans across Wiltshire.

[Andrea Leadsom]

I am grateful to my hon. Friend for that question. As he will know, the LIBOR fines imposed on banks for the appalling rigging of LIBOR are being used for mainly military charities, and a few other ideas have been put forward. I shall bear his remarks in mind and mention them to the Chancellor.

[John Cryer (Leyton and Wanstead) (Lab)]

Further to Question 8, what measures is the Chief Secretary taking to tackle the activities of payroll and umbrella companies that promote bogus self-employment which in turn fuels widespread tax evasion?

Mutuals’ Deferred Shares Bill [Lords]

Andrea Leadsom Excerpts

Friday 6th March 2015 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I think that, on this fine morning, I too should declare an interest, although there is no requirement for me to do so. I am a Labour and Co-operative Member, and have received support from the Co-operative party. More generally, the House is aware of my historical support for the mutual sector. Unlike other Members, I come to the Bill at a late stage in its progress, and I commend, in particular, the hon. Member for Cardiff North (Jonathan Evans) and Lord Naseby for their diligence.

As the hon. Member for Cardiff North explained, after the global banking crisis had swept across the world like a tsunami and the tide had eventually ebbed, one of the critical risks that were revealed was the issue of the ability of organisations—in this instance, mutual insurers and friendly societies—to withstand, and have the capacity to absorb, difficult circumstances that might make a call on their capital. So the need to resolve this has been a priority for these institutions, although I feel that regulators and others have perhaps not put this as high up the agenda as it should have been, hence the point made by the hon. Member for Cardiff North about the building society sector getting its house in order in terms of the core capital deferred shares, but now we also require a similar set of instruments for the insurance sector.

It is important to put on the record the work done not just by the Building Societies Association but the Association of Financial Mutuals and many others who have helped create a potential solution here. It is not absolutely necessary for the sector, which is able to cope with the new regulatory requirements, but it would certainly make it easier and provide much more of a level playing field, given the ability of the PLC shareholder sector to obtain capital in a far simpler way.

I also want to commend the right hon. Member for Banbury (Sir Tony Baldry) for at least taking the opportunity to put the spotlight on clause 2 and the question about the number of votes. Having listened to his comments, however, I would not want to see that part of the Bill taken out. The hon. Member for Cardiff North was very persuasive in pointing out that the particular character of mutual insurers and friendly societies is that their members together have control and ownership of the organisation, and history shows, through demutualisation efforts in the past, that we need to safeguard the ownership and the integrity of those organisations in this way. Therefore, I am persuaded that the single vote, regardless of the amount of the investment, through the deferred shares is the right way to proceed.

This is a sensible set of measures. It is important that we have them on the statute book. However, we are at a late stage in this Parliament and I ask the Minister to clarify the Government’s intentions for bringing forward the regulations and making sure we can get these changes through, because this is a piece of primary legislation that then enables regulations to be made by affirmative order, hopefully in quick succession. I therefore ask the Minister to give us a sense of the time scale for when that may happen, because, with the level of scrutiny we have had on this, there is quite a lot of consensus on the matter and we need to ensure that the financial services and insurance sectors have this diversity. The gradual disappearance of mutuals in this area will be to the detriment not just of the sector and competition, but consumers as well. Therefore, we have to modernise and sustain the mutual sector. The Bill provides worthwhile provisions for doing that and has the support of the Opposition.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I would like to put on record my great pleasure at the extent of cross-party consensus on the importance of this Bill to support the mutuals sector. I thank my right hon. Friend and constituency neighbour the Member for Banbury (Sir Tony Baldry), who raised some important points. I hope he will be persuaded to withdraw his amendments, as there are clear reasons for doing so.

One of the Government objectives for the Bill is to preserve the mutual status of firms in the sector. Government amendments give firms the option to provide membership rights to deferred shareholders, if they so wish. However, if deferred shareholders do become members of the firm, they will not be entitled to additional voting rights, regardless of the value of their deferred shareholding. This clause serves to protect the principle of mutuality. My hon. Friend the Member for Cardiff North (Jonathan Evans) set out very clearly why that is vital to ensure the success of this sector, which the Government have been so keen to support.

The proposals in the Bill have been carefully drafted to provide mutual organisations with a means to raise external capital in a way that preserves the mutual status of firms. This is no easy task, and the merits of attracting external capital into the mutual sector have been debated at length by mutuals, and some mutual organisations have taken steps to reform and issue mutual capital instruments. For example, in recent years building societies have commonly issued permanent interest-bearing shares that pay the holder a fixed rate of interest. The shares cannot be sold back to the society, although they can be bought and sold on the stock exchange, which means that the price can vary. Changes in banking regulation mean that those instruments will no longer be classed as core tier 1 capital, so the building society sector has designed a replacement mutual capital instrument, known as core capital deferred shares, which will enjoy the same tax treatment as ordinary shares.

--- Later in debate ---

[Andrea Leadsom]

I congratulate my hon. Friend the Member for Cardiff North (Jonathan Evans) on his speech, and on all his work in this area. I have certainly enjoyed working with him during his last few months in the House. He is well known as a strong supporter of the mutual movement, and has spent many years as the chairman of the all-party parliamentary group for mutuals, promoting the sector.

I thank my hon. Friend for piloting this Bill on an important and valuable issue, and for securing a prompt date for Third Reading. The Bill started in the other House, where it also had cross-party support. I congratulate my noble Friend Lord Naseby on his work to promote the merits of the Bill. The Government support the key aim of the Bill, which is to provide friendly societies and mutual insurers with the means of raising external capital in a way that does not impinge on their mutual status. I am grateful to my right hon. Friend the Member for Banbury (Sir Tony Baldry) for withdrawing his amendments, and would like to record my personal gratitude to him, as my constituency neighbour, and wish him a happy retirement from this place.

Access to capital and credit is the lifeblood of any company. It poses a specific issue for mutuals, as they are designed to serve their members, and were not designed with capital investors in mind. Unlike other firms, mutuals cannot issue shares, which deprives them of access to the equity markets. This means that, in broad terms, mutuals access their regulatory capital from retained earnings and by issuing subordinated debt. This long-term approach is often seen as a strength of the sector, but mutuals have long made the case that the restrictions on accessing external capital can act as a brake on their ability to adapt and respond to new market conditions. The sector has also argued that it limits firms’ ability to secure maximum investment, to develop new and innovative products, and to grow through acquisition.

The Bill has been carefully drafted to enable friendly societies and mutual insurers to access external capital in a way that does not impact on their mutual status. This enabling Bill would allow friendly societies and mutual insurers to issue a new class of deferred share. The Bill has two substantive clauses. Clause 1 allows Her Majesty’s Treasury to make regulations that would permit friendly societies and mutual insurers to issue new deferred shares. The Treasury will work with the regulators and all interested parties to determine the details and the process for issuing the deferred shares, and to ensure that these instruments are marketed to the appropriate investors.

My answer to the hon. Member for Nottingham East (Chris Leslie)—I apologise for not having an answer for him earlier—is that we will consult the Prudential Regulation Authority and regulators as soon as possible after Royal Assent to ensure that the procedures are right. We will progress with this as soon as the legislative timetable permits.

Clause 1 also sets out the key features of deferred shares, and explains that prior consent of the appropriate authority—either the Prudential Regulation Authority or the Financial Conduct Authority—must be obtained before a friendly society or mutual insurer can issue deferred shares. Clause 2 sets out the conditions that will preserve the mutual status of firms that wish to issue deferred shares. Mutuals will be able to provide membership rights to deferred shareholders, but no friendly society or mutual insurer will grant more than one vote per deferred shareholder, and no deferred shareholder will receive more votes than an ordinary member by virtue of being a deferred shareholder. That will respect and preserve the “one member, one vote” principle of mutual organisations. In addition, the regulations enabled by the Bill will restrict the voting rights of certain members who hold deferred shares, so that they cannot vote in any decisions to transfer, merge or dissolve the mutual. That serves further to protect mutuality. Clause 3 sets out the definitions of terms used in the Bill, and clause 4 contains the title of the Bill, and confirms that the Bill extends to the whole United Kingdom and will come into force when the Treasury makes the regulations provided for in clause 1. The Government can confirm that the Bill raises no human rights issues.

The Government fully support the Bill, which is of course consistent with the commitment in the coalition’s programme to promoting mutuals and fostering diversity in financial services. This short Bill could provide a huge opportunity for the mutual sector. I hope that all Members will be able to support it.

Question put and agreed to.

Bill accordingly read the Third time and passed, without amendment.

Future Government Spending

Andrea Leadsom Excerpts

Wednesday 4th March 2015 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

How dare Opposition Members indulge in the sort of scaremongering that we have heard this afternoon! I am sure that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) would like to celebrate the fact that youth unemployment in her constituency has gone down by 43% since 2010 and that overall, unemployment has gone down by 31% over the same period.

[Cathy Jamieson]

rose—

[Andrea Leadsom]

I will not give way to the hon. Lady as she did not give way to my hon. Friends.

Furthermore, does the hon. Lady agree that Labour’s motion today is false? She said that the cuts we have made take us back to the 1930s. In fact, the Office for Budget Responsibility has said that

“by 2019-20, day-to-day spending on public services would be at its lowest level since 2002-03 in real terms.”

And that was when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) was in the Government. Does she want to celebrate any of those points with me?

[Cathy Jamieson]

I thank the Minister for eventually giving way. Although I celebrate young people and the long-term unemployed finding work in my constituency, I hope that she will recognise that for many of them, it is zero-hours contracts, low-paid work, and jobs that are not in their chosen careers. They want more from a future Labour Government and they will get it.

[Andrea Leadsom]

I am sure that there is no need for me to give way to the hon. Lady again so that she can congratulate us on the fact that, on average, 75% of those new jobs are full-time employment. There are some other facts that Opposition Members might like to celebrate. I am talking about the fact that the UK was the fastest growing major economy in 2014; that more than 760,000 private sector businesses have been created over the past four years; and that employment is up by 1.85 million since the last general election—that is 1.85 million more people with the security of bringing home a regular pay packet. She might like to celebrate the fact that wages are rising significantly faster than inflation, and that total pay was up 2.1% in the three months to 2014.

The hon. Lady might like to hear the views of international commentators. Mark Carney, the Governor of the Bank of England, said:

“The sweet spot you want is low, stable predictable inflation. You’re going to get that”—

in 2015. Is the hon. Lady interested in the view of President Obama? He said:

“I would note that Great Britain and the United States are two economies that are standing out at a time when a lot of other countries are having problems. So we must be doing something right.”

Perhaps she would like to hear the views of Christine Lagarde who runs the IMF. She says:

“A few countries, only a few, are driving growth.”

The hon. Lady needs to listen to this. Christine Lagarde is talking about America and the UK. She goes on to say:

“And the UK, where clearly growth is improving, the deficit has been reduced, and where the unemployment is going down…Certainly from a global perspective this is exactly the sort of result that we would like to see.”

There is a word of warning from the OECD. It says:

“Well done so far, Chancellor. But finish the job. Britain has a long term economic plan, but it needs to stick with it.”

That is vital and it is what we intend to do.

Let me turn now to some of the very interesting comments made by colleagues across the House. In particular, my hon. Friend the Member for Braintree (Mr Newmark) gave an excellent talk about the reality of our determination to sort out Labour’s mess. My hon. Friend the Member for Morecambe and Lunesdale (David Morris) told us why the Government have been so good for his constituency and my hon. Friend the Member for Wolverhampton South West (Paul Uppal) spoke about the importance of competition for economic growth. It is absolutely vital.

My hon. Friend the Member for Peterborough (Mr Jackson) contrasted Labour now with Labour in 1997, when the party at least had a vision. He also talked about Labour’s spiteful prejudice against success, and that is right, Mr Deputy Speaker. My hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) pointed out the vital need to invest in infrastructure in his constituency and his fears that Labour would prioritise Scottish over English interests. My hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) pointed out the nonsense of Labour’s motion and the need to ensure that we in this generation do not leave our debts to our children and our grandchildren.

Let me point out to Opposition Members what the IFS recently said about Labour: higher Government borrowing acts to support household incomes in the short run, but the resulting higher levels of Government debt mean that a greater proportion of public spending must be allocated to financing debt interest payments in the long run and potentially leave the UK more vulnerable to large negative shocks in future. Simply borrowing more is just not an option.

The hon. Members for Corby (Andy Sawford) and for Preston (Mark Hendrick) both accused this Government of having done nothing for the NHS, but perhaps they would like to celebrate with me the fact that the health budget has increased in real terms every year during this Parliament, that total health spending has increased by £12.7 billion during this Parliament and that on top of that in the autumn statement the Chancellor announced an additional £2 billion for front-line NHS services in England in 2015-16. The vital point about the NHS is that we cannot have a strong NHS without a strong economy.

Since today we have had a very interesting living standards report from the IFS, I want to give hon. Members some other things to celebrate. The IFS has assessed that average household incomes are now restored to around pre-crisis levels. That is something to celebrate. Wages are up 4.1% in real terms for those in continuous employment. That is fantastic. Inflation is at 0.3%, helping family budgets to stretch further. Let us look at inequality, which is lower than when this Government came to power with, as the IFS has said, pensioner poverty at near record low levels. That is vital in our economy. This Government support fairness and have also ensured, as the IFS has today confirmed, that the richest households have paid the most, with

“larger proportional falls in income for higher-income households.”

That is absolutely vital. Inequality has fallen and the biggest burden has been borne by those with the broadest shoulders.

It is vital that members of the public who have to choose very soon who they want to run the Government for the next five years know that they have the choice between a Government who have been determined to ensure fairness and an Opposition who are completely incoherent and whose lack of facts and plans lead them simply to resort to scaremongering in the hope they can persuade people to accept a non-coherent plan from their Front-Benchers. This Government believe in a fairer society and a fairer society is created by helping the weak get stronger, not by making the strong weaker. We can only have a fair society on the back of a healthy, well-functioning economy and we can only have a healthy, well-functioning economy on the back of sustainable public finances.

The Government’s long-term economic plan is making public finances sustainable for the first time in a great many years. It is delivering economic growth and as the IFS confirmed today it is raising the standards of living across the country. That is vital. We are finally on the right track and now would be the worst time to change direction. Let us keep going, let us finish the job and let us give the people of this country the fair, strong, healthy and vibrant economy that they deserve.

Question put.

Financial Services Industry

Andrea Leadsom Excerpts

Wednesday 4th March 2015 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

indicated assent.

[Mr Speaker]

The Minister is an accommodating Minister, and therefore a suitable expression of gratitude I know will be forthcoming from the hon. Member for Rochester and Strood, Mr Mark Reckless.

--- Later in debate ---

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I congratulate the hon. Member for Clacton (Douglas Carswell) on securing this debate. I agree with him and the hon. Member for Rochester and Strood (Mark Reckless) that competition and choice are the bedrocks of a free market economy—something that the Government have sought to promote at every opportunity, and nowhere more so than in the financial services sector. Increasing competition means customers have more choice about how they bank and who they bank with, and it means that banks have to work harder to provide the best possible products and services.

More competition will also help to ensure that the industry evolves in a way that meets customers’ wants and needs—and, indeed, predicts them—and supports and harnesses innovation in financial services. It drives home the point that banks work for their customers, and not the other way round. Perhaps if that point had been driven home a little more often in the past, we would not have had some of the mis-selling scandals that have plagued the industry over the past decade. I agree that competition is a key factor in improving behaviour and tackling wrong-doing.

Choice and competition are important across the spectrum of financial services, be it banking, insurance or asset management, and the Government have placed competition and choice at the heart of all our policies relating to financial services, but I want to focus today on competition in personal current accounts and SME banking. The hon. Members will be aware of the Competition and Markets Authority’s investigation into competition in these markets and that the Government wholeheartedly welcome this investigation. We set up the CMA precisely to take action to improve competition where required.

I want to take this opportunity to make clear the Government’s commitment to increasing competition in the market for personal current accounts and SME banking, as in all areas of financial services. We must never again get into a situation where the banks do not seem to be accountable to the people they exist to serve. When we entered office in 2010, at the height of the financial crisis, we inherited a banking system that was broken. It all too easily let the big high street banks consolidate their stranglehold on the market and was far too relaxed about taxpayers picking up the bill when those same banks needed bailing out. There was not enough diversity and innovation, and there was certainly not enough competition. Ultimately, the customer, the taxpayer, lost out.

By making it a key part of the Government’s long-term economic plan to drive far more competition in banking, we have sought to rebuild the UK banking sector and to ensure that customers get a better deal. I have often used a phrase I coined myself—that competition should trump regulation. I genuinely mean that in the sense that regulation can go so far in ensuring that banks that were previously too big to fail are less likely to fail in future, but the real disinfectant is competition. That is what keeps banks honest, keeps them on their toes, keeps them lying awake at night wondering what is happening to their customers.

So what have this Government done? First and very importantly, we have sought to empower customers, shifting the balance of power away from the bank and towards the customer. By driving the delivery of the seven-day switching service, we have made it easier for customers and businesses to switch banks quickly and reliably. That means that they are more able to hold their banks to account and, if necessary, to vote with their feet.

The hon. Member for Clacton asked what switching levels should be. At the moment, it is still true to say that one is more likely to divorce twice than to change one’s bank account, which is an extraordinary fact. I have done neither—neither divorced nor moved my bank account, so I suppose I am a statistic waiting to happen—and, hopefully, I will move my bank account! Switching levels should clearly be significantly higher than that. I hope that will happen through the measures we are taking, and there is already evidence that switching levels have increased.

Very excitingly from April this year—both UKIP Members will be delighted to hear this—the Government’s “midata initiative” will enable customers to review how they use their personal current accounts, and they will receive for the first time a detailed comparison of which bank is best for them. They will be able to download a year’s worth of transactions, upload to a comparison website and see which bank would have been better to use, bearing the transaction flow in mind. It is vital to be able to differentiate between one bank and another bank.

As the hon. Member for Clacton said, I have taken a keen personal interest in an idea that could bring even greater benefit to customers by going further and introducing full account number portability. This is a potential game-changer, and I continue to explore the benefits it could bring and the different ways it could be implemented.

As the House will be aware, I wrote to the chief executives of the Financial Conduct Authority and the Payment Systems Regulator to ask them to consider these issues as part of their review into the effectiveness of the seven-day current account switch service. I look forward to hearing the outcomes of their review in the very near future—within the next week or so—and the PSR will no doubt be keen to take these conclusions on as part of its work on strategy setting in the payments industry, once it formally opens for business on 1 April.

This Government have introduced legislation to enable banks and building societies to introduce “cheque imaging”, which will speed up cheque clearing times in the UK. Again, that is customer-focused and customer-friendly action, so that people will in future be able to photograph a cheque and send it to the bank using a smartphone rather than having to take it into a branch. We saw the introduction in 2014 of mobile payment applications such as Paym, which allows customers to transfer money quickly, easily and securely, using only their mobile phone number as identification. That is the first thing—putting the customer at the heart of innovation.

Secondly and very importantly, we have strengthened the regulatory regime and put competition at its heart. We have created two new stronger regulators—the Financial Conduct Authority and the Prudential Regulatory Authority—each with statutory objectives to promote greater competition; and we have legislated for the new Payment Systems Regulator to make sure that payment systems will operate in future in the best interests of customers and on fair terms for new challenger banks.

Thirdly, we have made it easier for new players to enter the market and compete with incumbents. That means not just challenger banks, but alternative finance providers. We have pressed the regulators to make it quicker and less expensive for potential new banks to get authorised. About 20 banks are currently going through the new mobilisation process, and several of them hope to enter the banking market within a year. That is big news.

As the hon. Gentleman pointed out, Metro bank's full banking licence, which was granted in 2010, was the first to be granted in the United Kingdom for more than 100 years. That is extraordinary, but under the present Government five brand-new banking licences have already been granted, and there will be many more. We are seeing old and new brand names, such as TSB, Virgin, Metro and Aldermore, and Atom is on the way. Each of those banks has a different customer offering, which is very important for competition purposes. As the hon. Gentleman suggested, there may be others—not just traditional banks as we know them, but the likes of Google, Apple and other tech firms.

We have supported and promoted the expansion of the credit union movement, and have helped mutuals to raise new capital for their own expansions. We have supported the growth of peer-to-peer lending by allowing such loans to be included in individual savings accounts, and by channelling investment from the British Business Bank towards peer-to-peer lending. Those are small but important and fast-growing markets. We have supported equity crowdfunding by, for example, offering tax incentives to investors who take the risk of investing in smaller companies through the enterprise investment scheme. We are legislating to open up access to credit data to challenger banks, and requiring the big banks to pass on the details of small and medium-sized enterprises whose loan applications they reject to alternative, willing finance providers. That will help to level the playing field between established banks and alternative providers, and will make it easier for SMEs to secure finance.

We have also have done something on which neither the hon. Member for Clacton nor the hon. Member for Rochester and Strood focused particularly, but which is very important. We have opened the door to innovation in banking and financial services to help to make the UK the global centre for FinTech, which is a vital and fast-growing part of the financial services sector. We are already seeing the start of a sea change in the way in which people access and manage their money. It is now possible to send money overseas at the touch of a button, and much more cheaply than before. It is possible to lend directly to small businesses in the local community online, and it will be possible to clear a cheque by sending an online image to the bank.

However, that is just the start. The Blackett review, which was set up by the Government, will look into where FinTech will lead us over the next decade, and how the United Kingdom can reap the maximum rewards. We have already started to position ourselves. In August last year, the Chancellor announced an additional £100 million of British Business Bank funding to support FinTech and a major programme of work on digital currencies. And we have now concluded a call for evidence on how to deliver an open standard for application programming interfaces in UK banking. That will enable FinTech firms, challenger banks and alternative finance providers to use bank data, on behalf of customers, in a variety of helpful and innovative ways.

The hon. Member for Clacton raised the question of whether European Union rules helped or hindered effective competition. The one thing that I can say specifically is that the capital markets union initiative stands to benefit United Kingdom financial services enormously by opening new markets and making access to finance for small businesses in our economy far easier. We are engaging with that initiative within the EU as hard and as fast as we can in order to guarantee real benefits throughout the EU, but particularly for British businesses and British competition.

The Government have done much to increase competition, but there is more to be done. I shall read the Blackett review of FinTech and await the outcome of the investigation by the Competition and Markets Authority with great interest.

I thank the hon. Member for Clacton again for securing this important debate. I hope that it has given him some confidence that the Government are doing all that they can to facilitate better competition and choice in financial services.

Question put and agreed to.

Bank Closure (Stone)

Andrea Leadsom Excerpts

Tuesday 3rd March 2015 Westminster Hall

[The Economic Secretary to the Treasury (Andrea Leadsom)]

It is a great to serve under your chairmanship today, Mrs Main. I congratulate my hon. Friend the Member for Stone (Sir William Cash) on securing this debate and on presenting his case as compellingly as he always does. He has made good points to which I am extremely sympathetic. I well understand—I have my own constituency cases on the issue—how people feel when a bank in their area is to be closed. Bank branches are often felt to be at the heart of a local community. I appreciate that, as he said, the people of Eccleshall have produced a petition with close to 800 signatures expressing their concern at the loss of their bank branch. Each of those people, and those in the neighbouring communities in Blythe Bridge, Cheadle and Stone who are losing a branch of the Co-operative bank, will feel, quite rightly, that their town is losing a little piece of its identity.

Eccleshall has had a NatWest branch since 1970, and has had a bank branch operating since the 1870s on what I can well imagine is a well loved local site, so the situation must be unsettling for local people. I am deeply concerned about closures not just in my hon. Friend’s constituency but across the country. I therefore want to tell him a bit about what I and others in the Government have been doing to try to make sense of the situation and to protect the important local access to banking services that so many people need and want.

At the same time, my hon. Friend will appreciate that the way we bank is going through an unprecedented period of change. Customers are reducing their use of high street branches and embracing new online and mobile technology. Although we all recognise that decisions on where branches are located are commercial ones, I assure him that the Government can set the tone, stressing the importance of day-to-day banking services to everyone’s daily life. As Economic Secretary, I have made that a personal priority and have worked hard to make sure that the vital services that the banking industry provides remain as widely available as possible.

NatWest has set out its case that the number of transactions at its Eccleshall branch is low compared with the rest of its branch network, but I absolutely recognise the disappointment felt by customers more broadly in the local area at the news of the closure. People often feel that there is inadequate consultation with the community and local stakeholders who may be affected. NatWest has followed current best practice, giving customers a three-month notice period and contacting its most active and most vulnerable customers to help them find alternative ways to bank. However, if people are to feel that their concerns have been heard, and if local businesses are to feel that the services underpinning their livelihoods are safe, banks must go much further. That is why I have been working to encourage the industry to adopt a new protocol that each bank will undertake to follow so as to mitigate the impact of a local branch closure.

[Sir William Cash]

Did my hon. Friend hear the interview on this morning’s “Today” programme with the chief executive of Barclays bank, in which he talked about the amount of money he is earning and about bank bonuses, which are also under wider discussion? The chief executive and chairman of the Royal Bank of Scotland keep making statements about customer service—we have heard much the same sort of thing from the Co-op—but that does not help my constituents or anyone else in the country. They then find a little edge here or there with regard to the profitability of a particular branch. Does she agree that if banks want a reputation that is worth maintaining, it will involve making sure that people in communities such as Eccleshall have actual access to the kinds of services that the banks say they are offering in their annual reports and in the public arena—on radio and television?

[Andrea Leadsom]

I agree to a great extent with my hon. Friend. There is no doubt that banks are keen to restore their damaged reputations and that the big UK banks in particular are determined to show that they are there for their customers. I therefore agree with what he says about the need to make sure that they are addressing the needs of those customers and not looking only at commercial realities. Equally, however, I know he will agree that it is not for Government to intervene in private businesses to force them to retain completely unviable branches. We need instead to make sure that banks pay careful attention to the balance between commercial realities and the needs of local communities.

[Sir William Cash]

On Government activity, I seem to remember only a few years ago an extensive bail-out for RBS. There are also questions in relation to the Co-op. It seems to me that when banks want help—and by help, I mean monumental bail-outs—it comes from the Government and the taxpayer, yet when they say they are putting customer service first they close small but important branches in places such as Eccleshall, which needs its branch.

[Andrea Leadsom]

I am grateful to my hon. Friend for those further remarks. Again, I completely agree that banks have a long way to go to restore confidence that they mean what they say when they talk about customer service. However, again, he will understand if I do not say that a bank must open a branch in this place or that. Those decisions are commercial ones. The Government need to ensure that banks balance the needs of customers with commercial realities.

I mentioned that I have been urging and encouraging the industry to adopt a protocol that each bank would follow to mitigate the impact of a local branch closure. The protocol should not simply set out a series of steps for individual banks to take before they close a branch, but should raise the game of the industry as a whole, including how it listens to the concerns of its customers, and, crucially, how it responds. I am pleased to say that discussions on the protocol are at an advanced stage, and agreement is expected soon, thanks to the help of the trade body for banks, the British Bankers Association. We are hopeful that we will get something positive that will address some of the issues my hon. Friend raised.

My hon. Friend mentioned the availability of banking services through local post offices. I completely understand that for customers having a local post office is not the same as having a local bank branch. However, the services available through the Post Office offer most customers a real opportunity to continue to bank locally. We can and must do more to ensure that everybody understands and is comfortable with using the banking services available to them through their post office. For many customers, the Post Office can provide access to their bank account, including the ability to withdraw money, deposit cash and cheques and check their balance at all 11,700 of its branches throughout the UK—a huge network.

In some respects the Post Office can offer wider customer benefits. I know that a number of post offices, including in my constituency, have much longer opening hours than a typical high street bank and provide services seven days a week. Recently, I met the head of the post office network to talk about moves to improve the network, to provide more customer-facing space and more security, and to improve the range of financial services that it offers. The Post Office is working with its postmasters to ensure that facilities are upgraded and that appropriate security is put in place to enable customers to bank safely, and it is determined to do more to ensure that essential banking facilities remain available in as many communities as possible. The Government have committed almost £2 billion to protecting and modernising the post office network.

I believe that we can continue to improve the banking services that the Post Office offers and make them more consistent for customers, which is why I have encouraged the British Bankers Association and the Post Office to look at a standardised approach to counter banking services available through post offices. The Government expect a report on the progress of those talks in the near future.

My hon. Friend raised concerns about the future of banking beyond the traditional branch network, and about the services that will be accessible to all. It is vital that we ensure that vulnerable customers—particularly the elderly and those in rural constituencies—have suitable access. In Eccleshall, I believe that NatWest has made provision for a change to an existing mobile bank route, so a more traditional NatWest presence will still be available in the town.

A whole new world of banking is becoming available, and we should be excited about the opportunities that online and mobile technology can provide. The UK is positioning itself as a world leader in financial technology, and we can already see signs of the benefits that all the developments in financial technology can bring. For example, since April 2014, customers can securely transfer money instantly to other bank accounts using only their mobile phone number as identification, which means that they do not have to access a computer or travel to a branch to make a payment. From 31 July 2016, customers will be able to use their telephone to photograph cheques for payment into their bank account, making life easier for customers in remote areas. Several banks are taking action to help their customers use those new technologies with confidence.

We are also making progress on ATM provision. The number of free-to-use ATMs is at an all-time high, and 97% of withdrawals are now made free of charge. I understand that in Eccleshall NatWest will still provide an ATM in the local community. There are also two other free-to-use ATMs within 1 mile of the branch that is to close.

More generally, it is often the most isolated or disadvantaged communities that have the worst access to free-to-use ATMs, so the Government are working closely with the LINK network’s financial inclusion programme to subsidise free-to-use cash points in more than 1,400 remote and deprived areas across the UK. Importantly, members of the public can nominate their area for inclusion. I believe that the ATM network can play a more important role in addressing some of the concerns voiced by consumers whose local branch is closing.

On a trip to India last year as part of my job as Economic Secretary, I was impressed at the widespread use of smart ATMs, which have far greater functionality than those we tend to have in the UK. They allow customers not only to make withdrawals and deposits and check their balances, but to carry out a wider range of transactions, such as purchasing train tickets and bus passes. Progress in the UK could be made by simply ensuring that ATMs allowed customers to deposit cash. That facility would be particularly beneficial to local small and medium-sized enterprises if it were provided in a way that allowed depositors to feel safe and secure—for example, within the confines of a Post Office, a store or an e-lobby. I have raised that issue with the banking sector, and my officials are engaged with LINK to find a way forward.

In conclusion, although the Government recognise that individual branch closures are commercial decisions and must continue to be so, I fully understand the disappointment felt in Stone and other communities when local bank branches close. There is no doubt that customers’ usage of banking services is going through an unprecedented period of change, but it is vital that we ensure that vulnerable customers—particularly the elderly and those in rural constituencies—have suitable access.

I want to reassure my hon. Friend that it will continue to be my personal priority for the remaining weeks of this Parliament to ensure that the vital services that the banking industry provides remain as widely available as possible, wherever people live. I fully intend to make further progress on the initiatives to get banks to create a new protocol, to look at what services the Post Office provides, and to push further on using technology to provide solutions to businesses and customers in rural areas. Once again, I thank my hon. Friend for raising these important issues in this vital debate.

Question put and agreed to.

Banking Reform

Andrea Leadsom Excerpts

Tuesday 3rd March 2015 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

This Government have taken significant steps to reform the UK’s system of financial regulation.

In the Financial Services (Banking Reform) Act 2013 (“the Act”), we legislated to strengthen the accountability of bank senior management and to raise standards of individual conduct in the banking sector. I am now announcing the timetable for bringing the senior managers and certification regime (SM and CR) created by these reforms into operation. I am also announcing the Government’s plans for applying the SM and CR to foreign banks operating through branches in the UK.

The introduction of the SM and CR will be a major reform with significant implications for the firms concerned—banks, building societies, credit unions and investment firms regulated by the Prudential Regulation Authority (PRA) and for the individuals, particularly senior managers, who work in those firms. The Government have therefore decided, following discussions with the Financial Conduct Authority (FCA) and the PRA, that the SM and CR will come into operation on 7 March 2016. In order to facilitate an orderly transition from the existing approved persons regime, firms will be required to notify the regulators by 8 February 2016 of the approved persons who are to be senior managers under the SM and CR.

The Treasury will make the necessary commencement order (under section 148 of the Act) and a transitional provisions order (under section 146 of the Act) shortly.

The Government issued a consultation on whether to extend the SM and CR to UK branches of foreign institutions on 17 November 2014. The consultation closed on 30 January 2015 and the Government have been considering the responses received.

The Government have now decided to proceed with this measure. It will come into operation on the same date—7 March 2016—as the SM and CR applying to UK firms and foreign institutions will also have until 8 February 2016 to notify the regulators of the approved persons who are to be senior managers in their UK branches.

The Treasury must now make an order—subject to the affirmative procedure—under section 71A of the Financial Services and Markets Act 2000 to implement the measure. The Government intend to arrange the debates as early as possible in the next Parliament.

The PRA and FCA will shortly be consulting on additional SM and CR rules. These rules will help ensure that the SM and CR is applied in an appropriate and proportionate way to foreign institutions operating through branches in the UK.

The commencement order will also bring sections 36 to 38 of the Act into force from 7 March 2016. This means that the new criminal offence relating to decisions causing a financial institution to fail could apply to decisions taken by senior managers in UK banks, building societies and PRA-regulated investment firms—but not credit unions or any foreign institution—on or after that date.

[HCWS336]

Equitable Life

Andrea Leadsom Excerpts

Thursday 26th February 2015 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I add my congratulations to my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Members for Leeds North East (Fabian Hamilton) and for Eastbourne (Stephen Lloyd) on securing the debate. Their tireless work on this important issue is greatly appreciated by our constituents. Prior to my ministerial appointment, I was a member of the all-party group on Equitable Life policyholders and a number of my constituents have been badly affected, so I am deeply sympathetic to policyholders’ losses in this sorry tale. I shall explain what the Government have done to resolve the long-standing issue of Equitable Life and set the record straight on some of the history.

This situation has been a key priority for the Government. While Equitable remained solvent and continued to pay premiums to its members, its problems caused a great many of its policyholders to suffer significant emotional and financial distress. When we came to office, we made a commitment to implement the ombudsman’s recommendation that the Government should make fair and swift payments to Equitable Life policyholders in recognition of the part that the Government played in Equitable’s problems. Those payments were swift, in that within six months of taking office, we introduced the Bill that became the Equitable Life (Payments) Act 2010, and payments started to be made to policyholders in June 2011, which was within six months of Royal Assent. They were also fair because the scheme’s rules are based on the Government’s full acceptance of the parliamentary ombudsman’s findings of maladministration and, importantly, on the assumption that all policyholders would have decided to invest elsewhere had the maladministration regarding regulatory returns not occurred. Of course, that is a conservative assumption.

The ombudsman did not quantify the relative loss, which is the difference between the amount received by Equitable Life policyholders and what they would have received if they had invested in the same way in a similar company, but this Government assessed the total as £4.1 billion. That was significantly more than the final figure of £340 million that was arrived at under Sir John Chadwick’s methodology, which was based on the previous Government’s limited acceptance of the ombudsman’s findings. In the 2010 spending review, after taking account of the need to be fair to all taxpayers, we announced that up to £1.5 billion would be made available for payment to eligible policyholders.

[Mr Christopher Chope (Christchurch) (Con)]

Is my hon. Friend going to address the part of the motion that calls on the Government to pay full compensation in the next Parliament? The right hon. Member for East Ham (Stephen Timms) did not deal with that point, but our constituents want it to be addressed.

[Andrea Leadsom]

Yes, I am.

In line with representations received, out of that £1.5 billion, we covered the relative losses of the with-profits or trapped annuitants in full. Those annuitants were unable to move their funds elsewhere or to mitigate the impact of their losses by seeking employment. They were also generally the oldest policyholders. The remaining available funding, on the advice of the independent commission, was distributed pro rata to other policyholders, representing 22.4% of their relative loss. I know that that was deeply disappointing to many. These difficult decisions were taken in the light of the position of the public finances and in the interests of overall fairness to all taxpayers.

The motion notes that

“the Parliamentary Ombudsman recommended that policyholders should be put back in the position they would have been in had maladministration not occurred”.

However, the ombudsman went on to say that the impact on the public purse should also be taken into account when considering payment. She also stated that she was acutely conscious of the potential scale of what was recommended. She has subsequently written to the all-party group to say that the Government’s decisions on affordability and eligibility cannot be said to be incompatible with her report.

I congratulate all Members who contributed to the debate. It is clear that they have been assiduous in representing their constituents and have done an excellent job. My hon. Friend the Member for Southend West (Sir David Amess) talked about Ernst and Young as the auditors of Equitable, so he might be interested to note that in 2010, for its part in Equitable Life, it was fined £500,000, plus costs of £2.4 million, and received a reprimand by the accountants’ joint disciplinary scheme.

The hon. Member for Airdrie and Shotts (Pamela Nash) asked for a regional breakdown of amounts paid. No breakdown by region has yet been compiled, although we could produce a basic one if that would be particularly helpful. However, I assure her that regionality does not influence the scheme’s operation in any way.

My hon. Friend the Member for Harrow East, as well as the hon. Member for Coventry North West (Mr Robinson) and my hon. Friend the Member for Southend West, talked about the situation for the pre-1992 annuitants and the fact that they are elderly and financially vulnerable. The first regulatory return from Equitable Life that would have been different had there been no maladministration was that of 1991. This was available on request from Equitable Life from mid-1992 and could not, therefore, have been expected to influence investor decisions before late 1992. Therefore no relative loss was suffered by this group. However, as hon. Members have recognised, the Government agreed that this group of pre-1992 annuitants, although they are not affected by maladministration, have suffered significantly from a loss of income that they would have expected. For this reason the Government made an exceptional ex gratia payment of £5,000 to this group, with a further £5,000 to those on pension credit, in December 2013.

The hon. Member for Leeds North East and the right hon. Member for Knowsley (Mr Howarth) raised the question of compensation for the Icelandic bank savers in Icesave and why Equitable Life savers are being treated differently. The ex gratia payments to UK depositors in Icelandic banks were made as a result of a decision by the previous Government to guarantee all qualifying retail deposits specifically to protect the financial stability of the UK. The financial compensation scheme was simply the agent for these payments and we expect to recover all those sums from the Icelandic banks and are continuing to do so.

Specifically in the case of failed banks and why they receive compensation, the Financial Services Compensation Scheme is funded by a levy on financial services firms, so again those compensations do not come from the public purse.

In answer to the hon. Members for Moray (Angus Robertson) and for Airdrie and Shotts who asked when the scheme stops tracing people, all policyholders are either written to at their last known address or put through electronic tracing methods, such as looking them up against the electoral roll. Attempts are made through the Department for Work and Pensions to trace those owed more than £250. I should tell hon. Members that about 50% of the remaining policyholders are due less than £100.

My hon. Friend the Member for Poole (Mr Syms) asked whether we could re-allocate the remaining £500 million. That remaining £500 million is to make ongoing payments to annuitants for the duration of their annuity. Finally, the hon. Member for Stretford and Urmston (Kate Green) and my hon. Friends the Members for Bromley and Chislehurst (Robert Neill) and for Southend West asked what we had done to ensure that people were not put off the idea of saving for their retirement. As hon. Members know, the Government have undertaken a fundamental reform of the regulatory system, and put in place the Financial Services Act 2012 to establish a new system of specialised and focused financial services regulators. They abolished the FSA and set up new regulators within the Bank of England and the independent conduct of business regulator, the Financial Conduct Authority. These reforms are designed to ensure that the conduct of firms, and with it the interests of consumers and participants in our financial markets, are at the heart of the regulatory system and are given the priority that they deserve.

The recent news on the improvements that this economy has made since 2010 is to be welcomed and shows that this Government’s long-term economic plan is working, but we have a long way to go to restore the public finances, and the public purse remains very constrained. It is right that we have taken action on the Equitable issue, but we must balance this with the need to continue to address the difficult position of the public finances and the impact on fairness to all taxpayers. That is why this Government have no plans to change the funding available to the payment scheme. Our focus is rather to complete the small number of remaining payments. We have continued to make excellent progress with the scheme itself. Only this week I was pleased to report that over £1 billion has been paid to nearly 900,000 eligible policyholders.

In conclusion, I genuinely have deep sympathy with those who carefully saved for retirement and are not receiving the income they expected. Resolving the Equitable Life issue, and doing so swiftly and in a way that was fair to all taxpayers, has been a priority for the Government.

Bankers’ Bonuses and the Banking Industry

Andrea Leadsom Excerpts

Wednesday 25th February 2015 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I have to say that I am extremely disappointed by the remarks of the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). I find it absolutely astonishing that Labour Members have the courage to raise the issue of bankers’ bonuses. Perhaps they have forgotten that it was under their light-touch regulatory regime that the worst excesses of the banking sector were allowed to flourish. I wonder whether she regrets the fact that the shadow Chancellor is not in the House today. Does she suspect that he regrets saying, as City Minister in June 2006, that

“nothing should be done to put at risk a light-touch, risk-based regulatory regime”?

Does she think that he regrets presiding over a system under which £66 billion was paid out in bonuses on his watch?

[Cathy Jamieson]

I wonder whether the Minister heard what I said when I was challenged about whether the shadow Chancellor ought to be in the Chamber. I noted that the Chancellor is not present, and I raised the question of what Conservative Members had done on light-touch regulation. Were they not arguing for it? Can she give me an example from that time when her party proposed something different?

[Andrea Leadsom]

That is just another typical Opposition ploy. At that point, the Conservative party was in opposition and the Labour party was in government. It is absolutely unconscionable for the Labour party to suggest that the Opposition of the day should have saved the Labour Government from their own excesses.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Will the Minister give way?

[Charlie Elphicke]

Will the Minister give way?

[Andrea Leadsom]

I give way to my hon. Friend.

[Charlie Elphicke]

Does my hon. Friend not think that the last intervention is reminiscent of arsonists throwing rocks at the firefighters who have worked so hard to put out the fire the arsonists started?

[Andrea Leadsom]

My hon. Friend is quite right. It is extraordinary that Labour Members have the cheek to come to the House and suggest that Conservative Members are somehow responsible.

I want to draw to the House’s attention the very prescient quote from the former Prime Minister when, representing the previous Government, he addressed the City in his Mansion House speech in 2002:

“What you as the City of London have done for financial services, we as a Government aim to do for the economy as a whole.”

And didn’t they just? It is absolutely extraordinary that under the “intensely relaxed” Labour Administration, bankers were rewarded for taking excessive risk, and if they failed, were allowed to get away with it—heads they win, tails the taxpayer loses.

[Debbie Abrahams]

Will the Minister give way?

[Mr Stewart Jackson (Peterborough) (Con)]

Will the Minister give way?

[Andrea Leadsom]

I give way to my hon. Friend.

[Mr Jackson]

Is not this debate a displacement activity for a party that does not have any coherent narrative to deal with jobs, growth and the economy? Is it not reckless of Her Majesty’s Opposition to keep recycling the tax on bankers’ bonuses—10 times over—without ever having to account for where that money will actually go?

[Andrea Leadsom]

My hon. Friend is exactly right that the Opposition are simply trying to recycle something as a distraction. I am truly delighted that the motion gives me the opportunity to set out the wide-ranging measures that this Government have taken to sort out the appalling legacy of the Labour party on banks and remuneration. We have taken an extraordinarily wide-ranging set of measures to sort out a mess left, once again, by a Labour Government.

[Debbie Abrahams]

I am grateful to the hon. Lady for ultimately giving way. Will she remind the House how much more the Government are borrowing now compared with 2010?

[Andrea Leadsom]

The hon. Lady will know that the Government have taken steps to bring down significantly the amount we are borrowing each year to get our economy on the road to recovery after the disaster caused by the Labour party.

To return to the point of this debate, the real fact is that the public are absolutely right to be furious about the behaviour and misconduct of banks. It still feels as though there are fresh examples every day of the shameful practices that went on in the bad old days. The public will want to know what this Government have done to sort out the mess left by the previous Government.

I can tell the House that, under this Government, we have the toughest remuneration regime of any major financial centre in the world; we are making banks raise their standards, rebuild their reputation and get back to the job they used to do prudently and respectably for centuries; and we are making sure that we never go back to the bad old days of banking.

[Guy Opperman]

Will the Minister give way?

[Mr Marcus Jones]

Will the Minister give way?

[Andrea Leadsom]

I will give way in a moment, but I want to be very clear at this point. In such debates, there is always a sense that somehow all bankers are terrible people. The truth is that the vast majority of the up to 2 million people employed in financial services do an honest day’s work and always have done. They would not seek to rip anybody off, or distort anything they do. They are honest, decent people. I want to pay tribute to the work of financial services not just in oiling the wheels of our economy, but in contributing so much to our economy as a whole. Notwithstanding the very real misconduct issues, which have disgusted all of us right across the country, it is true that only a small number of people are responsible for such wrongdoing. I will talk about what we have done to put that right after I have given way.

[Guy Opperman]

Will my hon. Friend also make the point that this Government have ensured that LIBOR funds, which were not previously given to good causes, have benefited air ambulances—my hon. Friends and I supported them at No. 11 Downing street last night—and 96 military charities? This Government have brought in a magnificent innovation that supports wonderful charities.

[Andrea Leadsom]

I am very grateful to my hon. Friend for raising that point. The Government are extremely proud that fines for misconduct go to good causes, unlike under the Labour party, when any fines for misconduct were passed straight back into the hands of the people who committed it. The LIBOR fines have gone to military charities and air ambulances, as he pointed out, and the fines for the appalling foreign exchange rigging will support the NHS and GP surgeries in particular.

[Helen Goodman (Bishop Auckland) (Lab)]

The hon. Lady is a well-informed Minister. Will she tell the House what she did in her years as a banker at BZW and Barclays and, latterly, as a head of corporate governance to lobby for tighter financial regulation?

[Andrea Leadsom]

I am very grateful to the hon. Lady for giving me the opportunity to say that for the last 10 years of my career at Invesco Perpetual, I was responsible for writing a quantitative bonus scheme that measured the performance of fund managers over three, five and 10 years according to the performance of the team, the business and the individual, which involved clawbacks, as appropriate. I started that work in 1999 and finished it in 2009, so I can say with confidence that I did my bit on remuneration.

What have the Government done that we are so proud of? First, we have brought down the quantum of bonuses. City bonuses are now a fifth of what they were under Labour. The banks that were bailed out by the taxpayer have been a key focus for the Government, so let me inform the House about what is happening with bonuses at RBS. We will ensure that the total bonus pool comes down again, both in total and per head. That will continue the reductions that made last year’s bonuses more than two-thirds lower than those in 2009. The bonus pool at the investment bank will come down too in total and per head. We are continuing to restrict cash bonuses to £2,000, and no executive director will receive a bonus.

Let me also tell the House what is happening at Lloyds. This week, we announced that we are getting back another half a billion pounds for taxpayers—money that they had to put in. We can do that because since the crisis Lloyds has gone from failure to being a strong, profitable bank that is helping to drive the UK recovery and is contributing £230 million a year through the bank levy. We will ensure that Lloyds sees its bonus pool reduce this year and we are continuing to restrict cash bonuses to £2,000.

Let us compare that with the Labour party, which presided over a system that paid Fred Goodwin a cash bonus of £2.9 million in 2007. It is now calling for a 10-year clawback on bonuses—once again asking us to clear up the mess that it left—and has spent its bank tax proposal 10 times over.

The Government have made the link between bonuses and performance crystal clear. Bankers should be in no doubt that their bonuses are at risk should misbehaviour occur. Under this Government, highly paid bankers and those who are liable for big decisions have their bonuses deferred over at least three years, and at least 60% must be deferred for senior managers. Bonuses are now clearly linked to the performance of banks, since 50% of any bonus must be paid in shares or similar instruments. Deferred bonuses can be subject to cancellation in the future. Since the start of this year, bonuses can be clawed back up to seven years after they are paid out when misconduct or serious performance issues come to light. Guaranteed bonuses, which were commonplace under the previous Government, are banned in all but the most exceptional circumstances.

We have taken the lead in ensuring that there is transparency in senior executives’ pay arrangements. We have ensured that all the top 15 banks have signed up to the strengthened code of practice, which is a notable improvement on the two that had signed up when Labour left office. Our reforms to company law mean that shareholders are guaranteed a binding vote on pay policy.

We are not stopping there. The Parliamentary Commission on Banking Standards, which was attended so ably by my hon. Friend the Member for Wyre Forest (Mark Garnier), made strong recommendations on bankers’ pay.

[David Mowat]

The Minister is right to say that the level of bonuses has reduced hugely in the past few years. However, does she agree that the real issue with banking is not the bonus level, but the level of absolute remuneration, which the Labour party’s policy does not address? Why does she think banks require so many people to earn more than £1 million a year, in a way that oil companies and pharmaceutical companies do not? The issue is the absolute level of remuneration.

[Andrea Leadsom]

Philosophically, I agree entirely with my hon. Friend. Many people across the country will agree that the absolute level of remuneration in financial services needs to be clearly justified. Although the Conservative party truly believes that wealth creation, which creates jobs, tax revenue for the Exchequer and growth for our economy, should be properly remunerated, we want to give as much power as possible to shareholders to ensure that they can take decisions that make it absolutely clear that remuneration should reflect the contribution of the individual, and not just some norm in the industry.

We have agreed with the recommendations of the Parliamentary Commission on Banking Standards and asked the financial services regulators to look into implementing them, in particular the extension of clawback to 10 years when an investigation into an individual is ongoing and the extension of deferral to seven years for senior managers, which is a significant increase from the current three years. The regulators are due to publish final rules in response to the consultation shortly. I am sure that hon. Members will agree that we want to keep our independent regulators independent, so that they act in the best interests of our economy and not in the interests of a political party.

[Mr Marcus Jones]

My hon. Friend has mentioned power for shareholders and political interference. Does she agree that it is not right for the Government to intervene in certain situations, such as in the financial crash, when the last Prime Minister effectively pushed Lloyds TSB and RBS into a shotgun marriage?

[Andrea Leadsom]

I agree with my hon. Friend in principle. We want to see the market working properly, shareholders taking the decisions on remuneration and businesses acting fairly in the interests of all their stakeholders. That is why we have been so determined to sort out transparency, fairness and the binding votes that boards have in regard to the actions of the banks.

Our desire to see a lack of political intervention is why we have opposed and continue to oppose the deeply flawed and politically motivated EU cap on bonuses. My right hon. Friend the Chancellor, the Governor of the Bank of England and the head of the Prudential Regulation Authority agree that it will not control bankers’ pay, but instead push up fixed pay, make it more difficult to claw back earnings when things go wrong, weaken financial stability and make it more likely that the taxpayer, rather than the banker, pays the cost of mistakes. We continue to believe that the cap is fundamentally flawed. Members will know that we have, however, withdrawn our legal challenge to the cap and are instead looking at how else we can build a system of pay in global banking that encourages responsibility, rather than undermines it.

[Helen Goodman]

Will the hon. Lady explain to the House and the country why it is wrong to cap bankers’ bonuses but right to cap nurses’ pay?

[Andrea Leadsom]

The point that we have made about the bankers bonus cap is that bankers will find other ways to remunerate themselves in fixed pay, rather than in variable pay. The hon. Lady smiles, but she perhaps fails to understand that the whole point of the regime we have put in place is to ensure that bankers are accountable. The way for them to be accountable is through variable pay, which is performance related, unlike fixed pay. The problem with the cap on bonuses is that it will put up fixed pay.

[Helen Goodman]

rose—

[Andrea Leadsom]

I will not take another intervention on that point because I have explained it twice and would like to move on.

The cap remains fundamentally flawed, so we are looking at other ways to ensure that there is accountability. We do, however, fear that fixed pay is going up and there is some evidence of that. Last November, the Chancellor wrote to the Governor of the Bank of England to ask him to encourage this work in his role as chairman of the Financial Stability Board. Such methods at a global level might include standards that ensure that non-bonus or fixed pay is also put at risk, maximising clawback or paying senior staff in performance-related bonds. Any such solution must be international in nature to be effective. That is why we are pushing the Financial Stability Board, which is uniquely well placed, to pursue these issues with urgency.

[James Morris (Halesowen and Rowley Regis) (Con)]

I welcome all the action that the Government have taken to clamp down on excessive banking bonuses, but it is not the case that, as my hon. Friend said earlier, more than 2 million people are employed in the financial services industry in Britain, and not all of them are millionaires? It is important that we take into account the fact that there are people in the banking sector on relatively low pay. Not every banker is earning £1 million or more a year.

[Andrea Leadsom]

I am glad that my hon. Friend has raised that point, and I am happy to reiterate my remark that the financial services sector employs up to 2 million in this country, most of them outside the City and many of them doing regular jobs in banks and call centres, or even in places such as a new dealing room that has been set up outside Birmingham, which I recently had the pleasure of visiting. All those people are as mortified as the rest of us at the behaviour of a few, so it is always important to remember that we are talking about the behaviour of a few, not of the many.

The third thing that the Government have done is to improve the accountability of bankers. I hope hon. Members will agree that the vast majority of people in the financial sector are decent people who have played by the rules and just want to get on with providing a valued and trusted service to their customers. We must have high standards in banking, because that is what will help the UK to continue to thrive as a leading and trusted financial centre. The sector remains a huge asset to the British economy, contributing almost an eighth of the total tax receipts and giving us a trade surplus of £16 billion last year.

Banking oils the wheels of the economy, helps our businesses grow, fosters investment and boosts aspiration. When bankers get it right, it is a driver of this country’s growth. When they get it wrong, the damage is consequentially enormous, because it threatens the livelihood of millions of people in this country, as we saw during the financial crisis.

The public will want to know that this Government have made reckless misconduct leading to bank failure a criminal offence, and overseen banks being fined heavily for their worst excesses. There have been £450 million of fines for the disgraceful rigging of LIBOR and £1.1 billion of fines for the manipulation of foreign exchange rates—disgusting and unacceptable behaviour. I know that all Members will be reassured to know that the Serious Fraud Office has opened investigations into a number of individuals in relation to the manipulation of LIBOR and forex. Of course, many firms have sacked and dismissed staff found guilty as part of their own internal investigations.

[Richard Fuller]

My hon. Friend is now stressing one point that the everyday people feel is most important about the reform of our banking system—that when bankers do wrong, they should face criminal prosecution and the prospect of jail. Is she satisfied that we now have the right measures in place—measures that the last Government did not put in place—and will she assure the House that she will ensure that the Government use all their powers to enforce the regulations as far as possible?

[Andrea Leadsom]

That is an important point. This Government have taken every step we can think of to ensure accountability, prevent future wrongdoing and improve standards in banking. We are always open to new suggestions, but it is our genuine belief that we have fundamentally changed the underlying systems that banks work with. I can certainly reassure my hon. Friend that when I speak to the chief executives of banks, as I do regularly, they assure me that they, too, take the matter extremely seriously and have put in place checks so that they can indentify wrongdoing and punish the offenders under their own steam, as hon. Members will have seen in the press today.

[Helen Goodman]

Will the Minister give way?

[Andrea Leadsom]

I will not give way again; I am just coming to the end of my speech, and I want to give other Members the chance to contribute.

Fourthly, in our efforts to rebuild this vital industry, we have put in place the regulatory reforms necessary to improve bankers’ conduct and make banks serve their clients better, whether they are small and medium-sized enterprises or members of the public. We have legislated for a new senior managers and certification regime, to strengthen the accountability of senior management and raise the standards of individual conduct. We also launched an enforcement review, which recommended improvements to how regulators make decisions relating to enforcement.

We have promoted choice and competition in the retail banking sector, putting it at the heart of our regulatory system. By making it easier for customers to switch banks we are incentivising banks to look after their customers better, and by opening the door for new and smaller banks to compete with the established names we are ensuring that the entire sector ups its game, not least in helping our small and medium-sized businesses grow and expand. That is good for the customer, good for the sector and good for the wider economy.

Reforming remuneration for bankers has been a major priority for this Government. We are sorting out the mess left by the Labour party. It is not a pleasant spectacle when you lend someone your car, and they crash it and then criticise you for not repairing it quickly enough. I totally reject the proposals for changes that the hon. Member for Kilmarnock and Loudoun made. This Government are doing the work needed to ensure that the UK’s financial services are fit for the 21st century and that we put the bad old days of banking behind us.