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

John Glen Excerpts

Monday 9th September 2019 General Committees

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

I beg to move,

That the Committee has considered the draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019.

It is a pleasure to serve under your chairmanship once again, Sir Edward. The Government previously made all the necessary legislation under the European Union (Withdrawal) Act 2018 to ensure that, in the event of a no-deal exit on 29 March 2019, there would have been a functioning legal and regulatory regime for financial services from exit day. Following the extension to the article 50 process, the Treasury has used the additional time to review existing EU legislation, in line with the Government’s commitment to take all necessary steps to ensure our regime remains prepared for exit.

The statutory instrument fixes deficiencies in new EU legislation that will become part of UK law at exit on 31 October and amends some EU exit provisions that have been made already to account for the extension. The review identified a number of minor errors in earlier EU exit instruments, which are corrected in this SI. I note that the Secondary Legislation Scrutiny Committee’s report on 25 July highlighted this SI as an “instrument of interest” for what it called the “range and magnitude” of changes it makes. The Committee also expressed concern about the scale of the challenge facing financial services firms in adjusting to the changes being made to financial services legislation generally.

Although the SI amends 15 pieces of legislation, the number of amendments is modest and the nature of the amendments is minor. They follow the same approach to fixing deficiencies in EU legislation as approved by Parliament in previous financial services EU exit SIs. They do not change policy or alter requirements on firms. The SLSC is right to raise the challenge that financial services firms will face in adjusting to changes introduced by exit legislation, but I can reassure the Committee that minimising this challenge for industry has been central to the onshoring project from the beginning.

Under other SIs approved by Parliament, the Treasury has introduced a variety of measures to smooth the transition for businesses in adjusting to changes in EU exit legislation, and to changed circumstances generally. Those measures include a range of temporary permissions and transitional regimes for European economic area firms and funds. Parliament has also granted the UK financial services regulators powers to phase in requirements that change as a result of EU exit legislation, giving firms the time they need to adjust in an orderly way. The regulators have consulted on their approach to phasing in these requirements, which involves broad use of their transitional powers, and have received a very positive response from the industry. We have also engaged with the industry on the development of all our SIs, to give it as much time as possible to become familiar with the legislation. Given the minor and technical nature of the amendments in this SI, I will not cover every provision in my opening remarks, but I am happy to take questions on any of the individual provisions.

The provisions in the SI cover three broad areas. First, the instrument amends a number of pieces of EU legislation that have become applicable in the period since the article 50 extension and will therefore form part of UK law on exit day, but that are not substantive enough to warrant separate additional instruments. For example, the European Commission recently introduced measures to further promote the use of small and medium-sized enterprise growth markets. Those trading platforms are subject to more proportionate regulation, making it easier for SMEs to raise finance. The SI makes minor amendments to the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, to fix deficiencies in the new EU legislation and ensure it continues to function in UK law after exit. Following the approach approved by Parliament in previous financial services exit SIs, this SI gives UK regulators the job of fixing deficiencies in the new technical standards that have been adopted by the EU since 29 March.

Secondly, the SI amends existing EU exit legislation that is required to take account of the article 50 extension process. For example, the instrument makes a change to the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 by amending the date from which the Prudential Regulation Authority will be obliged to publish certain technical information that insurance and reinsurance firms must use to value their liabilities. Previously, the PRA had been required to begin publishing this information from 10 April 2019. The SI amends that date, so that the obligation on the PRA does not commence until an appropriate date after the UK has left the EU.

Finally, I will address the corrections that this instrument makes to earlier EU exit SIs. All the legislation laid under the European Union (Withdrawal) Act 2018 has gone through the normal rigorous checking procedures. However, as with any legislation, errors are made from time to time and it is important that they are corrected. Previously, when we found errors in financial services onshoring SIs, we sought Parliament’s approval to correct them as soon as possible, and we are doing the same now.

Although it is always regrettable when errors in legislation are made, it is important to keep them in perspective. The financial services onshoring effort has been an unprecedented legislative challenge for the Treasury, involving 53 SIs that make amendments to more than 500 pieces of EU and UK financial services legislation. These SIs have been positively received—indeed welcomed—by the regulators and industry, and they have provided reassurance that the UK financial services regime will continue to operate effectively from day one after exit day. In that context, the errors that we are seeking to correct are extremely minor and very small in number.

For example, the SI makes an amendment to the Criminal Justice Act 1993 to ensure that UK individuals trading financial instruments in the European economic area or Gibraltar are not guilty of insider dealing, which is a criminal offence, if they are compliant with the market abuse regime as it applies in those territories. This is not changing the criminal offence of insider dealing, but ensuring that the scope of the offence remains the same and operates effectively in UK law after exit.

As I explained in my opening remarks, the Treasury and Parliament have already completed the vast bulk of the legislative work that is necessary to ensure that our financial services regulatory regime is ready for exit. However, in line with this Government’s commitment, we continue to do all we can to ensure that our regime remains prepared. This SI makes additional fixes that will improve our state of readiness.

I know that regulators and the industry support our effort to address every legislative deficiency, and the SI helps to reinforce the message that the Government and Parliament will not take any chances with the safe and effective operation of the UK’s regulatory regime. I hope that colleagues will join me in supporting these regulations, which I commend to the Committee.

--- Later in debate ---

[John Glen]

I acknowledge the dissatisfaction of the hon. Members for Stalybridge and Hyde and for Glasgow Central with this process. As I have always stated when I bring these statutory instruments to the Committee, we have tried throughout to ensure that we are in the best possible state in the outcome of no deal. As my hon. Friend the Member for Poole rightly set out, my colleagues in the Treasury have used the time during the extension to address the elements that were deemed to be defective. We have worked with the regulators and industry and we are continually testing our exit preparations. Both industry and the regulators are reassured that only minor errors have come to light, and this process is about correcting those errors.

I will address the specific points raised by Opposition spokesmen. On the principle of amending so many pieces of legislation in one instrument, although the SI amends 15 pieces of legislation, the number of amendments is not high and their nature is minor. I have set out the categories, and the amendments are routine and minor deficiency fixes, which are required to ensure that the UK regulatory regime for financial services continues to be ready for exit. For that reason we brought them together in this single SI this afternoon.

The hon. Member for Stalybridge and Hyde raised the issue of legislative gaps in the contingency plans: for example, in the in-flight files. I assure him that the Government have ensured that all cliff-edge risks are addressed in exit legislation. There is now no immediate need for further in-flight files legislation. He also asked about the extension of ministerial direction and power. European central banks are exempt from EU regulations under the markets in financial instruments directive—MiFID. In the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, Parliament approved a power for Treasury Ministers to determine that the EU would be equivalent or exempt under the equivalence regimes that will form part of EU law at exit, including equivalence or exemption under MiFID. Because the agreement between the EU and the European economic area on the implementing of MiFID has not been fully ratified, any UK decision would not cover EEA central banks or Norway and Iceland, so this SI also ensures that the new EU MiFID equivalence decision for Singapore made by the Commission in April works as intended in UK law after exit.

The hon. Gentleman talked about the impact on and substantive challenge for industry. As I tried to outline in my opening remarks, minimising the challenge of adjustments to industry to the changes brought by these SIs has been central to the onshoring project. We engaged extremely closely with industry representatives, particularly CityUK as the convening body, and the regulators on the development of the SIs. We published on the website numerous SIs in advance of laying them, to give as much opportunity as possible for feedback and so that firms could become familiar with them. We also introduced a variety of measures to smooth the transition for business, including a range of temporary permissions and transitional regimes for EEA firms and funds; those measures have been approved by the House. Parliament also granted powers to the regulators to phase in requirements on firms, again to minimise disruption and to ensure that any adjustments would be carried out in an orderly way, and that has been hugely welcomed by industry.

The hon. Member for Glasgow Central raised the issue of longer term challenges. I recognise that there is urgent work to do to optimise the competitive positioning of financial services, which, as she rightly said, is a hugely important industry across the United Kingdom, but this SI is not concerned with that. The hon. Gentleman made a point about the authorisation of payment services firms. Firms that enter the temporary permissions regime will be able to continue to provide the full range of services that they do now. That is the purpose of the scheme. On the hon. Lady’s point about how we will update legislation in the future, the aim of the onshoring legislation has always been to ensure that we have a functioning regime in all scenarios. Onshoring is designed to provide continuity and minimise disruption at exit, as well as to provide for Government and Parliament to design a regulatory framework fit for the future, and that remains the case. The Treasury introduced a call for evidence document on 19 July. It set out the context for a long-term review of the regulatory framework and the key issues that we will need to consider for a regime that operates outside the EU. The call for evidence closes on 18 October, and we will report back on that.

On the PRA and the appropriate date, I sought to make the point that we moved the date from 10 April because that related to the previous exit point. The PRA will publish the dates in due course, based on the date on which we leave the EU, which is yet to be determined.

I hope that the additional measures and corrections in the instrument will ensure that the UK’s financial services regulatory regime remains prepared for withdrawal from the EU in any scenario. I hope that I have responded adequately to the points raised and that the Committee will support the regulations.

Question put.

Asset Sale Disclosure: Kaupthing Singer and Friedlander

John Glen Excerpts

Monday 9th September 2019 Written Statements

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

I am informing the House of the sale of the remainder of a claim against Kaupthing Singer and Friedlander Limited (in administration) (“KSF”) acquired by the Government during the 2007-08 financial crisis. The Government’s claim was held by the financial services compensation scheme (“FSCS”) which compensated KSF depositors at the time of the financial crisis. This sale to Tavira Securities Limited generates proceeds of £17.8 million for the Exchequer.

Rationale

The Government acquired their claim in KSF to preserve financial stability. The administration of KSF has now been running for over nine years and there is comparatively little value remaining in the residual assets. The Exchequer has received £421 million of dividends prior to this sale. In addition, FSCS has repaid to the Exchequer £2.6 billion (plus interest of £146 million) which it borrowed at the time of the financial crisis to enable it to pay compensation for covered deposits in KSF.

Continuing to hold the claim until the administration of KSF concluded was considered, but this option was discounted as the analysis suggested a sale could achieve value for money and would free up FSCS and HM Treasury capacity previously used to manage the claim to pursue other work.

FSCS discussed the sale with a number of potential counterparties, having previously examined the market for selling claims. The counterparty selected offered the highest price.

The proceeds from this sale will reduce public sector net debt. This marks the conclusion of the Government’s and FSCS’s involvement in KSF.

Format and timing

The Government and FSCS concluded that this sale achieves value for money for the taxpayer having (i) conducted an analysis of whether market conditions were conducive for the sale of this asset; and (ii) conducted an assessment of the fair market value for the asset. The sale made use of a third party broker experienced in selling claims against insolvent companies, which was done to create competitive tension among potential ultimate buyers of the asset.

Fiscal impacts

I can confirm that the sale proceeds of £17.8 million are within the hold valuation range. In 2019-20 the sale reduces public sector net debt (PSND) by £17.8 million and public sector net liabilities (PSNL) and public sector net financial liabilities (PSNFL) by £2.3 million.

The impacts on the fiscal aggregates, in line with fiscal forecasting convention, are not discounted to present value. The net impacts of the sale on a selection of fiscal metrics are summarised as follows:

Counter-terrorist Asset Freezing Regime: January-March 2019

John Glen Excerpts

Wednesday 4th September 2019 Written Statements

[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 2019 to 31 March 2019.

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.

EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings.

The annexed tables set out the key asset-freezing activity in the UK during the quarter.



The attachment can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-09-04/HCWS1813/.

[HCWS1813]

Counter-terrorist Asset Freezing Regime: April-June 2019

John Glen Excerpts

Wednesday 4th September 2019 Written Statements

[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 April 2019 to 30 June 2019.

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.

EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings.

The annexed tables set out the key asset-freezing activity in the UK during the quarter.

The attachment can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-09-04/HCWS1814/.

[HCWS1814]

Loans to Ireland Act: Bilateral Loan

John Glen Excerpts

Wednesday 4th September 2019 Written Statements

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

I would like to update Parliament on the loan to Ireland.

In December 2010, the UK agreed to provide a bilateral loan of £3.2 billion as part of a €67.5 billion international assistance package for Ireland. The loan was disbursed in 8 tranches. The final tranche was drawn down on 26 September 2013. Ireland has made interest payments on the loan every six months since the first disbursement.

On 30 July, in line with the agreed repayment schedule, HM Treasury received a total payment of £404,642,604.73 from Ireland. This comprises the repayment of £403,370,000 in principal and £1,272,604.73 in accrued interest.

As required under the Loans to Ireland Act 2010, HM Treasury laid a statutory report to Parliament on 1 April 2019 covering the period from 1 October to 31 March 2019. The report set out details of future payments up to the final repayment on 26 March 2021. The Government continue to expect the loan to be repaid in full and on time.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment data/file/791132/Ireland loan statutory report April 2019 web.pdf

The next statutory report will cover the period from 1 April to 30 September 2019. HM Treasury will report fully on all repayments received during this period in the report.

[HCWS1812]

Senior Managers and Certification Scheme: Extension to Financial Conduct

John Glen Excerpts

Thursday 18th July 2019 Written Statements

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

Today the Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) Regulations 2019 (SI 2019/1136 C. 35) are published.

In my Written Ministerial Statement of 3 July 2018 [HCWS823] I announced that the senior managers and certification regime would come into force for financial services firms regulated by the Financial Conduct Authority only—also known as solo-regulated firms—from 9 December 2019.I would like to update the House that, in these regulations, there will be two exceptions to the commencement date, for newer categories of solo regulated firms.

The first are benchmark administrators. This is a new category of authorised firm introduced by the EU benchmark regulation, which came into force on January 1 2018. The benchmark regulations included a transitional period such that these firms have until the end of 2019 to become FCA authorised. The SM&CR will commence for benchmark administrators on 7 December 2020 to allow the FCA to carry out a dedicated consultation for benchmark administrators before making final rules for the sector.

The second are claims management companies (CMCs). The Government have already legislated to bring CMCs within the FCA’s regulation, and applications for authorisation are currently being considered by the FCA. Firms awaiting full authorisation, but previously regulated by the Ministry of Justice will have temporary permission to operate. Not all CMCs will have gained full authorisation by December 9 this year, so the commencement regulations confirm that the SM&CR begins for these firms on December 9 this year, or at the date at which they receive full authorisation if this is later.

[HCWS1743]

Precious Metal Markets

John Glen Excerpts

Monday 8th July 2019 Commons Chamber

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

I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for raising a set of complex but important issues with the rigour and grasp of detail in his analysis that has characterised virtually every speech that I have heard him make in his nine years in the House. I listened carefully to what he said and I am grateful for our earlier conversation, which helped me in preparing what I hope is an appropriate response to the points that he has raised. Although I cannot comment on individual cases, I would also like to express my sympathies for the constituent whose experience he referred to.

The precious metals market is an important part of our economy, as my hon. Friend said, and London is one of the most important gold trading centres in the world. They and markets like them have a real impact on individuals, households and businesses, which includes his constituent. Those markets underpin borrowing costs, exchange rates and the cost of food and raw materials, and they help firms and households to manage financial risks and investments. A well-functioning derivative market fulfils a vital role in that process.

[Jeremy Lefroy]

One point that I should have mentioned but did not is that precious metals, probably with the exception of gold, have many other uses—silver in antimicrobial products and platinum and palladium in exhaust pipes and reducing emissions—so they are extremely important, both as a store of value and in having real practical uses.

[John Glen]

My hon. Friend is absolutely right and draws attention to the ever-expanding functional use of these metals in ever more sophisticated ways.

Precious metals allow businesses around the world to hedge their risks by reducing uncertainty about future prices. For example, a mining company can agree a price today for the gold that it will extract in the next year, safeguarding itself against potential future price movements and providing certainty over its income. Attempted market manipulation, such as the type that occurred in the US, undermines integrity, reduces public confidence and impairs the effectiveness of the financial markets. We take this extremely seriously, and it is therefore vital that we do everything in our power to detect and prevent such abuse.

Additionally, gold plays an important role in nations’ reserve policy. The Treasury’s role is to ensure that its choice for the strategic composition for the benchmark asset allocation of the reserves, including gold, meets the policy objectives of the exchange equalisation account.

My hon. Friend raised several important questions, which I will attempt to answer. I want to refer first to the significant volumes of derivatives and his question about the potential risk for financial systems. Derivatives are an important risk management tool and are used to hedge positions in underlying assets against adverse movements. They allow financial institutions to identify, isolate and manage separately the market risks in financial instruments and commodities. It is internationally recognised in forums such as the G20 that derivatives need sound risk management. Global financial regulators work to ensure that the derivatives market has robust oversight, monitoring, reporting and controls. In the EU, the legislative framework, which includes the market abuse regulation and the markets in financial instruments directive, does this.

The market abuse regulation, or MAR, provides the Financial Conduct Authority, as the relevant national competent authority, with the powers it needs to detect and prevent financial market abuses, such as insider dealing, unlawful disclosure of inside information and market manipulation. The regulation has been regularly revised and updated, most recently three years ago in 2016. MAR covers all financial instruments traded on regulated markets, multilateral trading facilities and organised trading facilities in the EU. It also covers financial instruments not traded on such markets, where the instrument’s price or value is dependent on the price of a financial instrument traded on a regulated market, multilateral trading facility or organised trading facility. Included in this scope are exchange-traded commodity derivatives. This means that gold futures, for example, are in scope of MAR.

MAR imposes stringent requirements on UK trading venues and firms, which have a duty to detect and report market manipulation. Trading venues and firms are required to establish and maintain effective arrangements, systems and procedures to prevent and detect all types of market manipulation.

--- Later in debate ---

Motion made, and Question proposed, That this House do now adjourn.—(Iain Stewart.)

[John Glen]

These arrangements must allow for the analysis of each and every transaction executed, and order placed, modified, cancelled or rejected. UK trading venues are also obliged to report to the FCA, immediately upon detection, all orders and transactions, including any cancellations or modifications, that could constitute market manipulation, attempted market manipulation or any other type of market abuse.

[Jeremy Lefroy]

Is my hon. Friend able to confirm whether there has been any indication, not necessarily just in precious metal markets, of this nefarious practice of spoofing within markets in the UK?

[John Glen]

I am just coming on to that, and I will make reference to some of the observations that have been made.

We are confident under MAR that where market abuse behaviour relates to exchange-traded commodity derivatives, as in the J.P. Morgan case, we have robust transparency systems and controls in place. Furthermore, in terms of enforcement, there have been examples in similar markets where traders have been caught attempting a similar type of market manipulation. For example, in 2013 a trader was fined almost £600,000 by the FCA for the manipulation of exchange-traded oil and gas futures.

The recent J.P. Morgan manipulation case in the US involved activity on a US-regulated exchange. The FCA’s regulatory scope obviously does not extend to oversight and enforcement in the US market. The FCA’s remit covers instruments traded on UK markets. The US authorities, therefore, have a remit over this behaviour, and it is in their competence to act against it on behalf of consumers.

On the manipulation of bullion markets, it is important to distinguish between the underlying market for commodities and the market manipulation of exchange-traded commodity derivatives. With regard to the former, precious metals are global commodities, where price is determined by the forces of demand and supply.

It should be noted that the Government have already taken action to ensure that specific commodity benchmarks for price setting are in scope of the market abuse regime. The London Bullion Market Association gold price and silver price—the global benchmark prices for unallocated gold and silver delivered in London—are within scope of the UK’s domestic benchmarks regime, which is the world’s first framework for regulating benchmarks. This means the administrators of those benchmarks, and those firms submitting to them, became subject to FCA authorisation and regulation. Manipulating the benchmarks is a criminal offence. The benchmarks are also regulated under the EU benchmarks regulation, which will supersede the UK regime when it comes fully into force in 2020.

My hon. Friend raised the potential risk of “paper gold” contracts, which are designed to reflect the market price of gold. Investors may use the contracts for hedging or speculative purposes, and without any overall intention to receive or deliver the physical asset. For example, a customer may have a claim on a bullion bank account provider for an amount of gold without physically possessing it.

This type of activity, relating to unallocated gold, does not guarantee an equal exchange for metal. Therefore, the risk that delivery is not met as part of the contracts should not undermine the overall market, given that this delivery is not guaranteed and the risk is priced into the instrument.

The Government commissioned the “Fair and Effective Markets” review in 2014 to restore trust in fixed income, currency and commodities markets. This review made several recommendations for the commodities markets, including the benchmark reforms I spoke of earlier. The review also established the FICC Markets Standards Board—the FMSB—an industry body to improve standards in wholesale fixed income, currency and commodities markets. The FMSB has already produced several industry-led standards and statements of good practices that have seen widespread adoption. The FMSB also supported work by the London Bullion Market Association to develop and issue the global precious metals code in May 2017. The code applies to the LBMA’s members’ dealings in the bullion market. It sets out the standards and best practice expected from market participants in the global wholesale precious metals market. It covers a wide range of topics, such as conduct, information to clients and the avoidance of market abuse. The code applies to LBMA members, who must publicly attest their compliance with it.

To conclude, I am confident that the robust regulatory framework in place in our country provides the FCA with the right tools in its regulatory perimeter to detect and respond to these attempts and ensure that the market works in a way that is fair and effective for all who wish to participate. I thank my hon. Friend for raising these important issues in the manner that he has. I trust that this response gives him considerable confidence in the sophistication of the regulatory regime that we have in place. There is never room for complacency in these matters. I acknowledge the concerns he has raised and I will take them on board as we look to the future.

[Mr Speaker]

Thank you. The Minister does speak in a most learned fashion on these important matters, responding in kind to the hon. Member for Stafford (Jeremy Lefroy), both of whom have benefited from tutorials from those who are in a position to proffer advice, from a Department renowned for its intellectual cream.

Question put and agreed to.

Oral Answers to Questions

John Glen Excerpts

Tuesday 2nd July 2019 Commons Chamber

[Kirstene Hair (Angus) (Con)]

9. What steps he is taking to maintain access to cash.

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

I welcome the benefits that electronic payments are bringing to people and businesses across the UK. However, the Government recognise the importance of cash to many, particularly the most vulnerable members of society. That is why we have committed to safeguarding access to cash for those who need it. In the light of changing payment trends, the Government have created the Joint Authorities Cash Strategy Group. That Treasury-led group will seek to bring together the regulators and the Bank of England to inform and co-ordinate members’ activities related to cash and safeguard access for those who need it.

[Kirstene Hair]

I recently sent a survey about access to cash to thousands of my constituents. There was an overwhelming response, because they are terrified that we are going far too fast into a cashless society. The next time the Minister meets banks, will he raise with them the impact that rural banking hubs could have on our local communities, just as the pilot business hub has had in Birmingham?

[John Glen]

I recognise my hon. Friend’s excellent campaigning on this matter, which we have had meetings to discuss. The Government have no direct role in the matter, but we recognise the role that banking hubs have played for businesses across six trial sites. We are looking at that carefully, and I will be very happy to raise it with the banks when I meet them next.

[Melanie Onn (Great Grimsby) (Lab)]

Will the Government commit to working with cash machine suppliers to ensure that cash withdrawals remain free across the board? Charges disproportionately affect those on lower incomes, who make smaller cash withdrawals.

[John Glen]

Absolutely. We are looking into that. The Payment Systems Regulator, which was set up four years ago, is responsible for overseeing LINK. It has two schemes in place to safeguard access to cash in the most impoverished communities and to ensure that, when an ATM is vulnerable to closure, there is a responsibility to keep it open if constituents would have to go more than 1 km to access cash.

[Peter Aldous (Waveney) (Con)]

21. The town of Bungay has been without a bank branch and a free-to-use 24/7 town centre ATM since last May. That is causing serious challenges for traders, the elderly and those managing on a tight budget. Will the Minister put in place a regulatory framework to reverse this regressive trend?

[John Glen]

I acknowledge the difficult situation that my hon. Friend has in Bungay. The Government-established Payment Systems Regulator is closely monitoring developments in ATM provision and, as I said, there are mechanisms in place to intervene. I am very happy to meet him to discuss the application of those to the situation in Bungay.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Given that post offices and credit unions provide easy access to cash, is it not now time to offer business rates relief to both to enhance the provision of cash and other affordable financial services?

[John Glen]

Of course small businesses receive that relief. The Chancellor will have heard that representation for the next fiscal event, but it is not a matter that I can comment on specifically at this point.

[Toby Perkins (Chesterfield) (Lab)]

11. What discussions he has had with the high street banking sector on closures of the last bank in (a) Staveley, Derbyshire and (b) towns throughout the UK.

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

While branch closures are commercial decisions for banks, I regularly engage with all key stakeholders on this issue and I recognise that it can be very difficult for some constituents, particularly if a branch is the last one in a community. The major banks have signed up to the access to banking standard, overseen by the Lending Standards Board, and that commits them to work with communities to minimise the impact of branch closures.

[Toby Perkins]

When the Government bailed out the banks, it was partly in recognition of the fact that banks were public services as well as profit-making businesses. I am disturbed—as will be the people of Staveley—by the Minister’s hands-off approach. Do not the Government either need to sit down with the banks and ensure they have a real commitment to having a bank branch in towns such as Staveley or adopt Labour’s proposal for a post bank so that we can have some Government control to make sure we have services where they are desperately needed?

[John Glen]

I have looked into the situation in Staveley and it will be served by a mobile bank following the closure. The post office, where a 24-hour ATM is available, is just a six-minute walk from Lloyds. The number of people visiting the counter at Lloyds bank in Staveley fell by 22% in the last year, so it is understandable why Lloyds has made that decision. The Government’s investment in the Post Office and its banking services facility is our solution.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

The Minister should make no mistake: communities up and down Britain are being deliberately starved of cash and banking services as the banks, with the support of Government, are trying to create a near cashless society. Can he say a bit more about what he is doing to help the more than 1 million poorer people who do not have access to a bank account?

[Mr Speaker]

A bit more, but not too much more.

[John Glen]

I recognise the difficulty and I am happy to meet my right hon. Friend to discuss the issues in his constituency. We have invested considerably in the post office network and I am meeting the Lending Standards Board to look at the mechanism for transfer to the Post Office and to consider solutions on a case-by-case basis.

[Tom Brake (Carshalton and Wallington) (LD)]

12. Whether he plans to launch a three-year spending review before the summer recess; and if he will make a statement.

--- Later in debate ---

[Julian Sturdy (York Outer) (Con)]

T6.   My constituent Karen Harrison-Taylor’s parents are among the tens of thousands of pensioners who are stranded in their homes due to shared appreciation mortgages saddling them with debts of up to nine times their original loan. What steps are being taken to assist those who are unfairly tied up in these schemes?

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

Borrowers who believe that they have been mis-sold a shared appreciation mortgage are able to take their complaint to the Financial Ombudsman Service. The Government are unable to comment on group action cases relating to this issue as we have no role in deciding whether cases may be heard in court. I note that the annual review of the Financial Ombudsman Service in 2003-04 said that in most cases it had not upheld complaints of shared appreciation mortgage mis-selling due to the information being satisfactory. That is the situation at the moment.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

T2. The Chancellor of the Exchequer has much good advice given to him, but is he picking up the nightmare scenarios that I am getting from senior business people in the north of England who fear that we are heading for a new global economic meltdown? They believe that that, combined with our crashing out of the European Union, would be a disaster for their businesses and for the country.

--- Later in debate ---

[Eddie Hughes (Walsall North) (Con)]

It has been a while since I asked the Chancellor about the blockchain and distributed ledger technology, so I was hoping that he could present an update on how the Treasury is embracing this new technology.

[John Glen]

I thank my hon. Friend for his question. The UK’s digital economy is thriving and is growing 10 times as fast as the wider economy. We are pursuing a range of measures to reinforce that leading position, and that involves implementing a 10-year action plan to unlock over £20 billion in finance growth in innovative firms and a further £7 billion for research and development since 2016, with internationally competitive research and development tax reliefs to support investment.

[Diana Johnson (Kingston upon Hull North) (Lab)]

As my right hon. Friend the shadow Chancellor has just pointed out, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) has made £30 billion-worth of spending pledges and the right hon. Member for South West Surrey (Mr Hunt) has made £13 billion-worth of pledges. The Chancellor has said it will not happen on his watch, but that seems to suggest that a magic money tree has been found in the barren soil of the no deal for which we seem to be heading.

I want to ask the Chancellor about the pledges announced by the current Prime Minister in the past few weeks, which unfortunately have not included any compensation for the infected blood community. How have the Chancellor and the Treasury prioritised and costed those announcements?

Co-operative and Mutual Businesses

John Glen Excerpts

Thursday 27th June 2019 Commons Chamber

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

It is a privilege to respond to this debate today on behalf of the Government. I would like to thank the hon. Member for Harrow West (Gareth Thomas) and my hon. Friend the Member for Wycombe (Mr Baker) for securing the debate, and the 11 Back-Bench Members who have spoken this afternoon about the enormous positive contributions that co-operatives and mutuals make to our economy and society.

I start by paying particular tribute to the hon. Member for Harrow West for his nearly two decades of leadership of the all-party parliamentary group for mutuals. In my rather more modest tenure of not even 18 months as Economic Secretary to the Treasury, he has lobbied effectively and constructively on these matters, and I will respond to the points he and other hon. Members have made in the course of this debate. I would also like to congratulate the hon. Member for Redcar (Anna Turley) on her recent election as Co-operative party chair and thank her for her contribution today.

The House has heard some impressive figures on the economic contribution made by co-operative and mutual organisations in this country and more widely across the globe. I would like to acknowledge the experience of my hon. Friend the Member for Stafford (Jeremy Lefroy), who brings great insights through his work in this country and also in Tanzania. That came over strongly in his thoughtful contribution and his suggestions.

[Jeremy Lefroy]

I thank the Minister for all the work that he does. Another major co-operative that is important to my farmers is an overseas-based one called Arla. It is based in Denmark, but it is a co-operative that works across borders for the benefit of all farmers—in Britain, Denmark or wherever else.

[John Glen]

Once again, my hon. Friend makes his knowledge clear. We should be looking to replicate the principles behind that model and to examine how we can extend it.

The all-party parliamentary group for mutuals found that mutuals generate over £130 billion of income each year but, of course, the contribution they make is about so much more than the raw numbers. Crucially, the House has also heard about the positive difference that such organisations make to people’s lives across the UK. I have been fortunate in my time as Economic Secretary to witness their impact at first hand. Last year, I visited 1st Class Credit Union in Glasgow, where I saw the effect of its work to help its members save and borrow responsibly. In my constituency, I am delighted to see my local co-operative, Chalke Valley Stores, flourishing as a community hub, providing a shop, café and post office to local people who might otherwise be underserved in this rural location. Various Members made the point about the welcome opportunities that exist, given the changes on the high street.

From fishing and school meals provision in Plymouth to funeral savings in Stoke, we have heard a large number of relevant examples this afternoon. Whether it is a young family able to buy their first home thanks to a mortgage from their local building society, a community that comes together to keep their local pub or lido running, or an individual able to pay off their debts and start building up savings with the support of their community credit union, mutuals and co-operatives bring choice and agility to our financial system and economy, ensuring that it can meet the varied needs of society.

As we have heard, mutuals are diverse organisations, found in almost every sector of the economy, meaning that the opportunities and challenges can be different. Let me first talk about building societies. Earlier this year, I was pleased to attend a reception to mark the 150th anniversary of the Building Societies Association, which has been the keeper of the flame for the building society movement since 1869. Building societies have been around since almost a century before that, with largely the same core purpose as they have now: helping people to buy their own homes. Building societies provide almost a quarter of UK retail mortgages, including one in three of new mortgages approved in the last quarter.

Although the core purpose remains unchanged, building societies have not stood still. Modern branches offer video mortgage advice and banking on iPads. They are also driving some of the most interesting innovations in the mortgage market. For example, the Saffron Building Society has launched a guarantor mortgage, while Marsden is the latest building society to offer a joint borrower, sole proprietor mortgage. Those two schemes take into account the financial circumstances of family members in order to give first-time buyers a leg up on the property ladder. Meanwhile, the Ecology Building Society offers green mortgages for self-build properties and discounted borrowing for home improvements, which is another great example of how the mortgage market can respond to the needs of society and of the generations to come.

As for retirement lending, it is hugely encouraging to see regional building societies, such as those in Leeds, Nottingham and Loughborough, offering retirement interest-only mortgages.

[Mr Sheerman]

I was a chairing a Committee in another part of the House, so I was out of the Chamber for a little while, but I came back for the winding-up speeches. I think it would be a shame if Nationwide was not mentioned today, and Liverpool Victoria or LV=, which has an office in my constituency, is a great insurance mutual. We have talked a lot about little co-ops, but big co-ops are important, too.

[John Glen]

As ever, the hon. Gentleman has anticipated my future remarks. I have met representatives from those institutions on several occasions recently.

The examples given today show that regulation and innovation are not mutually exclusive, and that building societies are able to adapt to serve the changing needs in our society. Members have highlighted the need for a proportional regulatory approach, so that building societies can effectively compete with the big banks. The Government are committed to ensuring that capital requirements are implemented proportionately in order to support smaller lenders, such as building societies. The recent updates to the Basel international standards are a clear positive step towards more proportional capital requirements.

The Government have a clear commitment to implementing those standards and refining capital requirements in the UK. That is demonstrated by the inclusion of the capital requirements regulation II in the Financial Services (Implementation of Legislation) Bill. Where we identify other barriers holding building societies back, we have acted to remove them. For example, one of the first pieces of legislation that I brought forward as Economic Secretary was to enable building societies to join central clearing houses.

I know how vital credit unions are for the people and communities they serve, and I am pleased to see the strength of support across the House today. Building up savings with a credit union, or having the opportunity to take out a reasonably priced loan, is one way that we can prevent people from having to turn to high-cost credit or loan sharks. The Government have acted to support credit unions by legislating to increase the common bond from 2 million to 3 million potential members and raising the cap on the interest rate credit unions can charge from 2% to 3%.

The hon. Member for Harrow West asked about insurance mediation and the provision of hire purchase, and my hon. Friend the Member for Stafford referred to the impact of regulation on credit unions. ABCUL, the largest credit union trade body, is currently carrying out a sector-wide consultation on the future of credit unions and will complete its work in September. The consultation will consider the legislative framework and opportunities for further change. I will consider the outcome of that consultation with interest. I visited ABCUL’s conference in March and have had an active dialogue with the organisation while in office. The co-ordination of its requests has been somewhat fragmented over multiple trade organisations, but it has been helpful in conducting the consultation, and I look forward to taking things forward.

In last year’s Budget, we announced an affordable credit package to support social and community lenders. The package included a £2 million affordable credit challenge fund designed to generate innovative FinTech solutions to address challenges faced by social and community lenders, including credit unions, as they try to match the broader innovations in financial services. It also included a measure to make it easier for registered social landlords to refer tenants to credit unions, and a two-year pilot of a new prize-linked savings scheme offered through credit unions. The package is designed to support the credit union sector through increased membership, awareness and deposits, as well as encouraging participants to build up savings to help them cope with financial shocks. We used examples from other jurisdictions —the US in this case—to inform that policy.

I am pleased to announce today that we have selected 15 credit unions from across Great Britain to take part in the prize-linked savings pilot. They are East Sussex, Lewisham Plus, London Capital, Clockwise in Leicester, Nottingham, 1st Alliance, Merthyr Tydfil Borough, Riverside in Liverpool, South Manchester, Central Liverpool, Bradford District, Westcountry in Portishead, Commsave, Police, and Plane Savers. I congratulate the successful credit unions and look forward to seeing the pilot up and running as quickly as possible.

[Jim Shannon]

I am sure that I must have missed it—I hope I have—but did the Minister mention whether Northern Ireland is in the pilot scheme?

[John Glen]

I did not mention Northern Ireland in that list, but Northern Ireland obviously has a strong tradition in this area. There was a competitive process, and I would be happy to talk to the hon. Gentleman about a specific credit union.

Members from across the House have spoken of the benefits of the co-operative model and its potential to improve our public services and strengthen our communities. This Government have a strong track record of support for co-operatives. We passed the Co-operative and Community Benefit Societies Act 2014 to reduce legal complexity for co-operative and community benefit societies. My hon. Friend the Member for Wycombe spoke about the apparent inadequacy of that legislation, but we have introduced a range of legislative measures in addition to the consolidation Bill since 2014, including making it easier to register digitally as a co-operative.

We have also reduced red tape by equalising the audit treatment between small co-operatives and small companies. I am pleased that the Financial Conduct Authority, which runs the UK mutuals register, recently made several practical changes to support mutuals, including simplifying the forms, creating an online portal and removing the fees to access documents. Members also raised the challenges that co-operatives face when raising capital. We recognise that that can be an issue, which is why in 2014 we increased the amount of share capital that an individual member can put into a co-operative society from £20,000 to £100,000, and I am happy to consider further proposals. We have looked at some proposals before, but I am happy to re-examine them.

Some Members called for changes to social investment tax relief, which is designed to incentivise investment in social enterprises that are constituted to provide a social or community benefit. Community benefit societies, a form of mutual, may therefore be eligible, as their purpose is to benefit the wider community. Although other forms of co-operatives and mutuals may have a wider community benefit, it is not central or essential, and their primary purpose is to benefit their members.

The Government are currently conducting a comprehensive review of social investment tax relief to better understand what impact it has had on access to finance for social enterprises. The public call for evidence is currently open, and it closes on 17 July. We will publish a summary of responses later this year.

I recently met representatives from across the mutual sector at a session hosted by Co-operatives UK and Nationwide. We discussed some of the opportunities and challenges facing mutuals, many of which have been raised by Members today. Following the session, Treasury officials will host a mutuals workshop with Co-operatives UK in July to investigate in more detail some of the barriers faced by mutuals. This will be a good opportunity to explore how the sector and the Government can work more closely together and, importantly, how mutuals can build closer links across the sector.

The latest estimates show that public service mutuals in healthcare and other sectors are delivering more than £2 billion-worth of services across England. They are driving innovation, too, with two thirds saying that they have created new products or services over the past year. Over the last three years, the Office for Civil Society has been delivering a £3.5 million programme to help new mutuals to emerge and existing ones to thrive. It has run several roundtables to create a proposal on the future definition of public service mutuals, which is planned for launch this summer.

I thank all Members for their contributions today and for their ongoing support for the co-operative and mutual sector. I am pleased to see that the sector continues to thrive, from the building societies that can trace their origins back hundreds of years to the newest entrants to the market. I recently met the executive director of South West Mutual, who is from Plymouth and is working with the Royal Society for the encouragement of Arts, Manufactures and Commerce to develop proposals for regional co-operative banks across the UK.

The demand for a new form of co-operative finance is a good sign, and the public appetite for co-operative and mutual services remains strong. This Government will continue to be a strong supporter of the mutual sector. Like hon. Members present today, I will continue to advocate for the sector’s considerable contribution to ensuring that our economy serves the needs of everyone in society.

Breathing Space Scheme

John Glen Excerpts

Wednesday 19th June 2019 Commons Chamber

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

With permission, I will make a statement on supporting people in problem debt. This is an issue close to my heart. As a former member of the all-party parliamentary group on hunger and food poverty, I have seen at first hand the hardship that problem debt can cause. Now that I am in a position to bring about change, I am focused on improving the lives of the most disadvantaged.

Problem debt places a heavy burden on households and can lead to family breakdown, stress and mental health issues. The Government have taken steps to prevent problem debt from occurring and to support those who have fallen into it. We have reformed the regulation of consumer credit and widened access to professional debt advice, and we are helping to build individual financial capability. Today, I can update the House on the Government’s plans to go further, with the introduction of a breathing space scheme and a statutory debt repayment plan. I am grateful for the support of the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst), whose private Member’s Bill and ongoing work have made a key contribution to the scheme becoming Government policy.

For people who are just getting by, even a small income shock can provoke a cycle of debt dependence that can be difficult to escape. If then faced with invasive debt enforcement, it is no wonder that many people in problem debt simply disengage. The first step to countering problem debt is to ensure that consumer credit firms are properly regulated, because loans should not be made to people who cannot afford to repay them. The Government have empowered the Financial Conduct Authority to ensure that firms lend responsibly, protecting consumers from over-borrowing. At Budget 2018, we announced new measures to increase access to affordable credit by helping foster a larger, more vibrant social lending sector.

In parallel, we have put in place support to help people make good financial decisions. The new Money and Pensions Service brings together three existing publicly funded money and pensions guidance services into one new organisation, providing free support and guidance on all aspects of people’s financial lives. Importantly, it also has a statutory duty to develop and co-ordinate a national strategy to improve people’s financial capability. Despite those preventive measures, I recognise that many people still fall into problem debt. For such people, further support is required.

Seeking professional advice is a vital step in moving towards a sustainable debt solution. That is why we have increased public funding for free professional debt advice to almost £56 million this year, delivering 560,000 sessions in England, but more needs to be done. The Money and Pensions Service estimates there are up to 9 million over-indebted people in the UK, but only a fraction of them access free debt advice each year. That is why I can announce today that, following consultation, the Government will deliver on their manifesto commitment to introduce a breathing space scheme for people in problem debt.

The scheme has two parts which, together, will protect debtors from creditor action, help them get professional advice on their debt problems, and help them pay off their debts in a sustainable way. Breathing space will provide debtors with a 60-day period in which interest and charges on their debts are frozen and enforcement action from creditors is paused. Creditors must not start new court action, communications with debtors relating to enforcement of their debt must stop, and benefit reductions to reclaim debt will pause. During the time, debtors will have to seek professional debt advice to find a sustainable solution to their debt problem. These protections will encourage people in problem debt to seek advice earlier and give them the headspace to identify the right debt solution for them.

The statutory debt repayment plan is a new debt solution that will extend the breathing space protections to debtors who commit to fully repaying their debts in a manageable timeline. Importantly, the payment plans will be flexible to changes in debtors’ life circumstances to remain sustainable over the long term. If someone’s disposable income decreases, their payments will go down, and vice versa.

The breathing space scheme will make a real difference to the most vulnerable families across the country, and I recognise the sense of urgency across the House to deliver this policy quickly. I am committed to delivering the scheme swiftly, working closely with key stakeholders to make sure that it works in practice. The Government will lay regulations on the breathing space element of the policy before the end of the year, and we intend to implement it in early 2021. We will continue to develop the statutory debt repayment plan to a longer timetable.

In addition, I am pleased to announce that the Government will go beyond their manifesto commitment in two areas. As many of us hear in our constituencies, people’s experiences of problem debt are changing. As I have seen at first hand, it is wrong to assume that over-indebtedness is simply a product of taking out too much credit. Many people struggle to meet essential bills and can end up owing money to multiple creditors in the public and private sectors. For the policy to be successful, it must properly reflect the issues that debtors are dealing with. I can therefore announce today that the breathing space scheme will cover a broad range of debts—not just financial services debts, but arrears owed to utility companies and to central and local government, including council tax arrears, personal tax debts and benefit overpayments. That broad protection will make the policy effective for debtors and fair to creditors.

The House will recognise the strong links between mental health issues and problem debt. Up to 23,000 people in England each year struggle with problem debt while in hospital due to mental health issues. The breathing space scheme must work for everyone facing problem debt. In particular, it must be open to the most vulnerable in society. To that end, I can confirm that people receiving treatment for mental health crisis can enter breathing space without seeking advice from a debt adviser, which could be a significant barrier for many.

The protections will last the entirety of an individual’s crisis treatment, followed by a further 30 days to allow them to get back on their feet and decide whether they wish to enter the main breathing space scheme or work out another solution for their debts. As mental health issues often recur, there will be no limit to the number of times that an individual can enter via this mechanism. I thank the hon. Member for Liverpool, Riverside (Dame Louise Ellman), the right hon. Member for North Norfolk (Norman Lamb) and my hon. Friend the Member for Plymouth, Moor View (Johnny Mercer) for their dedicated work on this issue, and I thank the Money and Mental Health Policy Institute for raising this important issue.

Millions of people struggle with problem debt and the burdens that it brings. The Government have committed to helping people take control of their finances and get back on a stable financial footing. The breathing space scheme that I have described today will help to fulfil that commitment, and I commend this statement to the House.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I begin by thanking the Minister for his courtesy in giving me advance notice of this statement, which we broadly welcome. There has been a growing consensus for some time about the need for something less dramatic than formal insolvency proceedings which offers hope to people with problem debts that there can be a way out. That is what the breathing space scheme should be—a space to let people get back on their feet, perhaps overcoming a health issue, a period of unemployment or something else that has adversely affected their lives.

There will always be disagreement between the Opposition and the Government on the necessity of the austerity policies that have blighted the country since 2010, but no one can deny that household debt in the UK is large, growing, and problematic for many people. The big change that I have seen in my constituency is that people are using credit not just to buy a car, a new sofa or a washing machine, but to pay their living costs at the end of the month—for food, dinner money, and children’s clothes. The worst is when people, unable to take control of their own affairs, go from one short-term credit product to another, compounding the costs and liabilities they are incurring and sometimes ending up in hock to illegal moneylenders as the only option they have left. One of my constituents in such circumstances ended up suicidal.

We want this policy to work, and my questions for the Minister are in that spirit. First, can he say why a 60-day period has been chosen as optimal? Going back to the need to let people overcome whatever problems they face, I have always felt that the period may need to be longer.

Secondly, will the Minister confirm my understanding that all debts will be covered, including public sector debts like council tax arrears and benefit overpayments? I very much recognise the obliteration of local government finances over the past nine years and, alongside colleagues, I presented a petition to Downing Street this morning on how bad it has been for councils like mine in Tameside. Council tax arrears are one of the biggest causes of the bailiffs being called, and we need such arrears to be included, too.

In addition, will the Minister look specifically at the issue of guarantor loans? Under such loans another person, typically a family member, accepts joint liability for the debt. I had another case of this type from a constituent in Stalybridge just this week. If the breathing space period does not apply to these loans, the burden will simply pass and offer no relief, which would be counterproductive.

Ultimately, this policy will work only if there are sufficient sources of advice and support for people to access during the breathing space period. It is a reality that such services—citizens advice bureaux, local authority and housing association advice centres, and so on—have been put under massive strain over the past few years. So what strategy do the Government have to significantly improve the capacity in this area? Whatever initiatives have been pursued to date, and whatever merit they have, there is no doubt that we need to go further.

Finally, in the famous words of Archbishop Desmond Tutu:

“There comes a point where we need to stop just pulling people out of the river. We need to go upstream and find out why they’re falling in.”

As well as a change of economic policy, we believe it is time to regulate further the interest that can be charged on overdrafts and credit cards, to look at the marketing of credit to vulnerable people, and to ensure there is real and effective financial education in schools.

There is a lot to do. This statement is a move in the right direction, but let us make sure we keep going in that direction.

[John Glen]

I thank the hon. Gentleman for his typically positive and constructive remarks, and I will try to address the five key points he raises.

First, the 60-day time period is longer than our manifesto commitment of six weeks and is the product of listening to the consultation responses and to the experience of the mechanism in Scotland. Overall, it is seen as the right solution.

Secondly, the hon. Gentleman asked which debts are included. I tried to set out in my statement that the scheme is extremely broad, covering public sector debts and arrears. He asked about bailiffs and their role. Of course, the Ministry of Justice completed a consultation exercise in February and will respond in due course. There is also Cabinet Office guidance on the fairness of debt collection. He makes a reasonable point.

Thirdly, the hon. Gentleman asked about guarantor loans, which are an emerging new category of high-cost credit. Such matters are regulated by the Financial Conduct Authority, and I had a conversation just this morning with its chairman. I spoke to Andrew Bailey, its chief executive, earlier this week on the need to be vigilant across all emerging forms of high-cost credit, which is under ongoing review.

Fourthly, the hon. Gentleman asked about capacity and capability in the area of debt advice. I envisage that the creation of the Money and Pensions Service as a new single entity will bring much better co-ordination of the available advice. As I mentioned, the Government spent £56 million last year, and 85,000 more people were seen than in the previous year. We are looking at how that advice can become consistently of a higher standard.

Finally, the hon. Gentleman asked about the long-term causes and the regulation and marketing of high-cost credit products. Following the recent issues at London Capital & Finance, I directed the FCA to examine what happened, and I have asked my officials in the Treasury to conduct a separate review of how regulation works. We have to continue being vigilant on this evolving space, and the increased digitalisation of the availability of high-cost credit means that the regulation and oversight needs to keep pace.

I hope that answers the hon. Gentleman’s questions.

[Dame Caroline Spelman (Meriden) (Con)]

I welcome this statement and the Government going beyond their original manifesto commitment. It gives me a chance to thank my citizens advice bureau, which has done fantastic work on debt rescheduling during my 22 years as an MP.

Does the Minister welcome the Church of England’s initiative to teach financial literacy in its primary schools, and would he encourage rolling out such an approach to prevention more widely?

[John Glen]

I welcome my right hon. Friend’s observations on the Church of England’s interventions on financial literacy. The ongoing challenge is to develop national consistency in the delivery of financial education and advice. A number of initiatives are under way, one of which is trying to get financial services providers, particularly the banks, to work in a more co-ordinated way. I am happy to endorse the work of the Church of England, which has been a significant partner in improving financial literacy across the country.

[Kirsty Blackman (Aberdeen North) (SNP)]

I am pleased that the UK Government have decided to put this in place and have set out the mechanism for doing so. In Scotland we have the debt arrangement scheme, which was launched in 2004 and significantly reformed in 2011, and a breathing space is built into that scheme.

Over £200 million of debt has been repaid since the reforms in Scotland, and 6,000 people completed a direct payment plan between 2011 and 2018, so I am pleased to see in the consultation responses published today that the Government have looked at how the system works in Scotland and have learned lessons. It is clear that, where the Scottish system has the powers to do so, we have the ability to trailblaze and lead the way.

In 2016, because of the debt arrangement scheme in Scotland, we had the lowest proportion of over-indebted people of any part of the UK. As austerity continues, we continue to see increases in the number of people suffering under the burden of debt. In 2017 there were 2.4 million children living in families with problem debt in England and Wales. StepChange, the debt charity, has said that 60% of those in problem debt fell into it because of an unexpected life event, and not because of poor money management—something external happened that changed their life, meaning they could no longer manage their debt.

I am concerned about why it will take the Government so long to implement the changes. Surely, as they already deal with a similar system in Scotland, most creditors should be able to take on the changes fairly quickly and roll them out over a wider group of people. Could this be done any quicker than 2021, which is the date I have seen in the papers?

--- Later in debate ---

[John Glen]

I thank the hon. Lady for her observations, and she is right that the Government have carefully listened to and observed the experience in Scotland. She asks about the timeline, and I have done everything I can to move this forward as quickly as possible. The challenge is to bring the sector along at the same pace and to ensure that we have complete commitment and sign-up to the process so that it will be a success. I am pleased that the chief executive officer of StepChange has said that he is particularly pleased to see the Government’s confirmation that debts owed to the Government will be included in the scheme. We are working very carefully, and this is the timeline to which we have to work.

[Fiona Bruce (Congleton) (Con)]

I thank the Minister for the proposals, which will help some of the most vulnerable and their families and, I believe, save lives. Will he clarify which stakeholders he will engage with to ensure effective implementation, and will they include debt advice charities such as Christians Against Poverty, which does such excellent work in this field?

[John Glen]

My hon. Friend is right to draw attention to the excellent work of Christians Against Poverty, which is indeed a key stakeholder. We engage widely with the sector, including the Money and Mental Health Policy Institute, StepChange, the Money Advice Trust and the charity National Debtline—it really is a collaborative effort—and I am pleased with their response to where we have got to.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Debt ruins lives. Debt harms health. Debt damages relationship. Debt holds back children. In extreme circumstances, debt kills. When the Financial Guidance and Claims Act 2018—it established the Money and Pensions Service—was being taken through the House, the Government made a commitment to move on a breathing space scheme. Today’s announcement is therefore welcome, particularly the action being taken to defend the interests of those suffering mental ill health. In welcoming today’s announcement, I urge the Government to ensure that the new arrangements are properly resourced and that there is a sense of urgency in their implementation, because the sooner they are put in place, relieving that terrible burden that afflicts so many people in our country, the better.

[John Glen]

I am extremely grateful to the hon. Gentleman for his comments. He played a significant role in the passage of the legislation that led to today’s announcement. He urges me once again on the timeframe, and I can assure him that my Treasury officials are working as rapidly as possible, but we must also ensure that it actually works. One of the questions he asked me previously, about what is included in the scheme and the range of public sector debts, has been a significant driver in those conversations. I acknowledge and take on board his comments.

[Vicky Ford (Chelmsford) (Con)]

I absolutely welcome the breathing space scheme, which will help people facing debts that they cannot repay. I join other Members in thanking citizens advice bureaux and organisations such as the Trussell Trust that help to signpost people to better debt advice. It has told me that young people, in particular, can get enormously concerned about their mobile phones being cut off, because if they lose their phones they lose their communications and any hope of finding work, for example. Will the Minister confirm that this will cover a wide range of debts and mean that people need not worry about losing their homes or their communications while their debts are sorted out?

[John Glen]

I am extremely grateful to my hon. Friend for those observations and for mentioning the Trussell Trust, which is headquartered in my constituency and has done a lot of work in this area. The principles underpinning the scheme are based on the Insolvency Service’s system and include all debts covered by the system. There are a small number of exceptions—for example, deductions for child maintenance payments—but we have designed this so that it is meaningful. It is not about a holiday from ongoing payments; it is about dealing with arrears and debt. The expectation is that when people join the scheme they will continue to pay for everyday expenses as they occur.

[Catherine West (Hornsey and Wood Green) (Lab)]

Is the Minister aware of Debt Hacker, a free online tool that I launched here in the House of Commons? It is run by activists and uses FCA rules that are poorly understood by the general public to help consumers to get back their £50—or however much it is—from companies that use extortion to get money out of others. Is he also aware, given his broader role in the Treasury, of the fact that it is mainly NHS and public sector workers who are in this debt trap, because wages have not kept up with housing, energy and other costs?

[John Glen]

The hon. Lady raises two points. I was not familiar with the Debt Hacker app, but I will seek it out because it sounds like a very worthwhile initiative. I respectfully say to her that in the fourth quarter of 2018 debt as a percentage of household income was 139%, whereas 10 years previously it was 160%. I recognise that households are experiencing strain, but it is not quite as dire as she makes out.

[Sir Edward Leigh (Gainsborough) (Con)]

Loan sharks are the unacceptable face of capitalism, but this is a complex area and the Government should proceed with caution. Confidence in the market, and in capitalism more generally, depends crucially on the payment of debt. I very much hope that the Government will consult widely with the industry, particularly with credit card companies, and consider piloting, because there are unintended consequences of Governments, in their dying days, trying to virtue-signal and regulate more but actually doing more damage than good. Therefore, please may we have piloting and widespread consultation?

[John Glen]

I am grateful to my right hon. Friend for his observations. This is not virtue-signalling; it is delivering on a manifesto commitment with the sectors involved, carefully and methodically. We rightly have a robust regulator with powers to deal with exploitative credit providers. As I indicated earlier, we are not complacent. I observe his concerns about ensuring that we implement this appropriately and with the wide assent of the industry.

[Nick Smith (Blaenau Gwent) (Lab)]

I welcome the breathing space scheme, which will certainly be helpful in Blaenau Gwent, because we discovered that Wonga lent £1 million a year to our borough’s residents. I suspect that a 60-day period will not be enough. The fact is that although citizens advice bureaux are great, we have insufficient guidance and support in our borough. I think that 90 days might be necessary, or perhaps even more, so I ask the Minister to think carefully about that possibility.

[John Glen]

We certainly keep all matters under review, but the 60-day period has not come from nowhere; it has come from deep engagement with the sector. As Joanna Elson, the chief executive of the Money Advice Trust, has said,

“this new scheme could well be a game-changer in our efforts to tackle problem debt as a society.”

I recognise that there are a range of views, but we have looked at what is out there and considered the Scottish experience, and we believe that this is the right policy response.

[Several hon. Members rose—]

--- Later in debate ---

[John Glen]

The hon. Lady makes a very reasonable point about the nature of the training for debt advisers. I cannot give her a specific commitment on that, because there are so many partners involved, but I will look into it and see what can be done to advance that very reasonable observation about the quality of advice given.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I welcome the proposals, although it has taken us since 2017 to get to this point and it is going to take another two years to get the first part operational. I am glad the Minister is moving swiftly and not dragging his feet.

Two problems for people who get into debt, particularly over tax credits or benefit clawback, are the interest charges that are applied as they try to repay and the management fees charged on top by debt-recovery agencies, which mean that the debt increasingly expands. The Minister could have a direct input on both those things; why does he not put a ceiling on those charges, rather than simply using a freeze?

[John Glen]

The hon. Gentleman makes an interesting point, but that is not an area for which I have direct responsibility. Reclaimed overpayments—for example, from universal credit—will be included in the scheme. I cannot comment on things that are outside my control, but I hear his point about doing this as quickly as possible.

[Heidi Allen (South Cambridgeshire) (Ind)]

The announcement of the scheme is brilliant news and I welcome the statement enormously, and particularly the parts on the inclusion of Government debt in the scheme. I also welcome the fact that the Government have recognised the effect that debt has on people’s lives and their ability to get out of debt. However, I urge the Minister to look into the Government’s own policies—I suspect he knows what I am coming to. The five-week universal credit wait is a big issue. Advance payments are not the solution because they themselves are a debt and are putting vulnerable people further into debt. As I have said many times, the advance payment for the most vulnerable should be a grant, not a loan. As it is, we are handing out advance payments to around 60% of claimants. We are handing out the money anyway, so it is not going to cost us anything. It is just a cash-flow situation.

The Work and Pensions Committee has recently heard moving and horrendous testimonies from women who have been forced into sex work because they cannot make ends meet. We heard stories of women going into a brothel for around three days, working 20 hours out of 24 and coming out with £150 of earnings, and that gives them a roof over their heads as well. As our Prime Minister leaves office, I cannot believe that is the legacy she wants to leave behind. Please will the Minister look into this issue? It is also a Government debt.

[John Glen]

I acknowledge the hon. Lady’s deep interest in and work on this topic over several years. She has raised points to which it is difficult for me to respond because they are outwith my responsibilities. As she will know, in the Budget we announced a £1.7 billion package of additional financial support for universal credit. I acknowledge that the hon. Lady disagrees with one element, but that additional support did involve the reduction of the maximum deduction from the standard allowance, from 40% to 30%. I cannot speak for a policy area for which I do not have responsibility. I am delivering a breathing space scheme that covers a wide range of debts and reaches deep into public sector debts, which I was keen for it to do from the outset.

[Ruth George (High Peak) (Lab)]

As I set out in a recent Westminster Hall debate, the amounts being deducted from universal credit are a significant part of the reasons people fall into problem debt. I agree that a lot of that is down to Department for Work and Pensions policy, but I have seen many examples of people whose tax credit overpayments are being deducted from their universal credit, and of people being told that they have overpayments dating from 2006 or 2011, when they were supposed to have been written off. The average of £1,200 being deducted from people’s universal credit is contributing to their not having enough to get by or to pay their bills. Will the Minister and the Treasury please look into this issue as a matter of urgency and allow people to appeal against such deductions?

[John Glen]

The hon. Lady will know that, as I said in response to the previous question, that is an issue of the administration of benefits and is the responsibility of the DWP. I will certainly make her observations clear to my colleagues in Government. Universal credit over- payments will be included from day one. I will make sure that I fully address the hon. Lady’s points and write to her on the detail.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

I very much welcome the statement and the action that will be taken from today, because research shows that each year more than 100,000 people who are in debt attempt suicide. The scheme has to be helpful in giving them the support they need and improving mental health. One suicide crisis period, particularly for young men, is early adulthood; will the Minister liaise with colleagues to ensure that financial education and support is available not only in schools but in colleges and universities?

[John Glen]

The hon. Lady makes a sensible point about the need for appropriate financial education at all levels. It needs to start early and endure through adolescence and into early adulthood. Several initiatives are under way to try to improve the quality of financial advice. The setting up of the Money and Pensions Service and its broader remit in this area is one part of that, but there are other partners, including our banks, through UK Finance, which is keen to do more. I very much take on board the hon. Lady’s observations.