Treasury
John Glen Excerpts(5 years, 7 months ago)
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Sir Vince Cable (Twickenham) (LD)
British families are currently spending considerably more than their disposable income and, as a consequence, debt levels in relation to income are rising back to crisis levels. At the same time, France and Germany have big savings surpluses. Which is the most sustainable of the two options?
John Glen
What is sustainable is that real household disposable income is up by 4.6% since 2010. I acknowledge that there are those who are experiencing challenges, and that is why I have set out the measures the Government are taking and are determined to take to assist those in a vulnerable position.
[Official Report, 11 September 2018, Vol. 646, c. 586.]
Letter of correction from the Economic Secretary to the Treasury, the hon. Member for Salisbury (John Glen):
An error has been identified in the response I gave to the right hon. Member for Twickenham (Sir Vince Cable).
The correct response should have been:
John Glen
What is sustainable is that real household disposable income is up by 3.4% since 2010. I acknowledge that there are those who are experiencing challenges, and that is why I have set out the measures the Government are taking and are determined to take to assist those in a vulnerable position.
Oral Answers to Questions
John Glen Excerpts(5 years, 8 months ago)
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The Economic Secretary to the Treasury (John Glen)
The Government are taking a proactive approach to supporting boroughs and enabling them to manage their money well and help those in problem debt. We reformed consumer credit regulation in 2014, and I am now working on setting up a single financial guidance body to help those who are in difficulties.
Danielle Rowley
One in eight workers is living in poverty, and the average worker is earning £25 a week less than they were 10 years ago. Many of my constituents who are working all the hours they can find still have to come to my office for food bank referrals and debt advice. Does the Minister accept that the rhetoric is talking down the people who are working as much as they can but still living in poverty?
John Glen
No, I am sorry; I would not accept that. I accept that this Government are committed to doing all they can for hard-working people. That is why we have raised the national living wage, which means £600 for those who are working full time. I am sure that the hon. Lady would also want to welcome the wage data that have come out today.
Matthew Pennycook
According to the Money Advice Service, the proportion of people in Greenwich and Woolwich who are over-indebted is higher than both the UK and the London averages. I know from my advice surgery that a significant amount of that is down to the behaviour of rip-off lenders. What more will the Government do to clamp down on predatory lending?
John Glen
The primary responsibility for rogue lending lies with the Financial Conduct Authority, and its report at the end of May brought in a number of measures, including a cap on rent to own. I accept that more can be done, and that is why I am working hard with my colleague, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman), on the financial inclusion forum to look at the expansion of alternative affordable forms of credit for the poorest in our society.
Charlie Elphicke (Dover) (Ind)
May I urge the Minister to take firm action against people who exploit the most vulnerable in our society? I refer particularly to loan sharks, payday lenders, rent-to-own outfits such as BrightHouse, rip-off bank overdraft fees and exploitative doorstep lenders. Will he be firm, to ensure that we protect the most vulnerable?
John Glen
I am happy to give my hon. Friend that assurance. I have deep conversations on this matter with the Financial Conduct Authority regularly. I also met representatives of Scotcash and the credit unions over the recess to see what alternative supplies of affordable credit are available.
Mr Philip Hollobone (Kettering) (Con)
Under Labour, household debt rose in every year bar one, but the Office for National Statistics now shows that, since 2010, the number of children in workless households has fallen by a staggering 637,000. Does that not demonstrate the huge contrast between the economic achievements of this Government and the track record of the Labour party?
Sir Vince Cable (Twickenham) (LD)
British families are currently spending considerably more than their disposable income and, as a consequence, debt levels in relation to income are rising back to crisis levels. At the same time, France and Germany have big savings surpluses. Which is the most sustainable of the two options?
John Glen
What is sustainable is that real household disposable income is up by 4.6% since 2010. I acknowledge that there are those who are experiencing challenges, and that is why I have set out the measures the Government are taking and are determined to take to assist those in a vulnerable position.[Official Report, 9 October 2018, Vol. 647, c. 1MC.]
Chris Philp (Croydon South) (Con)
The way to combat poverty and generate prosperity is to create jobs and raise wages. In that context, is it not welcome that a combination of the massive increase in the minimum wage and the rise in the personal allowance since 2010 have increased the net wages of someone working on the minimum wage by 39% when CPI during that period has been only 19%?
John Glen
My hon. Friend is on top of the figures, as always, and sets out the positive story that this Government have to tell, but there is no room for complacency. This Government are committed to getting as many people back into work as possible, and we welcome the current record figures.
Diana Johnson (Kingston upon Hull North) (Lab)
John Glen
There are different profiles of debt across the country, which is why the Government are committed to making interventions through the Financial Inclusion Forum to expand affordable credit and to assist those who are in difficulty. There is no room for complacency, and the Government are committed to assisting where necessary.
Steve Double (St Austell and Newquay) (Con)
Does the Minister share my view that one of the best ways of helping hard-working families is to enable them to keep more of the money they earn by keeping taxes low? Will he confirm that this Government will continue to keep taxes as low as possible for working people?
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
This Government may say that they are taking action on household debt, but the fact is that they rely on that excessive debt for economic growth. The Office for Budget Responsibility says that nine tenths of all GDP growth last year is attributable to household consumption, which is being fuelled by unsustainable levels of debt. Instead, we should raise investment, both public and private, which in the UK is well below the average for a developed country. We have plans to do that, but will we see any such proposals from the Government in the forthcoming Budget?
John Glen
The Chancellor has set out in successive Budgets our commitment to invest in this economy with the national productivity plan. We must recognise that we need affordable investment, and we have found out over the past 24 hours that the Opposition’s plans are confused. If £500 billion is just a down payment and the start of the investment, where will it end? Is that affordable?
Kirsty Blackman (Aberdeen North) (SNP)
Let us have some facts. The OBR predicts that unsecured household debt will reach 47% of income by 2021. The last peak was 45% in 2007. Families are using credit to pay for essential items. The people who are going to food banks are often in work, because work is not paying. What is the Treasury going to do? Will Ministers admit that austerity has created this mess?
John Glen
The Government are creating the conditions for growth and raising the national living wage. When I visited Glasgow just a few weeks ago, it was encouraging to see the constructive way that the 1st Class Credit Union and Sharon MacPherson of Scotcash are working with the poorest to help them when they are in difficulty.
Kirsty Blackman
I am really pleased that the Chancellor said that he will consider visiting a local pub. Will he consider coming to the Community Food Initiatives North East food bank in my constituency, which has today called for more food because its shelves are empty? If he was to come and visit a food bank such as CFINE’s, he would find out at first hand the effect that Tory UK Government policies are having on individuals up and down the country. The Minister cannot stand there and say that employment is up when the reality is that people are poorer than ever.
Ben Bradley (Mansfield) (Con)
Rebecca Pow (Taunton Deane) (Con)
The Economic Secretary to the Treasury (John Glen)
Green finance is a key Government priority. The Chancellor recently announced the creation of a new green finance institute to ensure that our world-leading green finance expertise is available to UK and international firms. This was the first recommendation of the green finance taskforce, and further responses from the Government will come in due course.
Rebecca Pow
I commend my hon. Friend for the action that the Government have already taken in this area, but does he agree that we should encourage green investment to support new technologies, especially in the energy sector, to help develop devices that can bring down household bills, make us more efficient, waste less energy and cut down on our greenhouse emissions? That is the subject of my ten-minute rule Bill tomorrow.
John Glen
I agree with my hon. Friend. It is absolutely the case that every household and small business will have those advantages by 2020 through the supply of smart meters. According to data from a leading energy supplier, we are already seeing energy efficiency savings of around 4% on annual consumption.
Geraint Davies (Swansea West) (Lab/Co-op)
The Minister will know from the UN that by 2050 there will be more plastic in the sea than fish, so will he ensure that the Chancellor brings forward a Budget with a comprehensive fiscal strategy that ensures that plastic producers pay 100% of the recycling and that targets tax on plastics according to their recyclability?
Mr Philip Dunne (Ludlow) (Con)
John Glen
Absolutely. Only two hours ago, the Department for Work and Pensions published its consultation response on pension trustees’ duties, which clearly sets out the Government’s intention to raise the profile of financially material climate change factors in investment decisions.
Douglas Chapman (Dunfermline and West Fife) (SNP)
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Tonia Antoniazzi (Gower) (Lab)
The Economic Secretary to the Treasury (John Glen)
One of the first things I did was to encourage the FCA to bring forward that paper, and I would be very happy to meet those involved in Macmillan care again to discuss their concerns following its publication in July.
Paul Masterton (East Renfrewshire) (Con)
The Economic Secretary to the Treasury saw at first hand when he visited East Renfrewshire a couple of weeks ago how small businesses are utilising FinTech to become more efficient and agile. What are the Government doing to help more small and medium-sized enterprises, such as First Floors in Giffnock, which he visited, to understand and take advantage of the opportunities FinTech presents?
John Glen
My hon. Friend is absolutely right. It was a privilege to meet David Hepburn at First Floors and see the value of new products. The Government are committed to stimulating more investment in FinTech, and it was a privilege to visit FinTech Scotland, which is doing a lot, too. We have invested a considerable amount to increase the numbers of people who are taking this step to innovate in finance, and with open banking we will see more.
Catherine West (Hornsey and Wood Green) (Lab)
Rushanara Ali (Bethnal Green and Bow) (Lab)
A recent Treasury Committee report on household finances found that arrears to local authorities are growing, and there is an overzealous pursuit of those arrears by bailiffs. The same goes for some central Government Departments. What will the Treasury do urgently to ensure that people are not penalised, and vulnerable households are not criminalised, by the Government?
John Glen
We have made several interventions since we responded in 2014 with bailiff law reform. I have spoken to the Ministry of Justice, and we continue to look carefully at the matter. We have arrangements in place through the Her Majesty’s Revenue and Customs time to pay scheme, and the Cabinet Office has its fairness group as well.
Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)
Next year, we move into a post-Brexit economy with new global trading opportunities for UK economic growth. Will the Chancellor update the House on his commitment to investing further in the Royal Navy, which is a vital tool for maintaining safe seas and oceans, so that trade coming out of north-east and other ports can be sustained and can underwrite economic growth?
Draft Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018.
It is a pleasure to serve under your chairmanship, Mr Davies.
From 1 January 2019, the ring-fencing regime will require the structural separation of core retail banking from investment banking for UK banks with retail deposits of more than £25 billion. Ring-fencing was the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, which the Government accepted and legislated for via the Financial Services (Banking Reform) Act 2013. It will support financial stability by insulating retail ring-fenced banks’ core services, whose continuous provision is essential to the economy—retail and small business deposits and payment services—from shocks originating elsewhere in the global financial system. It means that banks that provide those essential services become simpler and more resolvable, so core services can keep running even if a ring-fenced bank or its group fails.
As well as ensuring that UK taxpayers are not on the hook for bank failures, ring-fencing should mean fewer and less severe financial crises in future, which will benefit the whole economy. Details of the regime are set out in secondary legislation passed in 2014. As part of restructuring to comply with the ring-fencing regime, banking groups may be required to move some accounts from one legal entity to another—for example, they may need to move a retail depositor’s account into a new ring-fenced bank. However, some of the holders of those bank accounts are subject to financial sanctions that prohibit the movement of any funds that said account holders own, hold or control. The conflict with financial sanctions regimes means that at present some banking groups are unable to comply fully with the ring-fencing legislation.
The order resolves the otherwise conflicting requirements between a ring-fencing regime and financial sanction regimes by amending the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014. It amends the definition of a “core deposit” so that accounts whose account holders are or have been subject to financial sanctions, as defined in section 143(4) of the Policing and Crime Act 2017, at any time in the past six months, are no longer included in the definition. That means that banking groups will not be required to move retail accounts whose holders are subject to financial sanctions into ring-fenced banks. Banking groups will have six months from the removal of sanctions to remove retail accounts of those account holders previously subject to sanctions inside the ring fence.
The order will ensure that banking groups that cannot otherwise comply fully with the ring-fencing regime owing to sanctions legislation are not deemed non-compliant under the ring-fencing legislation. The amendment does not alter the location and height of the ring fence and nor does it alter the timetable for ring-fencing: banks in scope must be ring-fenced by 1 January 2019. Together with the Prudential Regulation Authority and the Financial Conduct Authority, we are monitoring their progress closely.
John Glen
I am grateful for the opportunity to discuss the order, and for the points made by the hon. Members for Stalybridge and Hyde and for Glasgow Central. We have engaged with the Prudential Regulation Authority and the Financial Conduct Authority on the wording and the extent of the order, which proposes to amend the ring-fencing legislation, and feedback has been positive.
The six-month timeframe was chosen to ensure that banks have enough time to make the necessary transfer; it was the result of a practical conversation with the regulators. The hon. Member for Glasgow Central asked why we are waiting until 2021 to review the instrument. That leaves enough time for the PRA and the Treasury to identify potential issues and consult on any changes.
Some wider points were raised when we were in Committee in this room previously. I acknowledge that there are ongoing concerns about various aspects of the sanctions and anti-money-laundering regime. They are without the scope of this conversation, but I am happy to address any specific concerns by letter; that would be more appropriate than to try to answer them conclusively now. I hope I have satisfied Opposition Members, and I commend the order to the Committee.
Question put and agreed to.
Banking Sector Failures
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Mr Hanson. I start by acknowledging the work of the all-party group and by thanking my hon. Friend the Member for Stirling (Stephen Kerr) and the hon. Member for East Lothian (Martin Whitfield) who secured this important debate. Members have spoken with conviction and passion about some banks behaving in an appalling fashion. I recognise that there are outstanding cases that have not been resolved to the satisfaction of their constituents. I will address some of the issues that need resolution by Government in my later remarks. First, I want to examine specific points raised by Members and then I shall go through what I have done since the previous debate and what I see happening to try to address the work of the APPG. Hopefully, that will give the House some clarity today.
The hon. Members for East Lothian and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) referred to bank closures. It would not be right for us to have a debate on banking without addressing that important issue. I am aware that that is a concern for many Members. Obviously, closures are commercial decisions for the banks, taken by the management without intervention from the Government.
Drew Hendry
The Minister mentions commercial issues for the banks, but surely ownership of the bank, certainly such a large majority ownership, plays some part in the commercial process. Would it not have been correct for the UK Government to use the fact that they largely own the bank to make a decision to protect the people it is supposed to serve?
John Glen
I thank the hon. Gentleman for that intervention, but I will take the opportunity to correct him. The Government do not have a 70% shareholding. We have a 62.4% shareholding. We do not have control of the day-to-day running of the bank, in the same way as the Scottish Government do not have control of Prestwick Glasgow Airport, yet they have a complete shareholding in it. We need to be real. There is a difference between ownership and day-to-day control. I want to address the practical issues because our constituents want to know what is being done to deal with these challenges. Before I go into that, I want to acknowledge that in previous debates I was challenged by Members from constituencies in Scotland. I will visit Scotland for four or five days at the end of August during the recess to address specifically the issues around rural banking. I went to look at the mobile banking units of one of the banks in Derbyshire in the previous recess, and I take very seriously the concerns about how effectively they function in terms of support for disabled people.
Peter Dowd
What sort of message does it send to banks when all these closures are happening and in 2016 the Government decide to cut, for example, the banking levy from £3 billion to £1.3 billion, sequentially, year on year? The Minister can try to duck the issue, but he gives a bung to the banks while they close their branches, and that is not acceptable.
John Glen
I want to try to address our constituents’ concerns about bank closures and what the Government are doing to see that their services are provided. The Post Office and the banking industry have a commercial agreement that enables 99% of the UK’s personal and 95% of the UK’s business customers to carry out their day-to-day banking. I am concerned about the effectiveness of that arrangement, so I am determined that public awareness of those services should be greater. I am pleased that UK Finance and the Post Office have responded to my call for further action, particularly when the last bank in town closes, to make sure that the transfer of responsibility—
John Glen
I will not keep giving way—I need to finish what I am saying. I will give way in a moment. Let me just finish this point.
The Government also support the industry’s access to banking standards, overseen by the independent Lending Standards Board, which commits banks to better communicate with customers and those who need more help when a bank closes. I am not seeking to duck any issue and I look forward to further engagement on this matter.
Drew Hendry
I appreciate the Minister’s giving way, and I appreciate that the issue is sensitive for many of us in rural constituencies. If the position is that the UK Government do not brook any interference or intervening in commercial decisions, how can it be the case that the Minister is listing a number of interventions that he is about to make in a commercial situation?
John Glen
I was making it clear that, as a Minister, I do not make the operational day-to-day decisions about which individual branches should close. My responsibility is to see that consumers have access to the services they need, and I have done that through brokering the arrangement between UK Finance, which represents the banks, and the Post Office, which provides services when closures take place.
The hon. Member for East Lothian mentioned insolvency practitioners.
Kevin Hollinrake
The Minister is being very generous in giving way. He talks about the issues around bank closures. One of the things that banks are doing to substitute for bank availability is moving us all online, so we are transacting more online through apps and the like. Colleagues have written on behalf of constituents to the all-party group to tell us about authorised payments and online fraud. Yet the banks themselves and the Financial Ombudsman Service are attributing gross negligence to the customer, despite the fact that they have gone to some lengths to try to prevent fraud. For example, the person on the other end of the phone knows their password, their maiden name—a degree of information that would not make that giving away of information gross negligence, yet they are being disadvantaged, despite the fact that the banks have pushed them online.
John Glen
I am grateful to my hon. Friend for that intervention. The Payment Systems Regulator is doing a live piece of work to look at scamming and will report in September. It looks very much at culpability in such cases and I hope it will come up with a clear resolution that will give the public a better understanding.
If I may, given the luxury of additional time, Mr Hanson, I am going to try and reply to the points raised and then I will come on to substantive points. Insolvency practitioners are regulated by one of five recognised professional bodies. Legislation in 2015 introduced binding statutory objectives on these bodies, and the Insolvency Service has more sanctions available to it to deter and deal with poor conduct or performance. The insolvency code of ethics, raised through the Joint Insolvency Committee, is also expected to be revised and updated later this year, but I will be happy to enter into dialogue with the hon. Member for East Lothian about the specific issues and concerns that he has.
Martin Whitfield
On that point, does the Minister accept that there is an inherent conflict of interest in the situation whereby we have a bank, what I will call a limited company, and individual shareholders? We have the bank instructing the professionals who then deal with the company, and that less than virtuous circle leads to an almost inherent conflict of interest for professional groups: the lawyers, the accountants and the insolvency practitioners.
John Glen
I am happy to look carefully at the issues and the respective responsibilities and interaction between them that the hon. Gentleman raises. I fully accept the sensible point he makes.
I want to return to the case raised by my hon. Friend the Member for Stirling. Several specific cases were raised and my hon. Friend spoke passionately about his constituent’s case, which is illustrative of many of the experiences that sadly occur. Following my meeting, I received a letter from Ross McEwan in May that said that his complaints handling team would be happy to discuss constituency cases with Members. I encourage all Members to do so. I want to put this on the record. I particularly encourage my hon. Friend the Member for Stirling to raise his constituency case with the team. I am keen to understand what sort of response he gets and how satisfactory the process is.
As to the comments of the hon. Member for Bootle (Peter Dowd) about the sale of RBS shares, I am not one to enter into unnecessary partisanship in such discussions, because the issues are important, and I generally welcome the tone of the debate, but he must acknowledge that when the shares were purchased by the Government for £5.02 in 2008 it was not a rational economic choice. It was necessary for the Brown Government to secure the banking system. Therefore, to point out the difference in price, after the Government had taken advice from those who are stewards of the Government’s interest, based on value for money, is not really rational. Most consumers would not have purchased shares at the time in question; it was for the good of the nation.
Peter Dowd
Okay, so if we push the bank aside and forget that, how does the Minister explain the loss to the taxpayer in the sale of the Post Office, which was another billion or two pounds—or is that irrelevant as well? How does he explain the reduction of 26% in corporation tax for banks and other corporations, to 19%, when people in the Gallery cannot get a penny out of the Government?
John Glen
I am glad that the hon. Gentleman has conceded the point on RBS. I want to focus on banks, and I was responding specifically on the matter of RBS.
I want to set out what the Government have done to address the issues that came to the fore during the financial crisis, because the regulatory framework and what has evolved over the past 10 years is a foundation for some of the outstanding challenges that we need to resolve. Since the crisis, the Government have reformed the UK system of financial regulation for the benefit of the industry and the people who rely on it. We have bolstered standards across the sector and taken strides to restore public trust in financial services. I acknowledge that there is more work to be done, and I shall come specifically to the issues raised in the report of the all-party group, and in other work. We have regulators armed with comprehensive powers and responsibilities co-operating to identify and address risks across the financial sector. The Financial Stability Board has praised the UK for its successful transition to a new regulatory regime, and the International Monetary Fund has applauded the UK’s more resilient system. We have implemented reforms to improve individual accountability in the financial services sector, and that includes the introduction of the senior managers and certification regime, which promotes individual responsibility.
My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) set out a list of individuals about whom he has outstanding concerns; and it must be right to hold people to account. Where evidence exists for individuals having behaved criminally or in a way that needs further analysis, it must be brought forward. I understand that the shadow cast over the issue by outstanding cases needs to be resolved by the regulator. However, the SMCR promotes individual responsibility, holding senior managers to account for misconduct that occurs on their watch. It ensures that individuals at all levels can be held to appropriate standards of conduct. Both those things were key recommendations of the post-crisis Parliamentary Commission on Banking Standards. The SMCR was implemented for all banks, building societies, credit unions and Prudential Regulation Authority-designated investment firms in 2016. The regime will be extended to cover insurance firms from December 2018, and all other Financial Conduct Authority-regulated firms in December 2019.
I want now to talk about the core issue of SME lending. Despite significant improvements to the system at large, I am acutely aware that concerns remain about misconduct within the sector.
Kevin Hollinrake
The senior managers regime is important, but it will not be effective unless the regulators or law enforcement agencies investigate, speak to victims, find out exactly what has gone on, establish the evidence and take prosecutions forward where guilt is demonstrated.
John Glen
I agree, and will discuss the implications of that.
Many of the concerns that are raised relate to small businesses—sometimes microbusinesses, and sometimes individuals who have been working hard, with a perfectly solid relationship with their bank. Those businesses form the backbone of our economy, as several hon. Members have said this afternoon, and there has been justified anger, both within Parliament and beyond, about Global Restructuring Group at RBS, HBOS Reading and the mis-selling of interest rate hedging products. The case of GRG, and other cases from the crisis period, are unacceptable and I will continue to push for action. I shall explain what is happening.
I mentioned at the Backbench Business debate in May that the chief executive of RBS had committed to modifying the GRG compensation scheme. RBS will set up an independent appeal process for consequential loss claims. I acknowledge that the hon. Member for Inverness, Nairn, Badenoch and Strathspey mentioned that in his speech. I shall discuss with Sir William Blackburne how that process will operate when we meet next week. I understand the concerns about the need for it to work effectively. As has been mentioned, the assessment of consequential loss is a tricky issue, and I need to be sure that the process will be expedited as well as possible.
Treasury officials receive regular updates from RBS on the compensation scheme, and I am glad that progress is being made on direct loss claims, with a further 200 complaints closed and a further £4 million paid out since the last debate in May.
Kevin Hollinrake
No one suggests that Sir William Blackburne at RBS or Professor Griggs at Lloyds are not decent people, trying to do the right thing, but is not the concern the fact that the compensation schemes are internal? It is not enough for justice to be done; it must be seen to be done.
John Glen
I am happy to keep taking interventions, but I am getting to the points that are raised. I would like some flow in what I am trying to say.
I remind hon. Members that what happened at HBOS Reading was criminal behaviour—beyond unacceptable. It is right and just that six people have been convicted, and that they are serving more than 47 years in prison. In March 2017, following the conclusion of the criminal investigation, Lloyds set aside £100 million for compensation payments to 64 victims, and Russel Griggs was hired to review individual cases. Professor Griggs’s recent letter to the Treasury Committee set out that 170 offers have been made to affected directors, ranging from less than £100,00 to more than £5 million. In addition, Lloyds Banking Group has appointed Dame Linda Dobbs as an independent legal expert to consider whether issues relating to HBOS Reading were investigated and appropriately reported to authorities at the time by Lloyds Banking Group, following its acquisition of HBOS.
The FCA continues to conduct investigations into both RBS GRG and HBOS Reading. It cannot be the case—I made this point when I met Andrew Bailey, the chief executive of the FCA—that we allow those institutions to arbitrate on outcomes when there are significant outstanding and unresolved issues. I was pleased to hear that the FCA is likely to conclude whether there is any basis for enforcement action in the matter of GRG by the end of this month, in line with the indication that I gave on 10 May. I look forward to the conclusion of that investigation and the investigation of misconduct at HBOS Reading.
My hon. Friend the Member for Thirsk and Malton and others were right to say that these matters will not go away. In a characteristically passionate speech, my hon. Friend the Member for Beckenham (Bob Stewart) set the expectation that the matter should be resolved. I have been in this job for nearly seven months and have responded to three or four debates on the topic; I expect there will be more, because more needs to be done. We understand how important it is that SMEs have access to the dispute resolution with banks that they need.
I am glad that there are four pieces of work looking at that matter, as I mentioned at the report’s launch yesterday evening. The FCA is currently consulting on expanding eligibility for the Financial Ombudsman Service. I acknowledge the points made and the concerns about resourcing and sufficiency in that regard; they will need to be addressed. Richard Lloyd is reporting today on his independent review into the workings of the Financial Ombudsman Service, which was stimulated by the excellent work of the journalists for “Dispatches”. That review includes several recommendations, and the FOS intends to publish an update on the progress made by the end of the year.
UK Finance is also reviewing the access of SMEs to dispute resolution. There is a lot of expectation that UK Finance, as the representative of the four big banks, will respond thoroughly to some—I hope, all—of those issues. We need to find binding and enduring solutions to the issues that have been raised. Last night, the APPG published its work into the options for an independent financial services dispute mechanism. Those four strands of work will come together in the autumn, and the Government will consider them in the round.
I also want to respond to the point raised by several hon. Members, in particular the hon. Member for Thirsk and Malton, and say that the Government are determined to ensure that financial markets work effectively for SMEs and to enable competition in the market. Since the Government set up the Prudential Regulation Authority in 2013, it has authorised 16 new UK banks, but I acknowledge that those banks are nowhere near challenging the four biggest banks in scale and size. There is work to be done to examine how that can change, so there is greater competition in the sector.
On lending specifically, the British Business Bank’s programmes support more than £4.6 billion of finance to more than 70,000 smaller businesses through programmes such as the ENABLE guarantee, which encourages banks to increase their lending to SMEs by helping to reduce the amount of capital that banks are required to hold against such lending.
I acknowledge the work of the regulators in seeking to ensure that the banking system is stronger, safer, and better placed to support the wider economy than ever before. Some of the Government’s actions are leading to that outcome. I am aware, however, of the outstanding concerns that hon. Members have expressed. I look forward to responding publicly to the various pieces of work that address dispute resolution for SMEs in the autumn. Given that the report was published only yesterday, and that there are some significant ongoing parallel strands of work that are nearly completed, it is reasonable for me to wait to do so. I hope that will move the debate forward to a resolution that we and our constituents can have greater confidence in.
We need a banking sector in this country that enables lending, prosperity and growth in our economy, and when things go wrong we need to know that the resolution process will not be random, complicated and legally tortuous. Where we have legitimate examples of behaviour by banks that involves, or involved, malicious proactive interventions that were not justified on economic grounds, they need to be examined until they are resolved, so we can move forward with a more reliable system of regulating this vital sector of our economy.
Pensions Cold Calling Ban
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
I have today laid before Parliament a ministerial statement to set out Government progress on the ban on pensions cold calling, as required under the Financial Guidance and Claims Act 2018.
Pensions cold calling is an important and complex issue. Pensions scams can have devastating consequences and cold calling is the most common method used to initiate pensions scams, so the Government have taken the time to ensure the ban works for consumers. The Government will imminently publish a consultation seeking views on a set of draft regulations to ban pensions cold calling. Once we have considered all responses to the consultation, in the autumn we intend to lay regulations under the affirmative procedure and subject to parliamentary approval bring the regulations into force as soon as possible thereafter.
[HCWS854]
JHA Opt-in Decision: Assignment of Claims
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
The Government have decided not to opt in (under the UK’s JHA opt-in protocol) to the proposal for a regulation on the law applicable to the third-party effects of assignments of claims.
In the proposed regulation, the competence for the EU to act stems from Article 81 (2) of the Treaty on the Functioning of the European Union. As such, the entire regulation represents justice and home affairs obligations, thereby triggering the UK’s opt-in.
The proposal applies a general rule that the law of the country where the assignor has their habitual residence governs the third-party effects of the assignment of claims (“law of the habitual claim”), but carves out three exceptions to the above rule, applying the law of the assigned claim to (i) the assignment of cash credited to a bank account; (ii) the assignment of claims arising from certain types of derivatives; and (iii) in certain circumstances to securitised entities. This is different to current market practice in significant parts of UK financial services, where the law governing a claim is determined by contractual agreement (“law of the assigned claim”).
The Government have concluded that it is in the UK’s interest not to opt in to this regulation. Its provisions would have significant unintended consequences for financial services market practices in the UK. It would create uncertainty for financial services transactions, could require changes to business as usual functions, and introduces an applicable law test that may contradict existing applicable law provisions such as those relating to securities.
Until the UK leaves the EU it remains a full and participating member. We will continue to work with the EU institutions, with the aim of ensuring that UK objectives are preserved as the negotiations progress on any compromise text. The Government will also continue to consider the application of the UK’s right to opt in to, or opt out of, forthcoming EU legislation in the area of justice and home affairs on a case by case basis.
[HCWS836]
UK's Counter-terrorist Asset Freezing Regime
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to prepare a quarterly report regarding its exercise of the powers conferred on it by part 1 of TAFA 2010. This written statement satisfies that requirement for the period 1 January 2018 to 31 March 2018.
This report also covers the UK’s implementation of the UN’s ISIL (Daesh) and al-Qaeda asset freezing regime (ISIL-AQ), and the operation of the EU’s asset freezing regime under EU regulation (EC) 2580/2001 concerning external terrorist threats to the EU (also referred to as the CP 931 regime).
Under the ISIL-AQ asset freezing regime, the UN has responsibility for designations and the Treasury, through the Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (asset-freezing) regulations 2011.
Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.
A new EU asset freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings. The first designation under the regime was made during this quarter, and is recorded in the fifth column of the annexed table.
The annexed tables set out the key asset-freezing activity in the UK during the quarter.
The recently passed Sanctions and Anti-Money Laundering Act will help ensure that UK counterterrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies to consider utilising, while also meeting the UK’s international obligations.
Under the Act, a designation could be made where there are reasonable grounds to suspect that the person or group is or has been involved in a defined terrorist activity and that designation is appropriate. This approach is in line with the UK’s current approach under UN and EU sanctions and would be balanced by procedural protections such as the ability of designated persons to challenge the Government in court.
Attachments can be viewed online at:
http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2018-07-09/HCWS838/.
[HCWS838]
Draft Financial Services And Markets Act 2000 (Regulated Activities) (Amendment) Order 2018
Draft Electronic Presentment Of Instruments (Evidence Of Payment And Compensation For Loss) Regulations 2018
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2018.
The Chair
With this it will be convenient to consider the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.
John Glen
It is a pleasure to serve under your chairmanship again, Sir Henry. I am pleased to introduce two statutory instruments today, both of which will help to improve the way in which financial firms in the UK can operate and deliver efficient services that meet the needs of firms and consumers. The Government are determined to ensure that our laws keep pace with developments in market practice to ensure that consumers are appropriately protected, while securing the continued international competitiveness of UK markets.
The order amends the Financial Services and Markets Act 2000 to address a gap in the regulatory treatment of alternative finance investment bonds, covering sukuk or Islamic equivalent bonds. The gap arose because of changes in taxation applicable to debt traded on multilateral trading facilities made in the Finance Act 2018. Those changes took effect on 1 April this year, and we intend to close the gap as quickly as possible in the interests of clarity and consistency. It is stated Government policy to provide a level playing field for Islamic finance instruments. That means that although sukuk are not debt instruments, they are deemed to be debt-like for UK tax and regulatory purposes.
That approach has served the UK well, with the UK being recognised as the leading western centre for Islamic finance, and London being a global venue for Islamic capital market activity. To date, more than $50 billion has been raised from sukuk listed on the London stock exchange. The instrument adds two additional types of financial trading venues—so-called multilateral trading facilities and organised trading facilities—to the list of permitted venues for alternative finance investment bonds. Conventional bonds can already be traded in the same venues. The order also amends the Financial Services and Markets Act so that a person administering a benchmark, as specified in the order, will be regarded as carrying on the activity by way of business. That is a minor, technical amendment, and is the final part of the legislation needed to complete the implementation of the EU benchmarks regulation into UK law.
The Joint Committee on Statutory Instruments reported the instrument for
“an unusual use of the enabling power.”
The Joint Committee raised concerns about the order’s coming into force immediately rather than 21 days afterwards. The Government treat the Joint Committee’s reports very seriously and give them full consideration. However, the Treasury has looked carefully at this matter and decided that an expedited approach was necessary for several reasons. First, the London stock exchange and UK-based advisers have warned that the continued failure to update the legislation for alternative finance investments bonds in regulation is causing issuers to look elsewhere. Secondly, the changes do not create any new cost for business, as the regulatory framework for alternative finance investment bonds has been in place since 2007.
I recognise the concerns raised by the Joint Committee that reasonable time should be provided for anyone to familiarise themselves with the changes made by the order, and to take steps to ensure compliance to avoid potential criminal liability. However, the criminal offence of carrying on a regulated activity without permission applies only to those people who are not already exempt or authorised by the regulators.
Instruments of such a nature are very sophisticated and highly unlikely to be traded in that manner by anyone without a significant level of expertise in financial services—in other words, firms already authorised by the Financial Conduct Authority. For those firms, carrying on an activity for which they are not authorised is contravention of a regulatory requirement, not an offence. The commercial reality is that it is a minor regulatory adjustment, rather than one that creates a new opportunity for criminal liability. In such circumstances, given that industry is eager to welcome the changes and the regulator foresees minimal impact from the amendments’ entering into force immediately, a longer waiting period was felt to be unnecessary and potentially even harmful to the markets.
I recognise fully, however, the concerns of the Joint Committee. I acknowledge that in this instance the Treasury could have done more to assure the House that its procedures are awarded due respect by the Government. The Treasury has taken on board the comments of the Joint Committee and will take steps to make improvements in future.
I now turn to the second statutory instrument: the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018. Its purpose is to ensure that the electronic clearing of cheques has no detrimental impact on cheque users. Cheques continue to form a key part of the British payments landscape and, although one cannot deny that their use has declined over the years, cheques are still important for smaller charities, voluntary organisations and certain members of our society, often the most vulnerable. To illustrate the continued importance of cheques, I inform the Committee that in the first quarter of this year more than 65 million cheques were cleared, with a value in excess of £80 billion—an average of almost 1 million cheques cleared per working day.
In the existing anachronistic process of paper cheques being physically transported around the country, a cheque takes six weekdays to clear fully and for recipients to be certain that the money is theirs. For that reason, in 2015 Parliament legislated to allow UK banks and building societies to accept receipt of cheques and similar instruments by electronic image. That innovation, now being delivered through the image clearing system, cuts down clearing times to the next weekday by sending a digital image of the cheque for clearing. Consumers, charities and businesses will therefore receive their funds more quickly. Cheque imaging will also facilitate further innovation in the industry—by enabling customers to pay cheques through their mobile banking app, for example.
I turn to the detail of the draft regulations, which provide for two measures to ensure that the electronic clearing of cheques has no detrimental impact on cheque users. The legislation seeks to protect customers as the image clearing system roll-out intensifies over the second half of the year. The first measure concerns the use of cheques as evidence of payment. In the existing model, customers may request from their bank a copy of the paper cheque that they wrote and that may be used as evidence of payment. To ensure that that right remains available, the measure will ensure that a copy of the cheque, along with some additional information, will be provided to the writer of the cheque on his or her request, and that copy has the same evidential value as a paper cheque.
The second measure concerns compensation. In cases of fraud or error, the rules for compensation are set out in scheme rules by the Cheque and Credit Clearing Company. No legislation, however, stipulates the circumstances in which customers must be compensated, or by whom. To prevent any harm to consumers from a fundamental change to cheque processing, the Government consider it necessary to legislate to ensure that cheque users are not left out of pocket if they incur a loss.
The second measure therefore provides that when a customer incurs a loss under the image clearing system, and prescribed conditions are met, including compensation not already having been received, the bank of the customer receiving the cheque must pay compensation. The Government believe that the existing industry-led approach works well. Indeed, the optimal solution is that the legislation need never be used because the scheme rules continue to effectively resolve losses from fraud or error.
In conclusion, the draft statutory instruments make necessary, albeit uncontroversial, changes to ensure that our financial services remain fit for purpose and work for the benefit of UK consumers. I sincerely hope that Members will join me in supporting the measures.
John Glen
I am grateful for the observations from the respective Front Benchers. I take seriously the observation of Lord Tunnicliffe, in the other place, on the adequacy of the explanatory notes. The Treasury always endeavours to make its explanatory notes as clear as possible, but I recognise the confusion and uncertainty caused. I will examine that and see what improvements can be made.
I welcome the support of both Front-Bench spokespeople for the draft orders. The gap and the delay are a matter of regret from the Treasury’s point of view. It would have been preferable to introduce the draft orders earlier, thereby avoiding a gap in the regulation and taxation of alternative finance investment bonds. On this occasion, I have to concede that the Government fell short of the standard we wish to set. I will do all that I can to ensure that that is not repeated.
I am pleased that the hon. Member for Stalybridge and Hyde acknowledged the leadership that the Government showed in 2014 by the issuance of a sovereign sukuk of £200 million; we look forward to trying to develop that further in the future. I welcome the support of the hon. Member for Glasgow East for the improvements to the image clearing system. With respect to the future protection of the use of cheques, there are no plans at all to curtail their use. A consultation is ongoing about the use of cash. On whether people should be encouraged to use images of cheques rather than physical ones, I think that customer demand and banking innovation will lead the way.
There has been a significant transition in the last three years. Given the advance of open banking and FinTech, we are seeing more and more products and opportunities enabling people to behave differently with their financial products, and I believe that that will lead the way. However, I take seriously the concerns expressed about vulnerable consumers and the need to ensure that they have adequate provision to make the transactions they need to. I hope that I have addressed the substantive points raised and that the draft orders will now be passed.
Question put and agreed to.
draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018
Resolved,
That the Committee has considered the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.—(John Glen.)
Oral Answers to Questions
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
The Government have a number of policies in place to support the development of low-carbon technology, including battery storage technologies. Those include the carbon price support mechanism, which encourages decarbonisation of the power sector; the Government’s smart systems and flexibility plan; and the Faraday challenge fund.
Sir Henry Bellingham
I am very grateful to the Minister for that reply. Is he aware of the huge investment in the offshore wind sector along the Norfolk and Lincolnshire coast, where more than 1,000 individual turbines are in place, with the prospect of many more to come? The key breakthrough that is required is enhanced battery storage technology, which will enable wind-generated electricity to be put through the grid on days when the wind is not blowing. What more is he going to do to try to incentivise further breakthroughs on that?
John Glen
I am grateful for that question. My hon. Friend is correct; we are maintaining our position as a global leader in offshore wind. But the combination of that with support for the battery storage sector is important, and we will be supporting it through the capacity market, which is helping to bring down costs.
Mr Jim Cunningham (Coventry South) (Lab)
As the Minister will be aware, Jaguar Land Rover is in my constituency and it is developing batteries. What discussions has he had with Jaguar Land Rover about tax incentives in that area?
Ruth Cadbury (Brentford and Isleworth) (Lab)
Craig Mackinlay (South Thanet) (Con)
The Economic Secretary to the Treasury (John Glen)
The Government are committed to ensuring that every part of the country has a modern and efficient infrastructure. In Kent, the extent of superfast broadband has risen from 33% to 95% since 2010, and the South East local enterprise partnership has secured £590 million for 30 transport schemes. Work has recently begun on a £105 million upgrade to junction 10a of the M20.
Craig Mackinlay
Given that Kent is on the frontline of EU border trade and that local plans involve the potential of more than 100,000 new homes over the next 15 years, will my hon. Friend consider investing in the dualling of the A2 and the A256 to improve traffic flows and resilience in east Kent?
John Glen
My hon. Friend makes a very sensible point. The dualling of the A2 near Dover was raised as an issue in Highways England’s route strategy for Kent and is being considered alongside other investments. The A256 is part of the indicative major road network and the Department will be publishing the final network by the end of the year. If it is included, it will be a matter for the local authority, working with the subnational transport bodies, to determine whether to bid into the fund.
John Glen
I am very sorry but I do not recognise the hon. Gentleman’s characterisation of the Government’s intentions. We have actually rolled out a comprehensive strategy across the country in terms of the northern powerhouse and the midlands engine with the systematic devolution of decision making and resources to enable growth throughout the country.
Matt Western (Warwick and Leamington) (Lab)
Gareth Thomas (Harrow West) (Lab/Co-op)
The Economic Secretary to the Treasury (John Glen)
I held a workshop with representatives of various credit unions this week, and one with community development financial institutions last week. I have convened a working group from the financial inclusion taskforce, which will meet in September to consider urgently expanding access to credit options on better terms than the high-cost ones that exist in the market. We are doing all that we can to incentivise growth in that sector.
Gareth Johnson (Dartford) (Con)
Dartford has seen over 1,000 new homes built in and around the town during the past 12 months, which is more than anywhere in Kent and one of the highest figures in the country. Does the Minister agree that investment in infrastructure needs to complement those new homes, not wait for several years?
Jeremy Quin (Horsham) (Con)
What is my hon. Friend’s reaction to the FCA report on doorstep lending, and does it go far enough?
Emma Reynolds (Wolverhampton North East) (Lab)
Over 1,600 people work at the Jaguar Land Rover engine plant in Wolverhampton, and the car industry has serious concerns about the Government’s plans to leave the customs union. Will the Chancellor guarantee that, when he goes to Chequers later this week, he will only sign up to a customs arrangement that preserves just-in-time manufacturing and integrated European supply chains?
Kevin Hollinrake (Thirsk and Malton) (Con)
The all-party parliamentary group on fair business banking is undertaking an important body of work on dispute resolution between banks and business. We will give it a parliamentary launch next week. Once the Minister has had time to digest the contents of that report, will he meet us to see how we can take the recommendations forward?
Helen Goodman (Bishop Auckland) (Lab)
Ending tax secrecy in the overseas territories will bring in £10 billion a year. Will the Chancellor organise a lunch for my right hon. Friend the Member for Barking (Dame Margaret Hodge), the right hon. Member for Sutton Coldfield (Mr Mitchell) and the entire Labour Whips Office, who were instrumental in securing this change?
Senior Managers and Certification Regime
John Glen Excerpts(5 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
The senior managers and certification regime (SM&CR) will come into force for financial services firms regulated by the Financial Conduct Authority only (also known as solo-regulated firms) from 9 December 2019.
The SM&CR is aimed at changing behaviours and culture in the financial services sector. It ensures that senior individuals in firms are approved by the relevant regulator, have a statement of responsibilities outlining what they are accountable for, and can be held personally responsible for misconduct. It also ensures that a code of conduct is set out for all financial services staff, and that employees in roles where they could do significant harm to consumers or to the UK’s financial stability are approved annually by their firm.
The SM&CR was first introduced for banks and building societies through the Financial Services (Banking Reform) Act 2013 and has applied to banks, building societies, credit unions, investment firms and UK branches of foreign banks since March 2016. The Government also legislated in the Bank of England and Financial Services Act 2016 to extend the SM&CR to all financial services firms. The Government recently announced the SM&CR would apply to insurance firms from 10 December 2018. The application to solo-regulated firms is the final stage in the extension of the SM&CR.
HM Treasury will make commencement regulations to bring the regime into force for solo-regulated firms.
[HCWS823]