Spending Review 2020 and OBR Forecast

Bim Afolami Excerpts

Wednesday 25th November 2020 Commons Chamber

[Rishi Sunak]

Business rates are, of course, a devolved competency, and I am sure the hon. Gentleman can talk to the Scottish Government about their plans. They will receive £2.4 billion of Barnett consequentials as a result of what we are doing this year, and they could choose to use some of that funding to provide support in the way that he asks.

[Bim Afolami (Hitchin and Harpenden) (Con)]

Earlier this week, I spoke to many people and companies— training providers and others—in my constituency about apprenticeships, and how we need to improve the system and make it more flexible. Will the Chancellor set out in further detail what the measures in this spending review will do to help businesses, training providers and young people get the apprenticeships they deserve?

[Rishi Sunak]

My hon. Friend knows this well, from his own business experience, and he is absolutely right. What businesses have been asking for is more flexibility on how levy funds are used. I am pleased that we can deliver that today. It means businesses can transfer their unspent levy funds down the supply chain easily, in bulk, to small and medium-sized companies. We are going to create a matching service for that to happen, and we are also going to allow employers, in certain industries at first, to front-load some of their training funding, which is what they also wanted. Those obviously will be funded by the Government—all those changes that happen as a result of our getting less in the levy funding—but we think they are the right thing to do. They will support business and support apprenticeships, and he is right to raise it.

Financial Services Bill

Bim Afolami Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Monday 9th November 2020 Commons Chamber

[John Glen]

As my hon. Friend mentioned to me a few days ago, he is aware that the Ministry of Justice is conducting a consultation on that matter, and that will drive the Government’s response overall, but it is a matter we take seriously. Following the Financial Action Task Force review at the end of 2018, we needed to move forward a number of measures to improve and tighten our regime. It is critical for the integrity of the United Kingdom’s financial services industry to have in place the appropriate sanctions and the important regulations on reporting standards across the whole of financial services.

Let me turn to clause 32, which will strengthen our breathing space scheme that supports people with problem debt. That has long been a priority of mine as City Minister, and I put on record my gratitude to my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst), who introduced a private Member’s Bill on this issue, for all her efforts, and to Members across the House for the consensus on that legislation’s introduction. The Bill contains crucial amendments that are required to implement fully and effectively statutory debt repayment plans, which will help people facing problem debt to pay back what they owe within a manageable timeframe. The Bill’s measures will allow us to compel creditors to accept these new repayment terms, providing greater peace of mind to consumers, many of whom will be vulnerable.

[Bim Afolami (Hitchin and Harpenden) (Con)]

I congratulate the Minister on the work I know he has done over many years on this subject. I understand that the Bill amends the Financial Guidance and Claims Act 2018 to ensure that the statutory debt repayment plan can include debts owed to the Government or Government Departments. Will he explain a bit further how that will work in practice? What will the ranking for claims be for creditors? Will it require a mediated process?

[John Glen]

I thank my hon. Friend for his question. As he says, the purpose of the measure is to provide, during the eight-week moratorium—longer for those with a mental health condition—a set of options, and it is key that the Bill will allow us to compel creditors to accept the new repayment terms. He is right to say that it will provide peace of mind to all consumers, with a compulsion under the provision to bring in debts owed across the public and private sector. He asked me to list the hierarchy of debts, which is probably beyond my capacity at this point, but I am happy to write to him to set out in more detail what the provision gives us room to do.

Clause 33 complements the Government’s pioneering Help to Save scheme, which supports people on low incomes to build up a nest egg. These changes will ensure that people can continue to save through a National Savings & Investments account after their participation in the scheme ends.

As I mentioned earlier, there will be some areas where this country will decide that it is right to diverge from EU regulation. Clause 34 is a good illustration of that, making amendments to the packaged retail and insurance-based investment products regulation, commonly known as PRIIPs. That EU legislation was laudable in its aims, although, one might argue, not quite as laudable in its outcomes and achievements. Concerns have been raised by Members across the House, and most tenaciously by my hon. Friend the Member for Basildon and Billericay (Mr Baron), that it is not working as intended and that there is a risk that consumers may be inadvertently misled by disclosures that firms must provide under the regulation. I am pleased finally to be able to address those concerns. The Bill will allow the FCA to clarify the scope of the regulation. It will tackle the issues around misleading performance scenarios and allow the Treasury to extend an exemption from the PRIIPs regime for undertakings in collective investments in transferable securities—UCITS—which are a type of investment fund.

These are some examples of how we intend to take advantage of a new ability to address issues in retained EU law. However, we have no intention of needlessly, ideologically or recklessly diverging from EU legislation. Instead, we will maintain existing regulations where they make sense for the financial services industry in this country. One instance of that approach is clause 35, which finalises reforms to the European market infrastructure regulation, which the UK supported as an EU member state, while clause 36 contains a change that should provide certainty to markets by ensuring the legal validity in the past and in the future of the financial collateral arrangements regulations.

Finally, clause 37 will make the role of the chief executive of the Financial Conduct Authority a fixed five-year term appointment that is renewable only once, in line with other high-profile roles in financial services regulation. That was recommended by the Treasury Committee not so long ago.

I recognise that Members might be concerned that some of the Government’s prior commitments are not included in the Bill. I assure the whole House that our focus on these issues has not wavered. One issue that came up in questions to the Chancellor earlier was access to cash. The Government are committed to ensuring that everyone who needs it has easy access to cash. I have heard representations on the issue from Members across the House in recent weeks, including my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell), whom I met recently, and Members from across Scotland and the whole UK.

Earlier this month, we launched a call for evidence, seeking a wide range of views on the subject’s key considerations. Once we have reviewed the findings, we will bring forward legislation as soon as parliamentary time allows.

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[Mr McFadden]

I do, and I will talk later about the Basel III regulations; certainly Basel II did not prove to be any kind of protection against what happened in 2007 and 2008.

The other issue that we will have to consider is the role of Parliament in debating and deciding these matters. The approach that we will take is to ask at each stage what these measures will mean for the UK financial services industry, for the wider economy and for consumers. Do they guarantee robust regulation in the public interest, or do they expose the consumer to greater risk?

There is a particular onus on the UK to get this right, because we are a medium-sized economy with a globally significant financial sector. There are obviously crucial benefits of that to the UK: the huge number of jobs generated around the country by financial services; the investment that comes into the country through being a world leader in the sector; and, of course, the tax revenue that goes towards supporting our public services. But, as we have also learned, there are risks if things go wrong, and it is in no one’s interest for the post-Brexit regulatory system to result in a race to the bottom, where the public are exposed to greater risk in the name of increased competitiveness.

We know that parts of the financial services sector will be knocking on the Minister’s door. They will not put it in terms of watering things down; they will tell the Minister that they could be so much more competitive if only he changed this rule or that rule, or gave them this or that exemption. Of course, we do not argue that any rulebook should be frozen in time. Regulation must adapt to circumstances and innovation, but these things are there for a reason. Capital has to be held against lending and other products for a reason. These rules are the public’s insurance policy against the risks involved in the enormous capital flows that go across countries and between financial institutions. They are the as yet untested firewall against a repeat of what happened across the globe a decade ago.

[Bim Afolami]

What is the right hon. Gentleman’s view on an expanding, ever more complex set of measures obscuring good supervision and prudential management of the financial services sector? To what extent would he welcome any efforts—whether cross-party or by the Government—to simplify regulatory standards while also ensuring that they continue to be robust? There is a danger for many in different parts of the industry not of watering things down, but of such complexity making it very difficult to manage a business on an ongoing basis.

[Mr McFadden]

Nobody should be wedded to complexity for complexity’s sake. As I said, beneath the complexity, the issues are actually not that complicated. They are about the safety of insurance and resilience when things go wrong, and that is what we are focused on, rather than defending complexity for complexity’s sake.

The second thing that we will have in mind as we debate the Bill is the broad question of what financial services are for. The Chancellor set out green goals for the UK financial services industry in his statement today, and we welcome, for example, what he said on green gilts. But those green goals are not mentioned in the accountability framework set out in the Bill. Indeed, in schedule 3, the accountability framework states that the regulator must have regard to

“relevant standards recommended by the Basel Committee”.

The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) was right to say that that should be a minimum, not a maximum, given the importance of resilience and robust regulation. The regulator must also have regard to

“the likely effect of the rules on the relative standing of the United Kingdom as a place for internationally active credit institutions and investment firms to be based or to carry on activities”

and

“the likely effect of the rules on the ability of…firms to continue to provide finance to businesses and consumers”.

Nothing there speaks of the green goals. Do the Government intend to amend the Bill as it progresses, to reflect the statement made by the Chancellor today? There is an opportunity here to put regulatory power behind the goal of net zero and, indeed, broader social and governance considerations for the greater public good. As it stands, the Bill is silent on that—it does not do that yet. When will the Bill be reconciled with the statement that we heard this afternoon?

Thirdly, we will want to ensure that the UK maintains the highest standards when it comes to transparency, money laundering and corruption. We have already had the report from the Intelligence and Security Committee referring to the “London laundromat”, where illicit funds can be washed and corrupt financing rendered more obscure. The UK’s globally significant financial services sector must not be tainted with any sense that this is an easy place for illicit or corruptly obtained finance to be washed through different institutions. As the Bill progresses, we will seek to ensure the highest possible standards with regard to these issues. Of course we want a successful, globally competitive financial services sector, but it has to be based on clean money, honest endeavour and socially responsible goals.

I turn to some of the individual measures in the Bill. As the Minister said, clauses 1 to 7 deal with new prudential regulation requirements, the implementation of the Basel rules and the new accountability framework, which I quoted from a moment ago. As I said, the schedule on the accountability framework states that, when making these new rules, the regulator must have regard to the likely effect on the “relative standing” of the UK as a place for firms to be based or carry on activities. I want to explore that with the Minister. Does that clause about the relative standing of the UK mean that, every time a regulated entity says, “We don’t want you to do that because it will affect our competitiveness in relation to other countries”—and they are liable to say that quite a lot when regulatory proposals are put forward—the regulators have to keel over and give in? How does this point to the UK being a leading player in the kind of environmental or social regulation that can help to ensure that the power of our financial services sector is a force for good? What is the guarantee that the provision does not, in fact, become a deregulator’s charter, on the basis that we should not do things that some in the industry could claim put us at a competitive disadvantage relative to other countries? The wording is crucial. The accountability frameworks, Parliament’s role in them and what they should cover will be the subject of significant debate as the Bill progresses.

On capital ratios, the FCA has estimated that total pillar 1 capital requirements will decrease by 5%. What is the justification for decreasing the capital requirements when we know that over-leveraging was a key cause of the financial crisis? How can the Government ensure that the onshoring of these powers does not result in a chipping away of the public’s insurance policy on financial risk? Similarly, in relation to Basel reforms, the Bill’s impact assessment talks of

“flexibility to tailor the actual detail of these subject areas to the UK.”

Given the weakness of the Basel rules in the past, it is clear that they should be seen as a floor, not a ceiling. Adherence to international standards is a minimum, not a maximum to be wriggled out of when we get the chance, so what exactly is the flexibility to be used for?

Clauses 8 to 19 deal with LIBOR and the governance of benchmarks. For my sins, a few years ago I served on the cross-party Parliamentary Commission on Banking Standards, which was established in the wake of the LIBOR scandal, which exposed manipulation, mutual favours and price setting based on conjecture rather than actual trades. The benchmark was abused to benefit traders, rather than markets or the end consumers of those trades, so it is right that it goes, but so many contracts around the world have been based on it that the Bill has to put in place a system for dealing with such so-called tough legacy contracts. The principles behind benchmarks should be clear: they should be based on actual trades and costs and should be insulated against manipulation for personal gain by those who submit the information to the benchmark in the first place. That will be the task of the FCA.

Clauses 22 and 23 establish the new Gibraltar authorisation regime. I share the warmth towards Gibraltar that is felt in all parts of the House. The measures could be described as a necessary consolation prize for taking Gibraltar out of the EU, by ensuring continued market access on a free basis between Gibraltar and the UK.

Clauses 24 to 26 give us a picture of how equivalence will work from the UK point of view, at least in part, by establishing the overseas fund regime, which negates the need for fund-by-fund approval and will instead be based on country-by-country approval and extending the time period for such funds to trade in the meantime. In his statement earlier this afternoon, the Chancellor had more to say about how we will grant equivalence recognition to others, but of course he could not say what would happen to UK companies that sell services overseas, because over that he has no control.

What was announced today dealt with one end of the telescope, because that is the position we are now in. Whatever this can be described as, it certainly cannot be described as taking back control, for we are now dependent on a response from others in respect of the crucial UK companies in the overseas markets in which they want to trade. There is also the question of how equivalence decisions are to be granted. Are such decisions a matter of economic policy or foreign policy—or both? I would be grateful if the Minister addressed that when he responds.

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[Bim Afolami (Hitchin and Harpenden) (Con)]

I am reminded of something that Lyndon Johnson, who is a bit of a political hero of mine, said at some point in the 1960s when he was talking about speeches on economics and finance. I hope I do not test your indulgence too much, Mr Deputy Speaker, because he said that making a speech on economics was a bit like peeing down your leg: it seems hot to you, but never to anyone else. I am reminded of that before I embark on my detailed comments on the Bill. I strongly welcome the Bill, and I do not want to repeat what other hon. Members have said about the good things in it. I speak as a former corporate lawyer working in strategy and restructuring at HSBC. Before that, I was a corporate lawyer at Freshfields and at Simpson Thatcher. Over the weekend, I was speaking to several people in the industry, including a constituent who I happen to have done a few deals with in the past—a man called Tim Lewis, who is an expert on financial regulation at Travers Smith. There are technical points I want to make to the Minister, and indeed I have written to him separately on some of them. I do not expect him to deal with them all in his summing up, but I think they are worth considering. He is looking forward to that, I can tell.

The Bill’s core purpose is to ensure a regulatory regime that continues to operate effectively after the end of the transition period at the end of this year. The first point I want to make is that the Bill empowers the FCA to impose obligations directly on certain parent undertakings of MiFID—markets in financial instruments directive—investment firms. But the current parent undertaking concepts in the Bill go beyond the equivalent EU legislative drafting in two important ways. I will not bore the House by going through that in immense detail, but proposed new clause 143B uses the wider concept of authorised parent undertaking. That matters because, effectively, it covers any entity that is regulated by the FCA. In its discussion paper, the FCA indicates that it currently regulates about 3,000 MiFID investment firms. However, it states on its website that it regulates nearly 60,000 firms in total. Those additional firms include, for example, small credit brokerages and insurance intermediaries. Therefore, the current proposal is, in short, a huge expansion of FCA power over smaller firms, going much further than what the equivalent European regulators can do. That is something we have to think about.

There is another way in which the proposals go beyond the EU regulation, and that is in relation to non-authorised parent undertakings. Today, it is accepted that parent undertakings will be caught by the regime where those undertakings are incorporated in the UK. However, it is not the case that any parent undertaking that has a UK office will be caught by the current regime. For example, a US-incorporated holding company with a US head office and a UK branch would ordinarily be out of scope of the rules.

Why does that matter? It matters because if the definition of non-authorised undertaking is retained in its current form in the Bill and is adopted by the FCA, that would lead to a significant expansion of the current rules. The effect might be to require some firms to restructure to close down existing UK branches of overseas businesses. It might push firms to ensure that overseas holding companies that carry out no substantive operating activities cease all UK activity, such as holding meetings in the UK, to avoid having a UK place of business. Again, this is a technical point, but it is an important one. To come to some of the points that have already been made, the Bill sees a big expansion of FCA powers, and we have to be very careful about that, particularly as we come out of the transition period and they expand beyond what is happening in the European Union. That is a particularly important point.

I also speak as the Member for Hitchin and Harpenden. In my constituency, I have not only many people who work in financial services, but some small financial services firms. The technical term for one group of firms is exempt CAD—capital adequacy directive—firms. The Bill and the FCA discussion paper leave open the question of how such firms will be treated. These firms are investment consulting, corporate finance and private equity firms, and their activities are limited to giving investment advice and arranging deals. In that sense, they do not hold much money; they are effectively providing advisory services. Today, they have a capital requirement of €50,000. The default position in the Bill is that the new rules will apply to them in full. If that is the case, many will see a significant increase in their capital requirements shortly after losing the benefit of the cross-border EU services passport, which some of them use. The Bill again effectively leaves it to the FCA to determine whether to make an exemption or transitional provision for these firms. Again, I make the point that the FCA needs to be scrutinised really carefully in relation to the powers it has under the Bill.

When making rules to implement and maintain parts of the investment firms prudential regime, the FCA will be required to have regard to a new list of matters. I do not want to repeat all the points made by my hon. Friend the Member for Wimbledon (Stephen Hammond), but these matters relate to important public policy considerations, including the relative standing of the UK as a place for internationally active investment firms to carry on activities. This point needs clarifying a bit further, whether from the Treasury Bench or in the Bill. It is clear what the Treasury is trying to do. It is trying to have a balanced approach between maintaining our reputation as a safe financial services centre in regulatory terms and ensuring that we do not fall too far behind other jurisdictions in our general attractiveness. However, I think we need to push the regulators much harder. I would like further clarity in this Bill on how regulators will need to actively seek to ensure that the UK financial services industry will be able, first, to support the UK economy and our ability to compete with overseas firms internationally, in addition to the UK’s relative attractiveness as a place to do business. This may sound like a technical difference, but I assure the House that it is not. If we do not clarify this and do not choose to try to expand the regulator’s requirement to think about our relative standing and competitiveness, not just in relation to this investment firms’ prudential regime, but across all of its rule making, I fear that this may be another example of the creeping weight of regulation and complexity that we have seen in recent years. I ask the Minister to confirm that the Government will at least consider publishing a financial services strategy in due course.

I wish to talk about how we are going to scrutinise the regulators and how this House and indeed this Parliament as a whole can do that more effectively. It is clear to me that the weight and volume of legislation and regulations after we leave the transition period will be quite significant, and I urge the Minister to consider strongly, within the review that the Treasury is already conducting, setting up a specialist financial services Committee in this House, perhaps a Joint Committee with the House of Lords, to consider not just statutory instruments that come through this House, but the actions of our regulator. What happens without that detailed oversight, involving a specialist group of people who are spending a huge amount of time on it? Financial services regulation is technical, as everybody in this House who has been listening to me for the past 10 minutes knows. We need to consider that.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) made the point about the huge changes in global finance—the growth in asset prices, and the increasing role of central banks and quantitative easing. Regulators are playing a huge role in those decisions, yet the oversight by Parliament is relatively slight. So I want the Government to consider how we can strengthen this House’s ability to scrutinise our regulators, particularly as they are getting a huge number of powers in this Bill. However, I would like to finish by saying that I commend the Bill, the Minister—I know the hard work he has been doing—and his team. I also commend the industry, which has been feeding in and discussing the Bill with the Government and other Members. The Bill is very important. It is a landmark Bill. I am sure there will be more financial services Bills to come, and I support it.

Future of Financial Services

Bim Afolami Excerpts

Monday 9th November 2020 Commons Chamber

[Rishi Sunak]

The hon. Lady will know the importance of offshore wind in her area, and she will have welcomed the Prime Minister’s announcements for that sector, including the increase in the amount of domestically manufactured content as we look to build on our advantage as a user of offshore wind to make sure that we also build an advantage in manufacturing the turbines. That is exactly what the hon. Lady is asking for, and this Government are in the process of delivering it.

[Bim Afolami (Hitchin and Harpenden) (Con)]

I welcome the Chancellor’s statement, which foreshadows a huge increase in powers for the Financial Conduct Authority and a huge increase in the amount of legislation and regulations that will come through this House. What thought has the Chancellor given to establishing a specialist financial services Select Committee of this House, perhaps with some oversight capacity, so that we can manage this huge influx of legislation and regulations once we get out of the transition period on 1 January?

[Rishi Sunak]

It is not for me to suggest that the Treasury Committee needs something else to do, but my hon. Friend is right that there will be a change in the regulatory alignment after leaving the transition period, which is why our future regulatory framework review is so important. We are just embarking on phase II of that. It will consider the right balance between Government, Parliament and the regulators. That is the appropriate place for him to feed in his thoughts on how we can get that balance right.

Black History Month

Bim Afolami Excerpts

Tuesday 20th October 2020 Commons Chamber

[Bim Afolami (Hitchin and Harpenden) (Con)]

It is a pleasure to speak in this debate and to follow many other hon. Members. We have talked a little bit about black history—that is appropriate, as it is, indeed, Black History Month—and I would like to echo some of the things that have been said so far. We have already talked about how black history is British history, and British history is black history; these things are synonymous. I want to say right at the beginning that, whatever our different political views—this got a little bit tetchy for a while, but I hope it has calmed down—the one thing on which we can all agree is that black history is British history. That shared bond that people in these wonderful four nations all share together—whether they be white, black, Asian or whatever ethnicity—is critically important. Indeed, it is one of the reasons why I think the Union we have is so precious.

In that spirit of camaraderie and friendship, I would like very gently to take on some of the points that we have heard from certain Labour Members—very gently. I have heard very moving speeches from Labour Members, including the hon. Member for Brent Central (Dawn Butler), who is always very passionate about this issue. She knows a lot about it and campaigns a lot about it, and I think everybody in this House respects her for that. However, as somebody who loves history—I studied it as a boy and at Oxford University—I think it is fair to say that, when I entered Oxford University in 2004, this issue, if I were to paraphrase it, of decolonising the curriculum, which has been mentioned, was not a common issue and was not talked about very much. I studied history at that university and enjoyed it very much, and my studies included this issue and a range of different things in all different continents and different countries. I also studied a lot of British history, and I can tell hon. Members that, throughout my whole life, the study of this country’s history has not made me feel inferior. It has not made me feel that I do not belong here. It has not made me feel that somehow my unique part in the story of this country—indeed, the unique part that all of us of every ethnicity has in this country—is not recognised.

[Kemi Badenoch]

My hon. Friend is making a very important point about who we identify with. Given what the hon. Member for Brent Central (Dawn Butler) feels about children who read books by authors of a different colour to them, would he agree with me that most children do not actually know the colour of the skin of the author of a book they are reading, and in fact we do not need to have people who share the same skin colour as us to identify with them?

[Bim Afolami]

I thank the Minister for her intervention. It is interesting because I have three boys—they are mixed race boys—and my wife told me something recently. I do not know whether I am meant to announce this in the Chamber, but why not? [Interruption.] Yes, I should be careful. She remarked to me recently that when she was trying to identify the black individual in an illustrated book with people of different colours—dark, mixed race, white, Asian: it was a complete mosaic—my son did not know what she was talking about. He could not conceive—[Interruption.] No. He did not understand how we would think about one individual as different from another simply on the basis of the colour of their skin. It is worth saying that he is very young, but my broader point is—

[Several hon. Members rose—]

[Bim Afolami]

No, no. My broader point is that it is very important that we do not allow the teaching and interpretation of our necessarily complex and diverse, yet brilliant and great British history to become very ideologically divisive. I would therefore reject comments from those who say that somehow we need comprehensively to reframe the entire nature of our history to address what they suggest. I believe that what we need to do—

[Christine Jardine (Edinburgh West) (LD)]

Will the hon. Gentleman give way?

[Dawn Butler]

Will the hon. Gentleman give way?

[Bim Afolami]

I will continue. What we actually need to do is to look forward, understand our past, understand where we have failed and understand that we have made progress, but accept that there is much further to go.



I would like to pay tribute to my hon. Friend the Member for Windsor (Adam Afriyie), who was the first black Conservative MP in the modern era; I do not want to get involved in the historical debate about when the first non-white MP was elected, because we will get ourselves tied up. He has done credit to himself and his family through his service in this House, his record as a successful businessman before coming to the House and the kind advice, wisdom and guidance that he gives to all Members as a senior Member. I remember watching him on “Question Time”—I think it was even before he had been elected, such was the reliability of the voters in Windsor that people were sufficiently confident he would win as a Conservative. I remember watching him and thinking, “Maybe I can become a black Conservative MP as well.” I pay tribute to him.

[Dawn Butler]

Why, because you saw somebody who was black, and—[Interruption.]

[Bim Afolami]

I was trying to be so nice to the hon. Lady. I do not know why she is carping from a sedentary position, but I will continue. Two words have come up quite a lot in the debate. I would like to address them, and I address them as a Conservative.

[Tulip Siddiq]

Is this what they teach you at Eton?

[Bim Afolami]

Okay; let’s address this. The hon. Lady shouts from a sedentary position, “That’s what they teach at Eton.” First, I am not sure that they did, but regardless of that point, yes, I went to Eton College. It is a good school. I am proud of being able to go to that school. I am proud of the fact that people of all backgrounds and all races are able to go to that school. I reject the idea that if someone is black or non-white, there are certain places that they are not able to go.

--- Later in debate ---

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Interventions should be short. I did remind the House about the length of speeches, and we are in danger of a time limit being imposed if we are not careful.

[Bim Afolami]

Thank you, Mr Deputy Speaker. I like the hon. Lady as well. What she says has a huge amount of truth. Of course there is a difference between people of different backgrounds, and it is in that diversity that we find strength as a country. I accept that I have had advantages that certain white working-class boys or girls may not have had, and I have had advantages that certain black people from working-class backgrounds may also not have had. Of course that is true, but at the same time—and I think this view is shared on both sides of the House; it is not partisan—we need to make sure that everybody can aspire to everything and there are no no-go areas, whatever someone’s race or background. That message of aspiration is one of the key reasons why I became a Conservative.

We have made progress. I do not want to repeat what others have said about where we have fallen short and need to make progress. I look at what my friend the noble Lady Morrissey, has done over the last few years with the 30% Club to get more women into senior positions in big public companies. We should look at that sort of approach and think about how we can increase the number of black people and other minorities in leadership positions.

[Christine Jardine]

Will the hon. Member give way?

[Bim Afolami]

I will continue, because time is short.

That sort of aspiration is important, but the question is often how we get there. As I have said, we need to seek out and identify talent wherever it appears, support people who do not necessarily have the advantages that others have—that is people from all types of background and of all races—and accept the diversity and intersectionality that the Member for Hampstead and Kilburn described. At the same time, we must reject the fundamental principle of identity politics, that we are mostly black, Asian, white—one of those characteristics. We must allow individuality to be the primary focus of how we think about diversity, opportunity, support and aspiration. I reject the idea, for example, that we should have quotas. I believe in targets and help in identifying where people need support.

I see that the hon. Member for Bath (Wera Hobhouse) is on the Liberal Democrat Front Bench. She has not made a speech yet, so I will not criticise her, and I am sure that she will address the point that I am about to make. Liberal Democrats say—and many people in Labour have suggested this in the past—that we should have all-black shortlists, but I reject that approach. Quotas are a bad idea, because that means that everyone else will look at the Minister, or at me, or at my hon. Friend the Member for Windsor and say, “They are only there because of their race.” That is a dangerous thing. We need to recognise the past, welcome our progress and look forward to the future with confidence as a United Kingdom.

Oral Answers to Questions

Bim Afolami Excerpts

Tuesday 15th September 2020 Commons Chamber

[Jesse Norman]

I can tell my hon. Friend that 67 local businesses registered for the scheme and that it was used 53,000 times in Bridgend, which, while not like the heroic figures we have seen elsewhere, will have provided a very important boost to the local economy. I am sure that he will have had the experience that Members across the House will have had of walking into a café or restaurant and having the proprietor say, “Thank you so much. It has made a vital difference at a critical time of year for us.”

[Bim Afolami (Hitchin and Harpenden) (Con)]

What fiscal steps his Department is taking to support businesses affected by the covid-19 outbreak.

[Miriam Cates (Penistone and Stocksbridge) (Con)]

What fiscal steps his Department is taking to support businesses affected by the covid-19 outbreak.

[The Economic Secretary to the Treasury (John Glen)]

The Government recognise the extreme disruption that the pandemic has caused businesses, which is why we have delivered a generous and comprehensive package of support, in line with best practices globally, totalling more than £190 billion. That has included grants, loans, the furlough scheme, the self-employment income support scheme, deferred VAT payments, business rate reliefs and protections for commercial tenants.

[Bim Afolami]

I thank the Minister for his answer. Will he and the Treasury consider reviewing the rules of the furlough scheme to deal with cases where some small businesses, particularly one in my constituency, missed out on that scheme through administrative error and, in effect, paid staff when that could have been done through the furlough? Will he discuss that with me separately to see whether we could review the rules to deal with that sort of administrative mistake?

[John Glen]

Obviously, the scheme has helped 1.2 million employers, and that involves 9.6 million jobs. I am happy to engage with my hon. Friend on the specific example he raises. No appeal process is available for those who have made administrative errors, but if a mistake has been made by Her Majesty’s Revenue and Customs, a complaints procedure can be followed. I will follow up on this with him personally.

The Economy

Bim Afolami Excerpts

Wednesday 8th July 2020 Commons Chamber

[Wes Streeting]

The hon. Gentleman makes a really important point. Of course, the devolved Administrations can provide their own policy responses, but we know that decisions taken here on public spending have a direct impact on their ability to respond accordingly, too.

We have said throughout this crisis that we would not criticise for criticism sake, and beyond the kick-start future jobs fund announced today, we welcome the attempt to make sure that the furlough scheme gets people back to work, instead of making them redundant through the jobs retention bonus. We are glad that the Chancellor included provision to get people into training and apprenticeships in his statement, and we welcome the additional resources provided to the Department for Work and Pensions to help get people back into work. In so far as they can, we hope that the cut in VAT and the limited “eat out to help out” scheme will be of some assistance to our tourism and hospitality industries, but this falls far short of what we called for and what was promised. We were promised a new deal, but the Chancellor’s big announcement was a meal deal. The Chancellor said that we cannot have endless extensions to the job retention scheme, which was echoed by the Chief Secretary, and that we cannot allow furloughing to go on forever. We agree. We have never argued otherwise. This straw man argument does a real disservice to the concerns coming from those employers and industries that face the biggest and longest hit as a result of covid-19.

[Bim Afolami (Hitchin and Harpenden) (Con)]

Does the hon. Gentleman not accept that, as the Chancellor confirmed, there is still a Budget to come later in the year and that the announcements today were not the sum total of everything that the Government will do? He should continue the constructive tone that he has used in part of his remarks and say, “Now we should work together on both sides of the House to see how, in the autumn Budget, we should extend things and see what needs to happen once we understand the economic situation at that time, which will be different from what it is today.”

[Wes Streeting]

The shadow Chancellor has always been willing to work with the Chancellor and we would be very happy to engage with the Government in terms of the flexibility that we are calling for in the sector-by-sector approach. In fact, as the Government did in establishing the job retention scheme, we would encourage them to sit down with employers and trade unions to look at what support is needed, for how long and across which sectors to make sure that people come through this crisis. The challenge with what the hon. Gentleman describes is that for too many businesses it will simply be too late. When there are some businesses that are still shut down through no fault or choice of their own, it is completely unreasonable for them to see Government support beginning to wind up before they can actually open their doors to business. The public health response and the economic response have to go hand in hand. I would have thought that point would be obvious to the Government.

Part of the Government’s challenge is demand and getting consumers spending again, as we have heard, but many of the challenges are also supply side, where a cut in VAT or a £10 discount on a Tuesday night is neither here nor there. Beyond tourism and hospitality, we have seen job losses across a range of sectors in recent days and weeks. The Chancellor offered nothing for manufacturing, including for companies at risk in aerospace and automotive industries, and nothing for the businesses whose doors are still closed. We fear that the Chancellor’s refusal to accept a more flexible and tailored sector-by-sector approach to business support and job retention is a failure of judgment that will be reflected in higher unemployment figures. I would be delighted to be proven wrong on that point.

In his statement, the Chancellor said that people need to know that although hardship lies ahead, no one will be left without hope. I am afraid, as we have already heard, he offered no hope whatever to the excluded, those who have consistently fallen through the cracks of the Chancellor’s support for employed and self-employed workers. Instead, they remain forgotten. Some of this is about choices and priorities. It is not clear why many of those facing the greatest financial hardship were offered no direct financial support in what the Chancellor announced today. Those who will benefit from the cut in stamp duty will, by definition, be better off.

--- Later in debate ---

[Bim Afolami (Hitchin and Harpenden) (Con)]

Like everybody in the House, I welcome the Chancellor’s statement, and I think it is worth considering that we have a twofold economic problem here, which we will have to deal with over the next few months. The first difficulty is one of demand, as there is a chronic demand shortage. The Government have done their best to stoke and increase demand over the summer and autumn, and I think those measures will be successful, but there are other fundamental structural problems with the economy that this crisis has shown us.

One is accelerated technological change on the high street in retail, and in automation in the industrial sector. The second is skills. We talk about building infrastructure, building back better and a green recovery. None of those will matter—all the money from the Government will not deal with the problem—if we do not have people with the right skills who can do the work.

The third structural problem we have is within our financial sector, with companies not having sufficient equity, or rather having too much debt, so that when the crisis is behind us they will not be able to grow sufficiently fast. Again, that is a structural problem with the economy.

There are three things that the Government and the House should consider over the coming months. First, while the crisis is here, we should maintain a loose fiscal policy and loose monetary policy. That is very important, because there needs to be sufficient demand growth over a sustained period of time for businesses to expand with confidence and not think that it will be pulled away in a couple of months’ time. For them to expand with confidence, there needs to be sufficiently loose monetary and fiscal policy. If they can do that, spending will grow robustly enough for there to be demand to create private sector jobs without subsidy from the public sector over the medium term.

The second thing we can do is adapt our financial system to make sure we can get more equity into businesses and reduce the debt burden. I have proposed certain things in work I have done. The Chancellor referred earlier to my work “Unlocking Britain”, which discussed how we can recapitalise the SME sector. Something like that needs to happen within our financial system so that we can reduce the debt burden for companies to give them equity so that they can grow.

The third thing, which connects with skills directly, is that we need to improve the ability of labour—people—and capital, money, to move from sectors and companies that are declining into those that are growing and have the potential to power forward our recovery. Those are the measures that the Government need to consider in the months to come.

Economic Update

Bim Afolami Excerpts

Wednesday 8th July 2020 Commons Chamber

[Rishi Sunak]

Scotland has benefited extraordinarily from the interventions that this Government have put in place during this crisis. I talked earlier about the Barnett consequentials and the billions of pounds, but more importantly about the ability for us to act as one United Kingdom. At a time like this, the importance of that has never been more to the fore. The hon. Gentleman talks about oil and gas. I am happy to acknowledge the difficulties in that sector, and I know that the Business Secretary is in talks with it. Mechanisms have been put in place before. Again, we keep all these things under review, and if we need to make more interventions in future, of course we will.

[Bim Afolami (Hitchin and Harpenden) (Con)]

I thank the Chancellor for his statement and also for his kind words that he is considering my proposals on recapitalising the SME sector. I want to ask about the infrastructure funding of, I think, £5.6 billion that he has committed to today. Will he expand on how he thinks we can get infrastructure delivered more quickly, whether it is through dealing with planning regulations or other practical obstacles, because that is how we can make sure that that money is most effective?

[Rishi Sunak]

My hon. Friend is absolutely right. It is one thing to sit here and approve budgets for things; it is more important that we get on and actually deliver them. We need to make sure that our communities see tangible improvements in what is happening around them, and, particularly given the economic situation we face at the moment, there is a premium on doing that quickly. That is why we brought forward £5 billion-worth of projects and why we have initiated Project Speed to look at our entire process end to end—procurement, planning, construction and regulations approval—to ensure that we can deliver for our communities as quickly as possible.

Self-employed Persons: Financial Support

Bim Afolami Excerpts

Tuesday 24th March 2020 Commons Chamber

[Steve Barclay]

Without straying into individual cases, the key advice from the Government is to follow the medical advice that was set out following the Prime Minister’s statement and updated on the Government website. That sets out the advice to workers, including what is safe to do and what is essential.

[Bim Afolami (Hitchin and Harpenden) (Con)]

In its unprecedented support for employed workers, the Treasury took a fairly generous overarching approach. I urge the Treasury—I am not the only one saying this; it represents the mood across the House—to take a similarly broad approach to benefit the majority of self-employed people who will need support, accepting that certain people may get support even if they do not quite need it.

[Steve Barclay]

The Treasury is looking at those issues in the design of the scheme. We recognise that the vast majority of self-employed people face very considerable challenges, and we are mindful of the urgency that goes with that.

Contingencies Fund Bill

Bim Afolami Excerpts

Committee stage & 2nd reading & 2nd reading: House of Commons & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Tuesday 24th March 2020 Commons Chamber

[Bim Afolami (Hitchin and Harpenden) (Con)]

This Bill, as the Minister said, shows decisive leadership by the Government and, indeed, by the whole House. It is supported by the Opposition parties. As the Minister explained, this is really a cash flow Bill. It is not a provision at this juncture for the extra £266 billion of Government spending for Departments; it is an advance to those Departments.

The first question I ask the Minister is, bearing in mind the advance, what is the Treasury’s current estimate of how much extra it thinks it will be borrowing when we come to estimates in July? That is something the House would like to consider and start thinking about.

Another point related to the fiscal and monetary management of this crisis, which I think this Government have done admirably, is whether the Treasury has done any thinking about the Government balance sheet, and in particular the balance sheet that will be looked at by international sovereign investors. Bearing in mind that this crisis is affecting every country in the world, have they done any thinking with our partners on whether money spent relating to this particular crisis may be somehow itemised differently on the balance sheet, rather than just being lumped in with all the other Government spending that may have taken place? If we could somehow delineate crisis spending and normal spending, that may well help investors, this House and anybody else in the future in trying to assess the fiscal health of this country and others. I think that is something the Treasury should consider.

However, there is a broader issue here. This is obviously thought about as primarily a global health crisis, but many people think about the economic impacts, and that is indeed correct. However, the health crisis and the economic crisis are intertwined, and I will focus, as so many in the House have today, on the self-employed, although this issue does not relate just to them.

This virus requires us to do social distancing, which is a phrase all of us have become so familiar with, although I do not think any of us knew it existed up until two to three months ago—all I can say is, bring back Brexit. To save lives, we are having to shut down major parts of the economy, and for people to save their own lives and the lives of others, they are having to shut down their personal economic activity. These people have families, houses and responsibilities; if they do not feel that they can meet those responsibilities, some may choose to take the path we have asked them not to take. Some may choose to do the risky thing and not what they know to be right, because they are caught in this difficult conflict between health and wealth. The job of any Government in a responsible society—indeed, this Government have met this challenge—is to make sure nobody is faced with that choice. I think that principle has underpinned all of the response from the Treasury and should continue to underpin it when the Treasury comes out with its proposals for self-employed workers.

I have a couple of specific questions for the Minister. I have been contacted by many constituents who are trying to use the business interruption loan scheme. Could the limit on unsecured lending be extended above £250,000? Many constituents have told me that they have been asked for personal guarantees above that threshold by the banks. Quite understandably, many are not willing to provide personal guarantees. Indeed, one asked me, “Bim, would you give a personal guarantee on a £500,000 or £1 million loan?” I said I could not say in all honesty that I would. Will the Minister consider extending that threshold for unsecured lending above £250,000—perhaps to £500,000 or £1 million?

[Kevin Hollinrake]

That is an interesting point. The position is not clear on the website, and it does need clarification, but I think that loans over £250,000 are ones that businesses could not get security for. This is the Government standing behind businesses that do not have other forms of security. I think that below £250,000 is where people can ask for reasonable security. However, my hon. Friend’s point about a personal guarantee is key, because it will deter many people from applying for these loans.

[Bim Afolami]

I thank my hon. Friend for that point. More broadly, the key question for the Minister is whether the Treasury is willing to adapt the scheme over the coming days and weeks as we hear more about the distinct problems and difficulties that there may be with it. That is not to quibble with the fundamentals of the scheme; it is a good scheme, and we need to recognise—indeed, I want to put on record—the fact that it was put together in record time. That is an incredibly difficult thing to do, and we need to give officials and Ministers credit for what they have managed to achieve, but let us try to improve the scheme so that it can be useful to more people, and addressing the issue I have raised is one way of doing so.

The final point I want to make is about tech start-ups—early-stage businesses. These are not necessarily all over the country; they tend to be concentrated in certain parts of the country. Indeed, I have several people who work for them in my constituency. The hon. Member for Hackney South and Shoreditch (Meg Hillier) cannot be here today, but I have been speaking with her, and there are many of these companies in her constituency. The nature of the support package that has been outlined is not particularly helpful for this type of company, because typically an early stage tech start-up deliberately incurs up-front losses as a result of heavy investment in research and product development. Such companies tend to rely on equity rather than debt funding, so the package that has been put in place is less helpful to them. The investors that back them usually back several dozen such companies and do not have enough cash to put into all their portfolios or their portfolio businesses. There is, therefore, a problem—a specific problem, but an important one, because although the number of the jobs in the sector is about 6,000 to 10,000, these are the companies that drive innovation and will drive the creation of tens if not hundreds of thousands of jobs in the future. Bearing in mind the Government’s ambition for the country, we need to safeguard these businesses as much as we can.

I have been discussing with many in the sector a proposal to join with the British Business Bank to put together a £300 million not-for-profit fund—not a fund that will take management fees or try to make any money—to invest in roughly 600 start-ups, to provide working capital for nine or more months. I ask the Financial Secretary or one of his colleagues to consider meeting me and industry representatives to see whether we can get that sort of thing going. It is a specific sector of the economy, but an extremely important one.

Everyone recognises the enormity of the challenge. Everyone recognises the speed and complexity of what we have to do. The money in this short Bill is critical, but in the coming days—especially if Parliament is to rise by the end of this week—we need to do what we can to improve the schemes as much as possible. Once Parliament is out and does not sit for however long it may be, it will be much harder for Members to do that. I ask the Minister to take those points into account.

[Richard Thomson (Gordon) (SNP)]

As many have said in the course of several of our debates this week, it is vital that we continue to work across party lines in response to the crisis. I reiterate here and now my party’s support for the Chancellor’s economic package for firms and workers that was announced on Friday.

Our attitude as individual Members to Government and what they should do, or even which Government should do it, determines in large part where we choose to sit in this Chamber, but the debates taking place now are very much subordinate to the task of deciding how to use our collective legitimacy and authority to guide, to direct and to steward the resources we are able to make available to protect the citizens we were elected to this place to represent. These are quite unprecedented times, the likes of which none of us has seen in our lifetime and which we all earnestly hope we will never see again in this or any other lifetime, but these extraordinary times require extraordinary measures. We all know all too well that lives and livelihoods are at stake. Significant policy changes in terms of support for the economy have already been announced, and yesterday this House took further important steps to protect the public by passing the Coronavirus Bill. Having made those changes to governance and policy, it is necessary also to make provision to support those changes in terms of supply through the Contingencies Fund. My party fully supports the steps that we are about to take to do that.

Although economic activity in the country will, of necessity, be curtailed for the duration of our response to the crisis, we need to maintain demand as far as it is possible to do so, and to be able to meet that demand where we can. We also need to make sure that we are laying the foundations of recovery, so that it can take place as soon as the scientific advice is consistent with doing so. To that end, I commend to hon. Members the work the Scottish Government have undertaken, particularly pledges of grants to support business and the offer of various business rates reliefs.

The economic measures we take must give people the security to follow the very clear public health advice that has been given by all the Governments on these islands, and we very much welcome the distance the Chancellor has already travelled in introducing measures to allow that to happen. However, we must recognise that, notwithstanding all that has already been done, not everyone either has or feels that they have the financial security to stop working or, in many cases, the agency to tell an irresponsible employer that they will follow the Government’s clear advice to stay at home.

On the further support we can offer, we need to be doing something and more to support those on zero-hours contracts. We must also provide support for those who have seen their hours reduced and are not involved in the Government’s furlough scheme. The Chancellor and his team have been questioned closely today, including by me, about support for the self-employed. We must take the Chancellor and the Government at their word that they are examining the details of a package and striving to present it to us as quickly as they can.

There are 330,000 self-employed workers in Scotland. Although they may not always feel that they have the ear of Government or that they are as visible as some of the larger corporate entities in the business landscape, they remain the backbone of our economy, and they must not be left behind in the responses to this crisis. We will certainly watch very closely to ensure that they are not.

Despite the Chancellor’s answers earlier, the SNP continues to believe that using the tax and welfare system to put money directly into people’s pockets through a universal basic income would be the simplest and most straightforward way of getting crucial individual financial support exactly where it needs to go.

[Bim Afolami]

Does the hon. Gentleman regard universal basic income as not desirable for the longer term and advocate doing it only for a set period, or does he want it for the longer term?

[Richard Thomson]

I happen to believe that it would be the best way to ensure that we deliver money to those who need it over the longer term. I do not view it as a Trojan horse; I believe its merits would speak for themselves. But whether we believe in it ideologically or not, from a pragmatic perspective, it would certainly reduce much of the red tape in getting financial resources where they need to be. I do not think the issue of whether it should exist in the long term needs to divide us; I think we could agree that it is how we can best deliver support over the period ahead of us.

There are other areas of the economy that require our attention. Although support for buy-to-let landlords is welcome—I draw Members’ attention to my entry in the Register of Members’ Financial Interests; I rent out a small flat myself—it would be more welcome if that financial support went directly to tenants, which would allow them security of tenure and keep that cash circulating in the economy. Other potential measures include increasing statutory sick pay to the EU average, strengthening welfare protections, removing the bedroom tax and removing the rape clause.

When it comes to our transport infrastructure, we need to protect capacity. We saw yesterday welcome interventions in the rail industry and the train operating companies. My constituency contains Aberdeen airport, and the companies responsible for the ground operations there have been in touch with me. Support for the airlines is no doubt important, but so too is support for the airports and the people who work on the ground to ensure that the activity can continue. Our airports will be crucial in getting the country moving again once we are through this crisis. We need to prepare for the contingency of repatriations to the UK in the event that commercial airlines are not able to carry out that task. We also need to be prepared to cover those whose insurers will not pay out for coronavirus-related claims, whatever activity they relate to.

Those measures represent just some of what will be necessary, but we need the resources in place to take them.

--- Later in debate ---

[Sir Edward Davey (Kingston and Surbiton) (LD)]

It is a pleasure to follow the hon. Member for Thirsk and Malton (Kevin Hollinrake). He made two points with which I wish strongly to agree. First, I agree on the need for clarity on people who can go to work: who are the essential workers? The issue is causing huge concern. If there are too many people on public transport because we are not leaving it for the essential workers, that is bad for the whole public objective of stopping the virus spreading. The hon. Gentleman is absolutely right on that. The bad news is that people are almost going to be forced to stay at home anyway because business is collapsing. Let us take the construction industry, which the hon. Gentleman talked about. I am getting messages telling me that because mortar supplies are basically collapsing, people will not be able to do any construction. That shows Members how dramatic is the impact of what is happening out there. There should be clarity from the Government on that because leadership is important.

The second thing on which the hon. Gentleman is right—I really want to impress this upon those on the Treasury Bench, and we have heard other colleagues talk about it already—is the genuine accessibility of the loans that have been made available via the Bank of England. The Government trumpeted their announcement and we all welcomed it, but I keep hearing stories of small businesses that find that, if they can get through to the bank—by the way, it is taking quite a long time, although that is not a complaint, because of course a lot of people are contacting the banks and I expect they are extremely busy—they have to give personal guarantees. At a time when it is very difficult for people to know how their business is going to pan out—how can they know that in such an uncertain certain time?—no one their right mind would give those sorts of personal guarantees. It is just not realistic for them to put their house and the whole family’s income and savings on the line. The Government are going to have to think again about the terms of the loan guarantee scheme. These are unusual times and the Government have made money available; rather than just giving a guarantee to the financial institution, they will have to find a way to transfer that guarantee to the business concerned. I know there are huge moral hazards with that—I get that—but if they do not, it is not going to work.

[Bim Afolami]

On that point, has the right hon. Gentleman come across the same thing as I have? I have found that the people who have been asked to give personal guarantees are often the ones with the lowest debt—indeed, no debt—in their businesses, and the people who have found it easier are those who already have a big debt facility with a bank that can be easily extended. It is almost a double punishment for those who have been prudent in managing their small businesses so far.

[Sir Edward Davey]

The hon. Gentleman is absolutely right. It is that old saying, “If you borrow a lot, you are able to borrow more,” whereas those people who have run things prudently are finding it a problem. This is a really crucial issue and the Government must give it some urgent attention. In the exchanges on the urgent question that I asked earlier on the self-employed, there were some welcome statements about the loans being available to sole traders and the self-employed more widely, but I do not think they will be able to access them, because they will not be able to give those sorts of personal guarantees. Given that cash-flow is going to be king, certainly until the Government come up with a solution for the self-employed, they will have to have access to some money. If that is just a loan on their personal bank account, with the interest we have been talking about, that is not going to work for people. People are going to be in real trouble. I welcome what the Government have done, but they need to look at how it is operating in practice—and look at it fast.

People out there remember what happened in the financial crisis. They remember that this House said, across party lines, that we must bail out the banks—that the banks could not collapse and the financial system had to keep going. They were pretty upset, because a lot of them took cuts in their own income and then saw that although some bankers lost their jobs—we knowledge that—many did not, and the banking system sort of recovered and looked like it was treated with quite a lot of generosity through our taxpayers’ money. When we hear stories now about ordinary people who have put their lives into building their businesses not getting help from the banks because the banks are getting in the way, I have to tell the banks that they have to sort themselves out, because this House will not be able to resist the political pressure. We need the banks in our society, right? No one is suggesting that they do not play a critical role, but if at this stage, after we helped them out 10 years ago, the banks do not come to the rescue of small businesses, sole traders, the self-employed and ordinary people, they will reap a whirlwind. I really worry about that, because I believe in the banking system, but the banks have got to step up to the plate.

[Bim Afolami]

I thank the right hon. Gentleman for giving way again. Is it not also important to recognise the nature of the schemes—that is, that they were put in place by the Treasury, the banks and the Bank of England all working together? The terms on which the banks are operating were agreed by all of them, so we need to ensure that all those parties—the Treasury, the Bank of England and the banks—collectively realise what needs to happen, rather than us necessarily saying that it is just the banks that are making it difficult; the structures and the terms are actually very important.

[Sir Edward Davey]

The hon. Gentleman makes a really important point, and backs up the thrust of what I am trying to say. The banks have been given access to free money. They are being looked after by the Bank of England through this extension of the Bank of England’s balance sheet, so they are doing okay. So why are they not stepping up to help the rest of the economy? There are some really quite serious questions on this issue. I hope that the Government say in response to this debate that they, the Bank of England and the Financial Conduct Authority are going to look at this situation, because it is just not good enough. I want to work on a cross-party basis on this issue, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) said; this is vital to all of us, and we need to send a message to those who are running the banks that we are expecting them to step up. It is time that they did their duty, right?

I actually want to come to my speech, because that was just a response to the hon. Member for Hitchin and Harpenden (Bim Afolami). I want to talk about the Bill in front of us—I know that is a bit unusual—as well as the supply process of which it is a part, and then I will give some thoughts on the economy.

On the Bill, will the Minister tell us why the Treasury chose to change the percentage limit of the contingencies fund, which is normally set at 2% of total authorised expenditure in the preceding year, to 50% until the end of 2020-21? In absolute figures, the amount before this Bill would have been £10.7 billion. That has gone up to £266 billion. I hope that the Minister can explain why. It does not seem unreasonable, given the pressures on Departments, but it is quite a big change. I am not against it—let me be clear that I will be supporting the Bill today—but it would be good to put on the record, for the House and for history, why that figure has been chosen. When people look at this situation in the future, they will need to know why that decision was taken.

The Minister said in his opening remarks that this was not an increase in expenditure. Well, I hope that he meant to say that it is an increase in expenditure in that it takes account of commitments that the Chancellor has made both in the Budget and since the Budget. If I have understood correctly, there is a big increase in expenditure because we need one—for the health service, our social care system and other parts of our public services that need the cash now.

I have another question for the Minister. If these contingencies are being given to Departments so that they have the cash they need, is the money also being given to local authorities? I want to underline this point: local authorities are on the frontline now, and they are having to spend money all the time on a whole range of things that are completely unbudgeted for. They are confused about the proposals for business rates, whether they are going to get any income in, what money they have to give out and all the rest of it. Local authorities are slightly unclear about what is happening. I hope that there will be genuine desire and action on behalf of the Treasury to get some money out—on account, if you like—to them so that they have the cash flow to ensure that they can provide the extra services that they are being asked to provide. It is essential that we hear that local authorities are getting the support that the Whitehall Departments seem to be getting.

I said that I also wanted to talk about the supply process. This legislation is part of the almost anachronistic supply process in this House. I am afraid that I am a bit of a geek on this. In 2000, I wrote a pamphlet called “Making MPs Work For Our Money: Reforming Parliament’s Role In Budget Scrutiny”. It is a cure for insomnia, so I do not necessarily suggest people read it, but in it I tried to argue that this House does not really have sovereignty over the Budget. We look at these Bills when they come along and we nod them through, but our processes of examining draft budgets and estimates are shocking. In my pamphlet, I made the comparison with all the OECD countries, and this House has the worst processes for examining draft budgets and measures such as this Bill—that is worrying. I do not wish to resurrect the Brexit debate, but it was supposed to be about parliamentary sovereignty and I used to say, “I wish we had some.” That is because this House rarely, if ever, looks at the estimates properly, analyses them in Select Committees and makes proposals about draft spending decisions. Other Parliaments do those things quite easily—the Swedish and New Zealand Parliaments are good models. Our approach undermines the value for money and undermines what we are here for, and we really need to look at the estimates procedure.

That is why this Bill looks so weird in many ways; it is called the Contingencies Fund Bill and we are not used to doing this sort of thing, because we have given up control over supply—it is just nodded through. The last time MPs voted against a spending request of the Government was in 1919, more than 100 years ago We have given up properly controlling the draft estimates. Although I will be supporting the Bill tonight, because it is really important that we let this one through, I just want to say to the Minister that I hope we can reflect on this. I raised this issue when I was in government and tried to get the then Chancellor to look at it. There was a flurry of excitement and then the dead hand of the Treasury said, “No way, we are not giving up control.” That was the wrong move, because control can be exercised with greater transparency. I hope that that may be one thing that comes from this experience in this emergency situation.

Let me end with some reflections on the economy, where we are at and the lessons we are taking. I talked about the importance of the banks really delivering, given the agreement with the Government and the Bank of England. That is probably the most essential message from me tonight. There are some longer-term things and possibly some relatively short-term things to address, one of which is the way we do the Bank of England’s quantitative easing. That is monetary policy, where we are, in effect, printing money and sending it out. That happened after the 2008 crash and it is happening now. I am not against it, but I just say that the way it works is not some sort of technical, politically neutral, value-neutral system; it has implications for economic equality in this country, because the money tends to go to people in the City—the financial institutions. It does not go to ordinary people and ordinary businesses. So if we are going to get things right this time and have quantitative easing, I urge the Minister to let us have a debate about how those mechanisms actually work, because in crises we do not want economic inequality worse; we want to make it better. These technical things sound as though they are available only for pointy-heads in the Treasury, but quantitative easing is a political issue and we have not debated that. It has massive social and economic consequences, and we need to make sure that there is democratic accountability on them, and that they are properly understood and work in the interests of society.

[Sir Edward Davey]

The hon. Gentleman has a point and he is right to take me up on that. I think that there is an improvement, but I do not think we have debated this in the context of QE and the monetary side of the policy response. I think we need to do that, because we need to unpick some deep issues here and I do not think this House has understood that. Although I am a big fan of the independent Bank of England, and I do not think we should interfere with the setting of interest rates, I do think QE raises some political questions which are not technical and require accountability.

[Bim Afolami]

On QE and how that would be done, we must make sure that it does not become too inflationary, that being the problem if we have a distribution network straight to the real economy without mediating it through banks.

[Sir Edward Davey]

I half agree with the hon. Gentleman, but I do not think inflation is going to be the problem; people have not got any money. This form of QE is often called helicopter money and perhaps that is the right move now, and we need to be debating it.

I have a final comment to make and then I will sit down. When we reflect in a few months on this crisis and what has gone on, we will have to look at some of the underlying assumptions of our economic models. I am not saying that we should rip them up—I do not believe that at all—but how the state underpins and works with the market is really important. What I mean by that is that there is an assumption that the market can do it all, that the market is fantastic and that Governments should come out of the way, but markets only exist because of Governments. Regulations and laws make markets and there have always been those.

Economy and Jobs

Bim Afolami Excerpts

Monday 20th January 2020 Commons Chamber

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

The Chancellor spoke after the shadow Chancellor. He complained that we were producing an unreconstructed list of misery and that we were not jolly enough about how fantastic he thought the economy was. I ask him to go and speak to the Wetherspoon workers who are on casual contracts, one of whom had to live in a tent because he could not afford his rent. I ask him to go and speak to them, and say whether we are being too miserable or whether the Government are looking through rose-tinted glasses at jobs and the economy. Of course, it was not the Government who helped those workers, but the Bakers, Food and Allied Workers Union that organised and struck for 24 hours, forcing better payment from the Wetherspoon management. That is constantly what produces better jobs and work conditions in this country—union action, time and again.

The Chancellor should ask the families who, week in and week out, have to use the food bank in Whitehawk, one of the estates in my constituency. Despite their being in full-time work, they are not able to put food on the table for their children. The rebranding exercise that this Government did in calling the minimum wage the living wage has not improved the lives of my constituents. What has improved the lives of my constituents is businesses, the council and trade unions working together to introduce a real living wage in Brighton. Collective action is what has improved their life standards—and where workplaces have refused that, people continue to be paid poverty pay.

Last year, classroom assistants in Moulsecoomb primary school were made redundant because the Government cut money for our schools: tell them that the job market is rosy, that everything is fine, and that we are being too miserable. They will say that their reality is what they experience day to day, and that the fantasy figures and rose-tinted Government view is not based in reality. Tell the academics who had to go on strike for numerous days last year, in the longest strike in the history of the University and College Union. Young academics are paid on casual contracts, only when they are marking their papers. They are not well-paid professors; many of them are struggling and cannot get mortgages, pay rent, or put down deposits. This Government’s underfunding of the university sector and our public services have forced that. Tell those people that there is no problem, and they will laugh in our face.

We have had an election, and unfortunately we lost. But that does not mean that the Government have won the economic argument—

[Bim Afolami (Hitchin and Harpenden) (Con)]

rose—

[Lloyd Russell-Moyle]

I will not give way because we must soon move on.

The economic argument shows that this country is stagnating, and that jobs do not pay enough to live. That is a disgrace in this country, one of the richest in the world. We must change that, and the only thing that will change it is trade union action, decent local government, and a Labour Government.