(1 year, 3 months ago)
Lords ChamberThat the draft Orders laid before the House on 27 and 29 March be approved.
Relevant document: 36th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 2 May.
(1 year, 3 months ago)
Lords ChamberTo ask His Majesty’s Government what assessment they have made of the impact of the Energy Profits Levy on energy companies.
The energy profits levy was introduced to respond to extraordinary profits in the oil and gas sector and includes an investment allowance to encourage companies to reinvest their profits in the UK. It has raised £2.8 billion to date and is expected to raise almost £26 billion by March 2028, in addition to around £25 billion from the permanent regime over the same period.
I thank the Minister for her response. We have all seen the eye-watering profits of the oil and gas companies. The energy profits levy does not treat all companies the same. Many of the largest companies pay considerably less, with their profits and extraction being largely outside the UK. This is not the same for many of the smaller domestic UK producers. Moreso, the EPL has a more favourable capital relief than the electricity generator levy. How can the Government justify a levy that gives favourable treatment to oil and gas companies over renewable developers?
On the noble Lord’s first point, he is right that the energy profits levy is applied to profits made in the UK or on the UK continental shelf. That is in line with other profit-based taxes on companies that operate in the UK and overseas. On the difference between the energy profits levy and the electricity generator levy, they are structured in completely different ways. The headline rates of those two taxes are also completely different. We have different programmes in place to ensure that we incentivise continuing investment in our renewables, which is why we have such a great track record on delivering renewable energy in the UK.
My Lords, one of the peculiarities between the energy profits levy and the electricity generator levy is the huge difference in tax relief—80% and 0% respectively, as the noble Lord, Lord McNicol, alluded to. So why this preferential treatment for the oil and gas sector? It is not as though we need new sources of fossil fuels for domestic use—or are the IEA, the IPCC, the vast bulk of UK scientists and the Government’s own net zero tsar, Chris Skidmore, wrong on this?
My Lords, I disagree with the noble Baroness that there is preferential treatment for the oil and gas sector, which faces a far higher tax rate based on the extraordinary profits it is benefiting from. That is entirely appropriate. On the investment incentive, we will continue to need oil and gas as we transition to net zero. We need to encourage investment into UK oil and gas fields to help meet that demand, and that is something the Government will continue to do.
My Lords, in November 2022 the current Chancellor estimated that the levy would raise £40 billion over six years. Six months later, the Treasury’s estimate seems to have gone down to £28 billion. What is responsible for that? Is it by any chance the OBR’s estimate of the increase in oil and gas expenditure by these oil and gas companies, rather than renewables expenditure, which they released alongside the Spring Budget, and the consequential forecast increase in tax relief on those sectors’ windfall tax bills?
My Lords, a number of factors affect predicted revenues from the EPL, not least the high degree of volatility that we have seen in commodity prices. I say to the noble Lord that, if we do not have investment allowances in place and if we do not invest in the future of this industry in the UK, there will be less revenue in future coming from UK oil and gas fields to contribute to the Exchequer and our priorities in future.
My Lords, following that answer by the Minister, I completely agree that we still need oil and gas as we transition to net zero. We cannot have a modern digital economy with high-speed electric rail running on solar and wind only, as the technology stands. However, the issue with the levy is that there are companies that are now saying they will pull investment from the North Sea. So how do we encourage that investment, given that we need it in the transition to net zero?
My noble friend is right. That is why the Government have always sought to deliver a balance between a fair return for the UK from the use of its resources and providing the right conditions to attract investment in the North Sea. That is why we have the investment allowance in the EPL that provides an additional incentive for companies to reinvest profits in the UK. On the point about environmental impact, the level of tax relief available for upstream decarbonisation expenditure was increased from January this year to incentivise companies for the cleaner production of oil and gas.
My Lords, the Government’s energy levy leaves billions in excess profits on the table while many households struggle through an unprecedented cost of living crisis. Only last week BP announced quarterly profits of over £6 billion while Shell recorded a quarterly profit increase of 22%, handing a further £5 billion to shareholders and now allocating more to dividend payments alone than to its entire investment in renewables. Given that, and with households and small businesses facing sky-high energy bills, how well does the Minister think the current levy is working?
I welcome the noble Lord to the Front Bench. He referred to figures that are the global profits of companies. As I have said to his noble friend, the UK applies its windfall tax to UK profits, and I think that is the Labour proposal also. Abolishing the investment allowance would be counter-productive. As I have said, the UK is still reliant on gas for its energy supply. Reducing incentives to invest would lead to investors pulling out of the UK, damaging the economy, causing job losses and leading to lower future tax revenue—tax revenue that we have used to put in place unprecedented cost of living support to families, which is still going out to households at the moment, so that those who are worried about their bills who are on low incomes and means-tested benefits can look forward to more support coming from the Government over the next year.
My Lords, while I am delighted that the Government took Labour’s advice to introduce the windfall tax that has been mentioned, there is no doubt that what is happening now, with the profiteering coming from these energy giants, is insufficient and is just not working. In fact, I would go as far as to say that it is almost peanuts when you look at the profits that were announced last week. So when will the Government fight back against “greedflation” and bring in a windfall tax with real teeth in it—something similar to what is happening across the rest of Europe at the moment?
I do not know whether referring to over £50 billion of tax take as “peanuts” reflects the broader Labour Party’s attitude towards public finances, but the Government consider that the measures we have put in place are working well. We need to balance the rightful approach of taxing the unexpected profits of these companies while ensuring that we have investment incentives in place that protect UK jobs and UK energy security.
Does my noble friend have any figures for the amount of money when profits are made that goes into pension funds and therefore to people who are earning pensions?
My noble friend makes an important point. Investors in these companies can come from all sources, including pension funds. It is right and proper that they think about the return they get from their investments when making those decisions.
My Lords, I declare my interests. May I take the Minister back to her fundamental argument that the electricity generator levy, which applies to renewable energy, is completely different from the energy profits levy? She has argued strongly that the latter needs the additional investment allowance to encourage investment in oil and gas, but somehow the electricity generator levy does not need that additional investment incentive. Is she absolutely sure that that is true and is she in any way concerned about the report that we may lose some offshore wind projects because of it?
The electricity generator levy reflects a historic approach to how we pay for our electricity. New electricity contracts are often done, for example, under the contracts for difference process, which is not subject to this levy. We have also put in place a wide range of other measures to support investment in renewables. That is why we have such a great track record and why I have every faith that we will meet our stretching targets on decarbonisation in future.
(1 year, 3 months ago)
Grand CommitteeThat the Grand Committee do consider the Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023.
Relevant document: 36th Report from the Secondary Legislation Scrutiny Committee
(1 year, 3 months ago)
Grand CommitteeThat the Grand Committee do consider the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023.
Relevant document: 36th Report from the Secondary Legislation Scrutiny Committee
My Lords, this Government have a clear vision for financial services—that is, for an open, sustainable and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens by creating jobs, supporting businesses and powering growth across all four nations of the UK. The two statutory instruments that we are debating today complement some of the measures that are being delivered through the Financial Services and Markets Bill, which is currently before this House. I note that both statutory instruments were raised as instruments of interest by the Secondary Legislation Scrutiny Committee.
I turn first to the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023. In recent years, multiple reports from the Cryptoasset Taskforce and the Financial Conduct Authority have identified that misleading advertising and a lack of suitable information are key consumer protection issues in crypto asset markets. This statutory instrument seeks to address those issues by ensuring that crypto asset promotions are held to the same standards as broader financial services products carrying similar risk.
To do this, the SI expands the scope of the financial promotion restriction provided by the Financial Services and Markets Act 2000 by amending the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 to include financial promotions in respect of in-scope crypto assets. This will mean that businesses that intend to make qualifying crypto asset promotions would need to have their promotions approved by an authorised person under the Financial Services and Markets Act if they are not FSMA-authorised persons or exempt.
At present, most crypto firms do not hold such FSMA authorisation in respect of their crypto activities under existing regulations, so the requirement to be authorised means that most crypto firms will not be able to communicate their own promotions, unlike other financial services firms. As set out in the February 2023 policy statement, there is also evidence of a lack of suitable FSMA-authorised persons in the market willing and able to approve crypto promotions.
In practice, the net effect of these issues would be to restrict significantly or amount to an effective ban on crypto asset financial promotions because there are unlikely to be FSMA-authorised persons willing to approve the promotions of unauthorised firms. To avoid the unintended consequence of an effective ban on crypto asset promotions, the SI introduces an exemption for crypto asset firms registered with the FCA under its anti-money laundering regime. This will enable qualifying firms to communicate their own crypto asset financial promotions without seeking approval from a FSMA-authorised person.
Crucially, the SI confers powers to the FCA to ensure that AML-registered crypto asset businesses relying on this exemption will still be subject to the same financial promotion rules as FSMA-authorised persons communicating equivalent promotions. Firms using this exemption will not be able to approve others’ financial promotions or to communicate their own financial promotions in relation to other controlled investments.
The Government intend this AML exemption to be temporary in nature. It will be in place only until the proposed broader regulatory regime for crypto assets is established. The Government are preparing to bring stablecoins used for payment into the scope of regulation and are also consulting further on their regulatory approach to unbacked crypto assets.
When in force, the SI and the FCA rules will apply to all businesses making crypto asset promotions to UK-based consumers, whether from the UK or abroad. The SI provides for a four-month implementation period, which will commence when this SI is made and on the publication of the FCA’s detailed rules subsequent to this SI. As set out in the policy statement published in February 2023, this period is intended to ensure that crypto asset firms have suitable time to understand and prepare for the financial promotions regime before it comes into force.
This SI will reduce a key risk to consumers, particularly that of consumers suffering unexpected or large losses without regulatory protection as a result of buying crypto asset products while being unaware of the associated risks. This complements and forms part of our wider, proportionate approach to regulation, harnessing the advantages of crypto technologies while mitigating the most significant risks.
Turning to the Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023, this second instrument reduces the burdens that firms face when determining their trading in commodity derivatives and emission allowances by requiring them to be authorised as an investment firm. Effective commodities markets regulation is key to ensuring that market speculation does not lead to economic harm. The regulator should be able effectively to regulate and supervise firms that trade commodity derivatives for investment purposes.
As well as financial services firms, a number of corporates trade on commodity markets to protect their business from market fluctuations. In regulation, this is referred to as trading that is ancillary to the main business. The regime that we have inherited from the EU uses something called the ancillary activities test to determine whether the activities of a firm trading commodity derivatives are primarily for investment purposes or only support the firm’s commercial business. The ancillary activities test currently requires firms to undertake complex calculations; they are also required to notify the FCA about the outcome of these calculations on an annual basis.
Taken together, this regime is overly burdensome for firms. Prior to the implementation of the ancillary activities test in EU law, the UK had a simpler test for determining whether firms were trading in commodity derivatives or emission allowances as an ancillary activity. This regime was cheaper for firms to comply with and resulted in the same outcomes as the current regime.
In 2021, as part of the wholesale markets review, the Government consulted on reverting to a simpler regime while maintaining the same regulatory outcomes. The proposal was to remove the annual notification requirement and revert to a principles-based approach. Respondents to the consultation agreed with the proposed changes, stating that the current regime was onerous and complicated. Consequently, the Government committed to bringing forward these changes when they responded to the consultation last year.
This SI delivers on that commitment by removing the annual notification requirement and omitting references to the calculations, which are no longer needed in legislation. This will pave the way for the Financial Conduct Authority to adopt a simpler and more streamlined approach to determining whether firms need to be authorised, alongside this SI. To reflect the FCA’s adoption of a simpler approach, this instrument also amends part of the regulated activities order, which exempts firms from having to perform the current calculations. As the FCA’s new approach will be based on different information, this exemption is no longer relevant.
The SI will come into force on 1 January 2025. This will ensure that industry has sufficient time to reflect on the changes that the FCA will be making and to make the necessary system changes. I understand that the FCA plans to consult on these changes later this year.
Maintaining the ancillary activities test as it currently stands would impose continuing costs on both firms and the FCA, as evidenced by feedback received through the consultation process. The changes outlined will reduce costs for firms and make the UK a more attractive place to do business, while maintaining high regulatory standards. I beg to move.
My Lords, I thank noble Lords for participating in today’s debate. I turn first to the changes to the financial promotions regime in respect of crypto assets. Several noble Lords asked about the exemption that applies to anti-money laundering regulated firms. I set out some of this in my opening speech but it is worth returning to it now. As set out in the policy statement published in February this year, the anti-money laundering exemption will exempt firms that are not FSMA-authorised but are included on the FCA’s anti-money laundering register from the requirement to have their crypto asset promotion approved by a FSMA-authorised firm. This is subject to said promotions also complying with the same rules set by the FCA for equivalent promotions made by FSMA-authorised firms. The purpose of the AML exemption is to avoid the unintended consequence of an effective ban on crypto asset financial promotions as there are not currently sufficient numbers of FSMA-authorised firms in the crypto space.
(1 year, 4 months ago)
Lords ChamberMy Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my financial services interests as set out in the register.
My Lords, the Government do not make assessments of bank branch networks or intervene in commercial decisions to close branches. Banks should follow FCA guidance, including considering alternative access where appropriate. One example of this is shared banking hubs. More than 50 hubs have been announced, with four now open, and the pace of delivery is expected to accelerate over the coming months. People can also access everyday banking via their local post office.
My Lords, in the past 12 months, 847 bank branches have closed or are set to close. Four shared banking hubs have opened. Does my noble friend the Minister agree that the Government need to act to ensure local banking provision, including deposit taking as well as withdrawals and advice? They must also act to ensure acceptance of, as well as access to, cash; otherwise, what currency is cash if there is no place to spend it? Finally, will the Government consider carefully commissioning a review into access to digital financial services to ensure that everyone can benefit from all the financial innovations in that space?
My Lords, as my noble friend will know, in the Financial Services and Markets Bill, we are legislating to protect access to cash. That covers withdrawal as well as deposit services. The Government do not plan to mandate the acceptance of cash. That would be an unprecedented intervention. However, the increased access particularly to deposit services for businesses should allow those who wish to continue to accept cash to be able to do so on a more sustainable footing. My noble friend makes an interesting suggestion. The Government are working hard to ensure financial inclusion, including digital financial inclusion. I will think about his suggestion very carefully.
My Lords, getting a smart hub still requires the voluntary participation of the banks, which is part of the reason why the pace of progress has been so slow. Will the Government consider changing the rules so that any community that meets the standards to justify a smart hub, as assessed by LINK, then has an automatic right to that hub and can overcome bank resistance?
My Lords, the Government are not considering changing the framework. As I said in response to the Question, we expect the pace of delivery to pick up. Shared banking hubs are one initiative to ensure that communities can continue to access banking. I mentioned the Post Office as being another route: 99% of personal and 95% of business banking customers can carry out their everyday banking there, with more than 11,000 branches across the UK.
My Lords, my noble friend will recollect, no doubt, an earlier Question asked by my noble friend Lord Holmes about the nature of the facilities provided by ATMs and banks, particularly for those with disabilities. Will my noble friend therefore confirm that, in the establishment of these hubs, there will be a requirement on them to be careful to provide the sorts of facilities that are suitable for people with disabilities, as the banks were starting to do?
My Lords, in taking forward this work, I am sure that that is a consideration the banks have in mind. The banking hubs came out of a pilot programme that allowed banks to test out this model to ensure that it was accessible to all their customers. Of course, they are subject to the equality duty, which also means that they need to make proper provision for those with protected characteristics.
My Lords, legal tender is legal tender. I urge my noble friend to bear in mind that the Government have the opportunity, if they wish, to mandate the use of cash—people can use it when they want. Will she also bear in mind that a lot of people now are being discouraged from writing cheques? Many people like to pay their bills with cheques. All these facilities should remain, certainly for the next two decades.
My Lords, the Government acknowledge the important role that cash still plays in many of our lives, which is why we are taking unprecedented action on protecting access to cash. As I said, ensuring that businesses have access to deposit facilities will also promote ongoing cash acceptance by businesses.
I do not think my children know what a cheque is, actually. The Social Market Foundation and the Treasury Select Committee in the other place have expressed some concern about the overreliance on post offices as a stopgap. Postal staff are wonderful, but they are not trained banking specialists. Does the Minister agree that we need that trusted expertise to be available on our high streets? Does she also agree that some post offices just are not suitable for many of the requirements of face-to-face banking, especially for more vulnerable customers, as they do not provide the privacy and dignity that many bank customers need?
I agree with the noble Baroness that the Post Office can play a really important role in ensuring ongoing provision, but it should not be the only provider of services. There are other services that are more appropriately delivered in other ways, including in person, which is part of where banking hubs come in. As I have said, we hope to see the delivery of those hubs accelerated this year. It is also reassuring to hear that several banks have committed that if their branch is the last in town, it will stay open until the relevant banking hub is up and running, to ensure continuity of service.
In my local town of Bishop Auckland, Newcastle Building Society and Darlington Building Society have moved on to the high street as banks have moved off it. Will the Minister commend building societies for their commitment to local communities and to making things accessible to them, and will she encourage further work on that?
I absolutely commend building societies and all businesses that have a commitment to local communities and are thinking about how they can make their services as accessible as possible. There are many different routes to ensuring accessibility. We should focus on the outcome for the customer and embrace the different routes that this can be delivered by.
My Lords, the bigger the profit, the less customer service there is. This has happened over the last decade. There are still some banks pretending that they are disabled by Covid and that is why you cannot get through on the phone, and the local branch is closed so you cannot actually talk to anyone. Will the Minister ask the banks to start putting the customer first and ensure that there are facilities available, not just at the odd hub but in local communities, which, in the past, could rely on serious, person-to-person customer service?
My Lords, a process has been put in place to allow communities to make the case through LINK for where they need access to further services, and there is a commitment that if something is deemed necessary, it will be implemented. The noble Lord is right that it is essential that the interests of consumers are properly considered in all areas of financial services. There is the new consumer duty, which is due to be implemented later this year and will take forward some of his suggestions.
My Lords, in contrast to my noble friend Lord Cormack, I do not know what a cheque is; I thought it was something one received in a restaurant in the United States. I do not carry cash and, in common with millions of people, I pay using contactless technology. Of course, some still need cash, including small businesses, but, as my noble friend says, is not the Post Office network a ready-made, available network for cash, which almost every business can use and is guaranteed in terms of proximity?
My noble friend is right about the breadth of the Post Office network, and I have talked about the high percentages of people who can access their everyday banking services through it. It is also geographically widespread; 93% of the UK’s population live within one mile of a post office and 99.7% within three miles of their nearest post office. There are other services that people need to be able to access, which is why it is important that we encourage banks to continue to innovate so that people can access the services in the way that is most appropriate for them.
(1 year, 4 months ago)
Lords ChamberThat the Order laid before the House on 13 March be approved.
Relevant document: 35th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 19 April.
(1 year, 4 months ago)
Grand CommitteeThat the Grand Committee do consider the Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) Order 2023.
Relevant document: 35th Report from the Secondary Legislation Scrutiny Committee
Noble Lords will be aware that Silicon Valley Bank UK Limited, or SVB UK, was sold on Monday 13 March to HSBC. Customers of SVB UK are now able to access their deposits and banking services as normal. This transaction was facilitated by the Bank of England, in consultation with the Treasury, using powers granted by the Banking Act 2009. In doing so, we limited risks to our tech and life sciences sector and safeguarded some of the UK’s most promising companies, protecting customers, financial stability and the taxpayer. We were able to achieve this outcome—the best possible outcome—in short order, without any taxpayer money or government guarantees. There has been no bailout, with SVB UK instead sold to a private sector purchaser. This solution is a win for taxpayers, customers and the banking system.
SVB UK has become a subsidiary of HSBC’s ring-fenced bank. Ring-fencing requires banking groups that hold over £25 billion of retail deposits to separate their retail banking from their investment banking activities. The regime provides a four-year transition period for an entity acquired as part of a resolution process before it becomes subject to the ring-fencing requirements. As a result of this existing provision in legislation, SVB UK is not currently subject to ring-fencing requirements. However, HSBC UK, SVB UK’s parent company, remains subject to the ring-fencing regime.
To facilitate this transaction, the Economic Secretary to the Treasury laid in both Houses of Parliament on Monday 13 March a statutory instrument using the powers under the Banking Act 2009 to broaden an existing exemption in ring-fencing legislation with regard to HSBC’s purchase of SVB UK. This is the first time that the Treasury was required to use these powers since the resolution of Dunfermline Building Society in 2009. I note that the Secondary Legislation Scrutiny Committee has raised this statutory instrument as an instrument of interest in its 35th report, published on 30 March.
This exemption allows HSBC’s ring-fenced bank to provide below-market-rate intragroup funding to SVB UK. This was crucial for the success of HSBC’s takeover of SVB UK, because it ensured that HSBC was able to provide the necessary funds to its new subsidiary. HSBC has since stated publicly that it has so far provided approximately £2 billion of liquidity to SVB UK, money that it needed to continue to meet the needs of its customers. The Bank of England and the Prudential Regulation Authority fully support this modification to the ring-fencing regime as a necessary step to facilitate the sale.
In view of the urgency, and given that this statutory instrument was crucial in enabling the sale, the Treasury determined that it was necessary to lay this instrument using the “made affirmative” procedure under the powers in the Banking Act 2009. Parliament provided the Treasury with these powers for exactly these situations: recognising that exceptional circumstances can arise where the Government must take emergency action in the interests of financial stability, depositors and taxpayers.
The statutory instrument also makes a number of modifications to the Financial Services and Markets Act 2000 in relation to the rule-making powers of the Prudential Regulation Authority and the Financial Conduct Authority. Specifically, these rule-making powers are modified to ensure that the regulators can exercise them effectively, where these powers relate to the Bank of England’s transfer of SVB UK to HSBC and write-down of SVB UK’s shareholders and certain bondholders. The statutory instrument also waives the requirement for the regulators to consult on certain rule changes related to the sale.
In addition to the statutory instrument we are debating today, the Government will also lay a further statutory instrument to make further changes to the ring-fencing regime with regard to HSBC’s purchase of SVB UK. This is to permit SVB UK to remain exempt from the ring-fencing rules beyond the four-year transition period, subject to certain conditions. Unlike the legislation we are debating today, this second exemption is not required immediately and will be introduced in due course. The second exemption was also crucial to the success of the sale of SVB UK, as it ensures that it can remain a commercially viable stand-alone business as part of the HSBC Group.
A clear determination was made by the Bank of England and supported by the Government that these amendments were crucial to facilitating the purchase of SVB UK by HSBC. The UK has a world-leading tech sector with a dynamic start-up and scale-up ecosystem, and the Government are pleased that a private sector purchaser has been found. Therefore, I hope noble Lords will join me in supporting this legislation. I beg to move.
My Lords, I declare my interest as a shareholder in UK banks which are subject to the ring-fencing regime. My husband and I hold shares in HSBC, which will benefit from this order, and in both NatWest and Lloyds, which are subject to the ring-fencing rules but do not derive a benefit from this order. I think my registered interests in this case probably cancel each other out.
I should say that I have never been a big fan of ring-fencing. The triple whammy of an electrified ring-fence, elaborate resolution planning and higher capital and liquidity requirements have imposed a very high set of costs on UK banks which can in the long run result only in disbenefits for UK bank customers —that is, all of us. I do, however, believe passionately in fair competition and level playing fields, and my concern about this order—and, more so, the one that we are promised that will come later—is that it distorts competition and creates an unlevel playing field by creating unfair advantage for one particular bank in relation to the ring-fencing rules.
I completely understand that the Bank of England had to operate under pressure to achieve a sale of Silicon Valley Bank over a weekend and that avoided having to place it into an insolvency procedure, and we owe the Bank a debt of gratitude for what it achieved over that weekend. But there are some aspects of the transaction—and therefore this order—which I find mysterious. I am also, as I said, concerned that HSBC has obtained an unfair competitive advantage compared with other UK banks, so I have some questions to put to my noble friend.
First, SVB UK is not a ring-fenced bank under UK legislation and it remains outside that legislation. Why did the Bank not agree to sell the bank to HSBC itself rather than to HSBC’s UK ring-fenced subsidiary? Had it done that, I do not believe that any special legislation would have been necessary. HSBC operates a narrow definition of ring-fencing—unlike other UK ring-fenced banks—such that the majority of its commercial customers are serviced within the non-ring-fenced part of HSBC. Why was it decided to place Silicon Valley Bank UK into the ownership of the ring-fenced bank? Would it not have been more appropriate to have put it somewhere else within the HSBC Group along with other commercial customers?
Secondly, what activities of Silicon Valley Bank UK would disqualify it from being housed within a ring-fenced bank? Commercial banking business can be satisfactorily included within a ring-fenced bank provided that the business within the ring-fenced bank is in effect plain vanilla business—that is, conventional lending and very simple derivatives, which are allowed. What does Silicon Valley Bank UK do which would disqualify it from being placed properly within the UK ring-fence of HSBC, and what policy grounds make it necessary to allow the ring-fenced bank to own this kind of business when it cannot carry out that business itself?
Thirdly, the Minister has said that the order was necessary to allow HSBC’s ring-fenced bank to provide funding out of the ring-fence at preferential rates to Silicon Valley Bank UK. Why was this funding not provided out of HSBC’s other, non-ring-fenced resources? Of course, I can see the attraction to HSBC of using the cheap funds that it has from its ring-fenced depositors, but the ring-fence regime was set up precisely to stop such funds leaching out of the ring-fence. Related to that, is there any limit on the amount of funding that HSBC UK can provide from within the ring-fence to Silicon Valley Bank in breach of the ring-fencing philosophy, and if there is not a limit, why not? Are there any limits to the generosity with which the ring-fenced bank can provide the funds, since it is going to be providing at rates below market rates? Will there be any limit to that degree of discount that it will allow, and again, if not, why not?
Fourthly, can the Minister confirm that Silicon Valley Bank UK will not be allowed to form part of HSBC UK’s Bank Domestic Liquidity Sub-group, or DoLSub, and that liquidity will be monitored separately for the ring-fenced and non-ring-fenced parts of HSBC UK? If that is not the case, can the Minister explain the position on how liquidity is to be managed and monitored within the ring-fenced bank and its new subsidiary?
Lastly, it is clear that the intention is to provide some long-term exemptions from the ring-fencing regime, and the Minister referred to this. I appreciate that the precise details may not yet be finalised, but will the Minister set out what exemptions are likely to involve? I believe that the Minister said that this would be in a separate statutory instrument and therefore Parliament would be able to look at that, but it would be good if she could confirm that. My main concern when we come to the second order is whether it will be fair and reasonable for ring-fencing exemptions to be provided on a long-term basis, which disadvantages other UK banks which have to operate completely within the ring-fence rules. Put another way, when considering the case for HSBC to be allowed special treatment, will the Government ensure that they consider the case for equivalent relaxations to be more generally available? I look forward to my noble friend the Minister’s response.
My Lords, I am grateful to the Minister for introducing this order. I begin by reiterating the Labour Party’s thanks to the officials at the Treasury, the Bank of England and the regulators to secure a rescue deal for the UK arm of Silicon Valley Bank. While there will be important lessons to learn from SVB’s collapse, it was vital that swift action was taken to preserve financing for the life sciences and tech companies that will play such an important role in our future economic growth.
I also thank the noble Baronesses, Lady Kramer and Lady Noakes, for bringing out areas of concern, which I certainly have not seen raised in the same sharp relief. I hope that the Minister will be able to give us some feel as to the extent to which this reach of the ring-fence will be of significance or not, and, if it is significant, why it is intended to be made perpetual by a subsequent order. Equally, when we are discussing lessons learned, the noble Baroness, Lady Kramer, shone a light on the issue of the speed of collapse. The physical queues outside Northern Rock created time; today, very little time need be created between an area of significant concern turning into total collapse. I hope that the regulators, when doing a proper lessons-learned exercise on this will ponder on that point, to see what, if anything, we need to do to be better able to manage the rate of collapse that is potentially available.
The collapse of SVB was the catalyst for several other major events in the global financial system, including the very serious difficulties faced by Credit Suisse. In many senses, the UK regulatory system has functioned as hoped, which we welcome. It certainly makes the many hours spent on previous legislation worthwhile. Financial institutions and regulators in other countries have taken their own steps in recent weeks to deal with issues with entities in their own jurisdictions. The collective action seems to have calmed the markets, which is important for us all. However, I hope that the Minister can assure us that the Treasury, the Bank and the regulators continue to monitor the situation very closely, and that they stand ready to act, should that be required. With inflation still in double digits, and with the implications that is likely to have on interest rates in the short to medium term, will the Treasury finally commission a review of the risks that this could present to the financial system?
On SVB itself, the Government have thus far been unable to provide a proper justification for exempting the bank from ring-fencing requirements, which makes the four-year transition period turning into a perpetual one all the more puzzling. In another place, the Minister sought to reassure colleagues that they need not worry about the potential implications of this exception, as the number of SVB UK customers is low, particularly as a percentage of HSBC’s total client base. Is that really the most that the Treasury can say, or does the Minister have more to offer, given that this debate comes three and a half weeks after the Commons one?
Another question in that debate was on potential reform to ring-fencing requirements in this country. Andrew Griffith promised that
“there will not be any tinkering, but there might … be appropriate reforms”.—[Official Report, Commons, First Delegated Legislation Committee, 27/3/23; col. 7.]
I am not sure that those words are particularly reassuring. We expect news on those reforms in advance of the Autumn Statement, but can the Minister be a little more specific about dates and processes? How swiftly would any reforms be implemented once announced, for example? Will changes require primary legislation? If so, could this come in the Financial Services and Markets Bill, or would the Government bring forward a further Bill?
The action taken to protect SVB UK worked because it provided certainty. Customers of that bank knew within days that they would be able to continue their relationship with it, because of the acquisition by HSBC. However, in other areas, certainty is in short supply. The Prime Minister says he has a plan to halve inflation and bring interest rates down, but inflation remains in double digits and the Monetary Policy Committee is expected to announce a 12th consecutive rate hike. Under this Government, our economy is weaker, prices are out of control and never have people paid so much to get so little in return.
My Lords, I thank all noble Lords for their detailed questions on this statutory instrument. While everyone agreed that we reached a good resolution in this instance, it is absolutely right that we look at how it was delivered in detail and how we should reflect from this instance on the resolution regime in our wider regime. The noble Baroness, Lady Kramer, asked explicitly—but I think all noble Lords wanted to know—what the Government will do to ensure that we can learn lessons from the events around SVB UK. The Treasury and the Bank of England are working together to ensure that we properly reflect on these events and will consider how best to draw on the lessons learned and share them as needed in future.
The noble Lord, Lord Tunnicliffe, remarked on wider financial stability events, including Credit Suisse. I reassure him that the UK financial sector is fundamentally strong. The resolution of SVB UK on 13 March highlights how the resolution regime can be effectively used to protect UK financial stability. However, we continue to monitor the situation closely and remain in close contact with the Bank of England, the Prudential Regulation Authority, the Financial Conduct Authority and relevant foreign and international authorities. We are absolutely committed to protecting the stability of the UK banking sector, which is key for supporting economic growth and for the UK’s world-leading financial sector.
The noble Lord, Lord Tunnicliffe, also asked whether we would commission a review of the risks that higher interest rates pose to the financial system. I reassure noble Lords that the Bank of England already has in place processes to monitor and assess risks to our financial sector and banking system. In particular, each year, the Bank of England carries out a stress test of the major UK banks, which incorporates a severe but plausible adverse economic scenario. The 2022 stress test scenario includes a rapid rise in interest rates, with the UK bank rate assumed to rise to 6% in early 2023, as well as higher global interest rates.
I do not want to pre-empt the noble Baroness, Lady Noakes, in trying to press her question, but it seemed to me that she was asking why was the ring-fenced part of the bank used to make this purchase? HSBC presumably had a very wide range of options of pieces of corporate structure that it could have used. There may be a very good answer to that, such as “This was the only one we could do over a weekend”, or something. However, the Minister also said that it was explicit in the agreement that the extended exemption would be a part of the package. That has not yet gone through a parliamentary process, and it will, but it is clear that the Government have taken a position that they will support that extended exemption. There is stuff going on here that we are trying to unpick, and I just wonder whether the Minister can help us to do that.
I was only at the beginning of my attempt to answer my noble friend Lady Noakes’s questions. I think that I will cover a fair amount of ground in dealing with them, but I am also very happy to follow up in writing.
I moved between the permanent exemption and the intrabank lending, so I will deal with the intrabank lending question first, then I will move on to the matter of a subsequent SI. As I say, the provisions in today’s SI were essential for the sale and allowed for the provision of around £2 billion of liquidity. My noble friend asked whether this exemption was permanent and whether there was any limit to the funding that HSBC could provide through this route. This exemption is permanent to ensure that HSBC can continue to provide liquidity support, should that be needed at any point in the future. There is no limit to the amount of funding that can be provided through this route. The PRA has stated that it has the tools to effectively supervise HSBC, even with this exemption in place.
In bringing this back to us, as the Minister will have to do for the second SI, and responding to these questions, can we have some analysis of the competitive advantage that HSBC will get out of this transaction?
That point was also raised by my noble friend, and I was hoping to come to it. Whether my answers mean that we will not have a further discussion on it either on the Bill or when the future SI comes forward remains to be seen. I shall try to address some of the points around the ring-fenced bank, the need to go down that route and whether SVB UK needed to be purchased by HSBC’s ring-fenced bank. That was a commercial decision made by HSBC, and it would not be appropriate for me to comment further on it.
I am sorry to interrupt, but the only rationale I can think of is that from a ring-fenced bank you have that very cheap source of funding known as bank checking accounts and savings accounts. That precisely gives the commercial advantage to HSBC that the noble Baroness, Lady Noakes, is describing. Is that the only basis on which the Government were able to negotiate the deal: to make sure that the ownership of Silicon Valley Bank and the business it would pursue in future would be advantaged compared to similar activities by its rival banks? Is that what we are talking about here?
I am afraid I have to disappoint noble Lords and say that I have no further comment to make on the decision to purchase it by the ring-fenced bank. It was a commercial decision for HSBC.
My noble friend had some other questions on the use of the ring-fenced bank. She asked what activities SVB UK undertakes that are not allowed under the ring-fence regime. SVB UK provides lending to certain types of financial institutions, such as venture capital funds, which is not allowed under the ring-fencing regime. It also provides certain equity-related products in relation to its lending, which is also not allowed under the ring-fence regime. She also asked whether I could confirm that SVB UK will not be added to HSBC’s domestic liquidity subgroup. That is a matter for the regulator to decide.
All three noble Lords asked about the implications for competition and whether this move has given a competitive advantage to HSBC. The exemption is limited to the acquisition of SVB UK by HSBC, and was necessary to facilitate this acquisition—something I think all noble Lords welcomed. As Sam Woods explained at the TSC recently, a necessary condition of HSBC moving forward was that it could keep the entirety of SVB UK as one business. The value was in the integrated nature of the business, and HSBC could make that work only if it had it as a subsidiary of HSBC UK, the ring-fenced bank.
It is also worth reiterating that SVB UK remains very small compared to HSBC. Its assets amount to around £9 billion compared to HSBC’s $3 trillion group balance sheet.
To come on to the second statutory instrument and the permanent exemption from ring-fencing for SVB UK, the second exemption was also crucial, as it ensures that SVB UK can remain a commercially viable stand-alone business, as part of HSBC UK. It will be subject to conditions, which are intended to ensure that the exemption is limited to what was needed to facilitate the sale of SVB UK. We will set out details of those conditions alongside the second statutory instrument, which noble Lords will have the opportunity to debate. Alongside that, as I said earlier, the PRA outlined in its response to the Treasury Select Committee that it has a range of tools that it can and will draw on to ensure the effective supervision of HSBC and the protection of retail deposits.
Can I just clarify something with my noble friend? I can just about understand why, for the transaction to happen over the weekend, HSBC was allowed to bully the other participants into breaking the ring-fence rules to allow it to be set up. However, allowing a permanent change means that the ring-fenced bank will be allowed to provide liquidity, and presumably capital as well, on advantageous terms to a bank which can be used as a growth vehicle within HSBC, thereby increasing the risk to ring-fenced funds. I understand why you might have to do that initially, to get the deal through, but I do not understand whether there are any limits at all on what can happen after the acquisition has happened. These permissions have been set up in a way, and are likely to continue in a way, that will allow Silicon Valley Bank to continue to operate in a way that is completely antithetical to the ring-fenced banking regime. As I have said, I am not a fan of it, but I have a strong objection to one bank being allowed to operate in a distinctly different way from other banks.
In relation to the provision in this statutory instrument, my understanding is that the exemption to this aspect of the ring-fencing regime is on a permanent basis. The subsequent SI that we will debate will have conditions applied to it, and we will set out those conditions at the time.
I refer my noble friend and the noble Baroness to the comments from the regulators when they were asked about this issue. The PRA was confident that it
“has a range of tools that it can and will draw on to ensure the effective supervision of HSBC and protection of retail deposits”.
As the noble Baroness mentioned, that is one of the aims of the ring-fencing regime.
Can the Minister confirm whether I have understood this correctly? My understanding was that we are assured that any impact on the ring-fence regime will be brought about through primary legislation.
It is important to distinguish between the near-term reforms that the Skeoch review recommended—I listed some examples of what can be taken forward through secondary legislation—and any more fundamental changes, which are the subject of the questions in the call for evidence, which would need primary legislation to be amended to take forward. So it is possible to make alterations to the ring-fence regime through secondary legislation; in fact, the Government have been quite clear about their intention to do so. We will consult on that before we do so, and we will set it out then. However, the call for evidence sets out more fundamental options, and that would require primary legislation. So there is a mix, but anything such as abolishing the ring-fencing regime, or other more fundamental changes, will be set out in primary legislation. I hope that provides sufficient clarity on that point.
The noble Baroness, Lady Kramer, asked about the interaction between SVB UK and its parent in the US. I will write to her on that subject. It was a UK subsidiary, was subject to UK regulation, and had its own requirements under that regulation. However, to provide absolute clarity on that point, I will write to her. I will also look back on this debate because it has been detailed and technical—as well as very important—and will endeavour, where I can, to improve on my answers to noble Lords in writing. However, there may be areas where there is nothing further to add, even if that is not to the satisfaction of noble Lords.
It is worth concluding on the more positive note that most noble Lords started with: that the outcome of the Government’s action, together with the Bank of England, to facilitate the sale of SVB UK protected its customers and UK taxpayers. It was a good result in that respect, but the Government will continue to monitor the financial system and consider ongoing events. The final note of reassurance I offer is that the Bank of England has confirmed that the UK banking system remains safe, sound and well capitalised. I beg to move.
(1 year, 4 months ago)
Lords ChamberTo ask His Majesty’s Government what assessment they have made of the case for applying the same rate of VAT to building repairs and maintenance as to the construction of new homes.
The Government maintain a zero rate of VAT on new-build residential or qualifying buildings to incentivise the construction of new homes and increase the housing supply. The Government do not have plans to introduce a new VAT relief for building repairs and maintenance. Introducing a new relief for repairs and maintenance would have a significant fiscal cost, which would lead to associated spending, borrowing or tax decisions taken elsewhere.
I am most grateful to my noble friend, but she will have to concede that new building emits 48 megatonnes of carbon dioxide in the UK each year—equal to the total emissions for the whole of Scotland, and that is before you get to the emissions coming out of the SNP headquarters as we speak. Conversely, if we are serious about addressing climate change, we should look at refitting and restoring existing housing stock. Now that we are outside the EU, I simply cannot understand why we cannot have one level of VAT, or even a 5% level, both for new housing and for refurbishing and restoring old stock.
My noble friend raises an important point. He is right that the renovation of existing properties can be an energy-efficient way to bring them back on to the market. There are special reduced rates of VAT for the renovation of properties that are converted either from commercial to residential use or from one residential use to another, if they are renovated after a period of two years without use. A temporary zero rate of VAT applies to installations of qualifying energy-saving materials, such as insulation, to address some of the points my noble friend raised.
My Lords, the noble Lord, Lord Swire, has just reminded me that, the last time I intervened with the Minister, I asked her to get Treasury officials to intervene in Scotland to stop the improper expenditure—she said she would not. Will she rethink that in light of recent events?
My Lords, I would not want to interfere with an ongoing police investigation. My answer was not quite as the noble Lord termed it, but it may have reflected that his question goes slightly beyond the scope of this Question.
My Lords, this is not a devolved issue, and it therefore affects Northern Ireland as well. Does the Minister not agree that conservation of the countryside and the built environment is a very high priority? The effect of continued government policy along this line, especially in Northern Ireland, is that a lot of older houses—nice heritage houses—are ignored, and people simply build new houses beside them. When visitors come to Northern Ireland, they say, “What is this? It is bungalow blight”. There are new houses everywhere, and no wonder, because of successive government policies. Will the Minister please assure us that the Government will look at this anew?
My Lords, the Government keep all taxes under review, but there are no plans to change the VAT treatment of repair and maintenance. The noble Viscount made the important point that we need to ensure that the maintenance of heritage and other older buildings in particular is supported, and we do that through a number of ways other than VAT relief. For example, approximately £206 million of the £2 billion culture recovery fund supported heritage sites and organisations through the pandemic, and several other sources of funding from government arm’s-length bodies are available for historic buildings in need.
My Lords, does His Majesty’s Treasury not have a climate change policy? What goes on there? Does it really not understand that this does not just come down to the cost of living? It comes down to dealing with the impacts of climate change. This tiny measure from the noble Lord, Lord Swire, would actually help with that because it would reduce the amount of embodied carbon that gets trashed every year and we would have a more efficient housing system.
My Lords, it is not a tiny measure; it is a measure that has costs in the billions. There may be several different ways to achieve the point that the noble Baroness is making, which is more energy-efficient construction to create new dwellings. That is the point that I was making to the House.
My Lords, the All-Party Arts and Heritage Group, which I helped to found 49 years ago and of which I have the honour to be president, has lobbied consistently on this. There is no single measure that would do more to help conserve our wonderful historic buildings, and our large historic houses in particular, than this move. Will my noble friend please receive a small deputation, which I hope will be accompanied by my noble friend Lord Swire, to talk about this, because the Government’s answers are totally unsatisfactory and frankly wrong?
I will always be happy to meet my noble friend and a deputation that he brings with him. I am not sure whether I will be able to persuade him of the Government’s view on this matter, but we agree on the importance of support for heritage properties. In addition to the support I previously referenced, DCMS provided £285 million for heritage in 2021-22, including £162 million to Historic England. We also have our heritage high-streets programme running until March next year and have extended the listed places of worship scheme until March 2025.
My Lords, as most registered providers of social housing cannot reclaim VAT, they are reluctant to buy VAT-elected land and resort to an inefficient process known as “golden brick” to address the conflict between themselves and the developers. There are many such conflicts and unintended consequences across the construction industry. With such a broken system, is it not time for a full review? Will the Government at least consider allowing registered providers to claim back VAT on land built for social housing?
On the noble Baroness’s specific point, if I may I will write to her with the details because I do not have them to hand at the moment.
My Lords, can the Minister confirm that around one-third of the money allocated by the Government to fund installation of heat pumps and home insulation has so far gone unspent? That is £2.1 billion that could have been spent on making British homes cheaper to keep warm. Do the Government have a plan to spend this money? For example, could it help to fund VAT reductions on improvements to energy efficiency, encouraging more people to upgrade their homes?
I can confirm to the noble Baroness that we already have a reduced rate of VAT in place for energy-efficiency installations. She will also be aware that we are extending the available support through a new energy company obligation, the energy-efficient Great British insulation scheme. It is estimated that the scheme will make around 300,000 homes more energy efficient, primarily through the installation of insulation measures, reducing household bills by around £300 to £400 on average per year and, crucially, reducing emissions.
My Lords, I draw the House’s attention to my interests, as set out in the register. Is not the noble Lord, Lord Swire, absolutely right on this point: we have underestimated the effects on the Government’s statutory net-zero targets of the demolition of existing buildings and not taken into account the embodied carbon that occurs? The noble Baroness referred to the exemption from VAT on energy-saving materials, but that does not go across the board at the moment. The announcement in the Budget of a consultation on further extension of it was welcome, but I wonder if she can tell me when the Government expect some results from that consultation.
The noble Baroness is right that, to target our support on energy-efficiency measures, we have extended VAT relief in that area. I do not have dates for when the consultation will complete or when the results are expected, but I will write to her if I have any more information.
Can the Minister please tell me which aspects of VAT in Northern Ireland are still governed, and going to be governed, by EU regulations since the Windsor Framework?
Let me relate that to the topic at hand. The temporary zero rate of VAT that I have referred to, which applies to installations of qualifying energy-saving materials, will be expanded to Northern Ireland on 1 May this year.
My Lords, does my noble friend not agree that, with rural churches closing at an alarming rate, there is a case to be made for VAT to be either reduced or abolished on repairs for local churches?
As I referred to earlier, we have in place the listed places of worship scheme that provides support to places of worship, which runs until March 2025.
(1 year, 4 months ago)
Lords ChamberTo ask His Majesty’s Government what assessment they have made of the (1) jobs created, (2) revenue generated, and (3) tax receipts generated, by the introduction of arrivals duty free at UK airports.
Duty free on arrival would place additional pressure on the public finances, to which excise duty makes a significant contribution. Any loss in tax revenue would have to be balanced by a reduction in public spending, increased borrowing or increased taxation elsewhere. Although there are no plans to introduce such a scheme, the Government keep all taxes under review.
I thank the Minister for that Answer. Is she aware that arrival duty-free stores have had considerable success in Norway and Switzerland, where they provide additional commercial revenue streams for the airport to supply growth, and that passenger spending would increase by 30% if they were brought in in this country? Will the Minister ask the Treasury to commit to discuss arrival duty free with airports and ports and explore the wide-ranging economic benefits for the UK through consultation?
My Lords, we welcome engagement on this issue, and we have heard the case put forward for duty free on arrival. As I have noted, the Government believe it would place additional pressure on public finances. One challenge is that any potential uplift in spending potentially displaces spending with other domestic duty-paid retailers and therefore could compete against them. The Government would also need to be confident there was adequate infrastructure and resourcing to combat fraud and ensure compliance. We have no plans to consult on duty free on arrival, but we keep all taxes under review and we consider all available evidence as part of the tax-making policy process.
My Lords, I am delighted that the Government are not looking at this but, if they were to do so, would they look at the alcohol harm that could be caused by the increase of cheap alcohol?
My Lords, public health considerations are a consideration in the decision-making process. I am sure the noble Baroness will welcome both the changes that we have made to the system for alcohol duty, relating it to strength, and the decision in the Budget around uprating.
My Lords, Brexit has presented the travel industry with a wealth of opportunities, and the clear advantages of permitting duty-free purchase on arrival into UK airports would provide us with a level playing field along with our global competitors in this area. Will the Minister urge the Secretary of State and the Chancellor to reverse the current situation, which is damaging our tourist sector and our world-class retail sector?
My Lords, I have set out the position on duty free on arrival, but of course my noble friend is right that, following our exit from the EU, we have been able to introduce changes. One of those changes has been outbound duty-free sales of alcohol and tobacco for passengers travelling to the EU from Great Britain, including by rail and on board cruise ships. That is a new opportunity for retailers to offer that service.
My Lords, I think what the noble Lord, Lord Goddard, said was very sensible and I hope there will be a proper review of this matter. As the noble Baroness is the Minister who has been responding to me on my duty-free Question, could she now please give us a plain and simple answer for why, if Northern Ireland is still part of the EU, duty free cannot be got from Northern Ireland to Great Britain? More importantly, if you can get duty free from anywhere in Great Britain to the rest of the EU, why can we not get it from Belfast?
My Lords, Northern Ireland enjoys frictionless trade with both the rest of the UK and the EU, and the Government are committed to ensuring that that remains the case. Introducing duty-free shopping for goods moving between Northern Ireland and the rest of the UK or the EU would undermine that commitment.
My Lords, it may well be that the introduction of duty free has been one of the fantastic benefits of Brexit, but it seems odd that the Government have taken the opportunity of Brexit to get rid of tax-free shopping. That means that wealthy tourists who used to come here and shop now go to France, Germany, Spain and Italy. It hits our regional airports and our small manufacturers. The change has been opposed even by the Scottish National Party, which must be a clue that the Government have got this catastrophically wrong. Will the Minister keep this policy under review and eventually change her mind?
My noble friend is a persistent campaigner on this issue. He is right that, in leaving the EU, we were not able to maintain the previous policy of offering tax-free shopping to non-EU citizens only; it would have to be extended to all visitors, which would come with a significant cost. However, I reassure my noble friend that we keep all taxes under review, and we welcome representations to help to inform future decisions on tax policy.
My Lords, the Government were slow to back the tourism sector during the coronavirus pandemic, U-turning on a special deal for airports and airlines and missing the opportunity to tie support to green initiatives. Their flip-flopping on the issue of tax-free shopping for international visitors and slowness on the issue of arrivals duty free have led many in the sector to question whether the Treasury truly understands the challenges that the industry faces. What plans, if any, do the Government have to bring forward a cross-departmental strategy for boosting British tourism?
My Lords, I reassure the noble Lord that the Government fully understand the contribution that tourism makes to our economy. To pick up his point about the Covid pandemic, through the pandemic the UK Government provided over £37 billion to support the tourism, leisure and hospitality sector in the form of grants, loans and tax breaks. Since then, the Government have contributed to various successful campaigns to stimulate recovery, including the £10 million National Lottery Days Out scheme and efforts by VisitBritain to deliver its international marketing campaign.
My Lords, following the question from the noble Lord, Lord Vaizey, who mentioned the Scottish National Party, is the Minister aware that in Scotland we have had a Minister for Tourism—which includes what we are talking about in this Question today—since 1999, but the current Government of Scotland have made no such appointment? Instead, they have appointed a Minister for Independence, when the Prime Minister has rightly ruled out a referendum. As a Treasury Minister, will she get her officials to look into this unauthorised expenditure by the Scottish Government?
My Lords, I will say that it shows that the Scottish Government’s priorities lie in the wrong place, instead of seeking to address the priorities of the people of Scotland, whether it is tourism or improving their health and education systems. I think the people of Scotland would welcome a greater focus on those issues and less of a focus on something on which we recently had a referendum that settled the issue.
My Lords, further to the answer that my noble friend has given, surely this is a question of the propriety of the use of public funds. The Scottish Government are involved in spending public money on a matter for which they have no rights. If these people were in local government, they would be being surcharged.
My Lords, I will repeat what I said to the noble Lord, Lord Foulkes, that this absolutely demonstrates that the priorities of the Scottish Government lie in the wrong place and are not aligned with the people in Scotland.
My Lords, returning to the abolition in 2020-21 of the right to reclaim VAT on purchases made in high-street shops, I think the Minister said that nowadays that would cost a considerable amount. But the tourism and retail industries contest that claim. It is two years since that decision was made. Surely the Treasury has up-to-date details.
The noble Baroness is right that there are direct costs of offering any scheme through VAT being refunded but there may be indirect benefits in terms of stimulating tourism and other spending. The Treasury seeks to take both those issues into account when looking at these issues. When the decision was taken to withdraw VAT-free shopping for visitors, the Treasury also held a round table with the industry to hear those views. As I said to my noble friend Lord Vaizey, we continue to welcome representations to help to inform future decisions.
(1 year, 5 months ago)
Lords ChamberMy Lords, all speakers in this debate have recognised the diversity and value that mutuals bring to our economy. At their core, mutuals give people a stake in how businesses and organisations should be run. Their unique, purpose-led, member-focused approach provides an alternative model of economic organisation and activity across all industries, from financial service providers to housing, agriculture, manufacturing and—as the noble Lord, Lord Mann, noted—sports clubs, down to community assets such as locally owned libraries and pubs.
As the noble Lord, Lord Kennedy, described to the House, he has a keen appreciation of the importance of mutuality as a committed member of the Co-operative Group and a non-executive director of the London Mutual Credit Union, one of the largest credit unions in London. I thank him for lending his wealth of experience and expertise as he leads the Bill through this House on behalf of the honourable Member for Preston, to whom plaudits must go for the Bill before us today.
I also take a moment to acknowledge the spirit of cross-party collaboration of which this Bill is a product, particularly that which was fostered between the honourable Member for Preston and my honourable friends the Economic Secretary to the Treasury and his predecessor, the honourable Member for North East Bedfordshire, which saw the Bill move unopposed through all its stages in the House of Commons. Throughout, their endeavours have been backed by significant levels of support and input from the sector itself, particularly the trade bodies Co-operatives UK and the Association of Financial Mutuals, and the think tank Mutuo.
The noble Lord, Lord Kennedy, clearly explained the positive change this Bill seeks to deliver for co-operatives, friendly societies and mutual insurers. This country is rightly recognised as the birthplace of the modern mutual movement. It is right that we protect this legacy by equipping co-operatives, friendly societies and mutual insurers with a stronger option in law to safeguard their funds for the future so that they can continue to contribute value to society and their members for years to come. The merits of the Bill are clear and roundly endorsed by the sector itself. I am pleased to be able to give the Government’s full backing to it. Within the limited legislative time available to us, I look forward to the Bill progressing swiftly.
My noble friend Lord Bourne asked how the provisions in this Bill can be taken forward in Northern Ireland given that co-operatives legislation is devolved and there is no Executive in place. Northern Ireland is governed best when governed locally. The Government believe that this is the moment for the restoration of the devolved institutions. It would be for a restored Executive to take forward any similar legislation, but I assure my noble friend that my officials have had regular dialogue on mutuals issues with their counterparts in Northern Ireland and would be happy to continue that engagement in future.
As noble Lords have noted, the Government’s commitment to this sector is not limited to this Bill. Through the Financial Services and Markets Bill, a number of important amendments are being made to the Credit Unions Act 1979 to support the future growth, diversification and development of credit unions. These reforms include empowering credit unions in Great Britain to offer a wider range of products and services, creating a more agile and competitive sector, which can better adapt to changing market trends to deliver for its members.
Furthermore, the Government are delivering for building societies—mutual savings providers and mortgage lenders—which are not included in the scope of this Bill. As the noble Baroness, Lady Taylor of Bolton, noted, and as announced in the Edinburgh reforms package, the Government will in due course bring forward legislation to amend the Building Societies Act 1986 following the conclusion of our consultation. The amendments will help to establish a legislative framework that is fit for the future and promote a level playing field for building societies to grow and compete.
The Bill is focused on safeguarding the positions that mutuals hold today, but we must also focus on the future. To respond to my noble friend Lord Bourne, my noble friend Lord Naseby—to whom I pay tribute for his long record of support for mutuals—and the noble Baroness, Lady Taylor of Bolton, I say that we are in active discussions with the Law Commission on options to proceed with reviews of both the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992, with a view to launching those reviews in the next financial year. As my noble friend Lord Naseby noted, modernised, fit-for-purpose legal frameworks will enable friendly societies and co-operatives to seize opportunity and grow.
All in this House appreciate the potential of modern mutuality. Mutuals are invested in the success of their members and the local authorities where they operate. Because of that, they can be a real asset in our mission to level up and spread economic opportunity across every region of this country. In the meantime, I look forward to working with noble Lords to ensure the successful passage of the Bill, which is one important step along the road to reform for the mutual sector.