Problem Debt: Breathing Space
John Glen Excerpts(4 years, 11 months ago)
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The Economic Secretary to the Treasury (John Glen)
The Government are establishing breathing space to help those individuals in problem debt. Today, the Government are updating the House in order to reaffirm our commitment to implementing this in 2021, as planned, and to provide figures from the impact assessment which is also published today.
Breathing space will provide a period of up to 60 days, where people in problem debt would be protected from enforcement action by their creditors and the accrual of further interest and fees on their debts.
This protection will help those in problem debt move towards a sustainable debt solution. The protections from enforcement action, fees and charges will encourage more people to seek out debt advice and to seek it earlier. It will provide them with the time and space to work with their debt adviser in an environment free from creditor pressure, in the knowledge their debt would not escalate due to further interest or charges. This will help give people the time and space they need to choose the right debt solution for them.
To ensure that breathing space works for everyone, people receiving treatment for mental health crisis will be able to enter breathing space without seeking advice from a debt adviser. They will be able to remain in breathing space for the period of their crisis treatment and a further 30 days.
In its impact assessment, the Government forecast;
700,000 people to be helped by breathing space in the first year, rising in time to over 1 million a year.
25,000 - 50,000 a year are expected to receive a breathing space via a specific route designed to support those in mental health crisis treatment.
The Government impact assessment can be found here:
https://www.gov.uk/government/publications/breathing-space-impact-assessment
[HCWS100]
Lloyds, HBOS and the Cranston Review
John Glen Excerpts(4 years, 11 months ago)
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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship again, Mr Hollobone. I, too, pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). Obviously, in this role, I have shadow Ministers shadowing my every move, but I also have my hon. Friend, who has spoken up very effectively on these issues over the past 25 months. We have had a constructive dialogue on many matters, and I look forward to addressing the points he and others have made in my response.
It has been just over a year since I announced that Lloyds would commission a review into the Griggs compensation scheme, which is another stepping stone in Lloyds’ journey to right the wrongs of the past and rebuild trust with their business customers. From the outset, I was clear that if the findings of the review were to hold up to scrutiny, the person overseeing it must be truly independent. I was therefore delighted by the appointment of Sir Ross Cranston, a former Labour Member of Parliament who was Solicitor General between 1998 and 2001 and is a professor of law at the London School of Economics, a Queen’s counsel, and a retired High Court judge. I met him on two occasions to check on progress, between May and when purdah commenced. That was not to influence him regarding the particular conduct, but to encourage him to look at this issue as thoroughly as possible.
Sir Ross found that the Griggs compensation scheme had serious shortcomings, as has been expressed fully in this debate, and that it did not achieve the stated purpose of delivering fair and reasonable compensation offers. Assessments of direct and consequential loss were too adversarial and legalistic, which was unfair and unreasonable for the customers it was designed to support. Sir Ross also found several other inconsistencies, along with a general lack of clarity underpinning the scheme, while the bank’s failure to communicate with customers in a transparent manner caused further unnecessary confusion.
Sir Ross found that some elements of the compensation scheme were good. For example, Lloyds provided generous legal assistance and wrote off some customer debts, as well as paying substantial distress and inconvenience redress. Nevertheless, the overriding conclusions were hugely disappointing, and Sir Ross has made it clear that Lloyds has more work to do to achieve the stated aims of its original compensation scheme.
The most substantial of Sir Ross’s recommendations is that customer claims for direct and consequential loss must be reassessed, and Lloyds is working with customers and relevant parties to agree the details of this process. I know that representatives of Lloyds have been mentioned in this debate, and I have been given assurances that they are eager to get on with things. That could be through the new Business Banking Resolution Service, which has been referred to in today’s debate, or through an equivalent scheme that is committed to achieving the same rigorous outcomes. Either way, it is pretty clear to me that these cases must be considered by an independent body in a transparent manner.
There has been work on this issue by the all-party parliamentary group on fair business, with support from Heather Buchanan, who was mentioned earlier, and the SME Alliance. I also know that Sir Ross Cranston himself is engaged in this process, which must continue, and must be thorough and rigorous.
Sir Ross has also recommended that Lloyds make payments to cover the debts of customers who repaid or refinanced loans, as well as releasing customers from certain aspects of their settlement agreements. It is vital that Lloyds now implements the recommendations as quickly as possible and continues to support customers as they navigate this process. I will follow progress closely and I expect to be regularly updated; I have made that clear.
I turn now to some of the points made by hon. Members throughout the debate this afternoon. The hon. Member for Gower (Tonia Antoniazzi), who is no longer in her place, asked whether all reviews should be tested against Sir Ross’s methodology. I will just say this: I think that all banks have a responsibility to reflect on the findings of the Cranston review and consider whether their own redress schemes achieved fair and reasonable outcomes for customers. Obviously, people have different interpretations, but the Cranston review is a wake-up call to banks to examine whether the appropriate transparent processes have been followed. That should happen now.
John Glen
I will just make my next point, then I will give way to my hon. Friend.
My hon. Friend the Member for Thirsk and Malton asked about the appropriateness of the Financial Conduct Authority carrying out a review under the senior managers and certification regime. As he will know, the FCA is operationally independent of Government and it is for the FCA to consider whether there is sufficient evidence for such an investigation.
I know that we have spoken previously about Dame Linda Dobbs’s investigation, which has been ongoing for a considerable amount of time. That really needs to come to a conclusion; we need to see the results of that investigation. However, I cannot say more than that, because it is a matter for the FCA to consider. Now I am very happy to give way to my hon. Friend the Member for Beckenham (Bob Stewart).
Bob Stewart
I thank the Minister for giving way; he is an honourable and decent man. However, what shocks me most about all of this is that some banks are not acting decently and honourably. That really worries me; they should do that naturally. They are a bastion of our society, just as business is.
John Glen
My hon. Friend makes a powerful point, which goes to the core of this matter. The Cranston review points to the fact that we now have a higher bar of expectations in terms of how these redress schemes should be operated in a transparent way. He has spoken in this debate and previously about the distress that has been caused to his constituents, and many other Members have also made points during this debate.
The wider banking industry has a responsibility to reflect on the review’s findings and act accordingly, so I welcome the banking industry’s commitment to creating a new scheme to address unresolved historic complaints from small and medium-sized enterprises that have not been through a formal independent process, and to address future complaints made by slightly larger SMEs that are just outside the remit of the Financial Ombudsman Service.
John Glen
I will in a moment.
The aforementioned Business Banking Resolution Service opened to expressions of interest last November, ahead of its full launch later this year. Meanwhile, the expansion of the FOS last April means that over 99% of all SMEs now have access to fair, free and fast dispute resolution.
The hon. Member for Strangford (Jim Shannon) asked me to give way; I am happy to do so, but I want to refer to the points that he made. He referred to the eligibility of the BBRS. It is not for me to determine the eligibility of the BBRS, but his points about the prioritisation of cases will have been heard very clearly by those who have set up that service, and I urge the BBRS to reflect on his contribution to this debate.
The BBRS and the expansion of the FOS build on several initiatives that the Government have introduced, including the senior managers certification regime, which will hold key individuals at banks to account for the decisions that they make, including decisions that could impact on their SME customers. The industry has also made changes. For example, all major lenders are signatories of the standards of lending practice, ensuring that banks treat their customers in a fair and reasonable way. I hope that these steps, together with the work carried out this year to address historic SME disputes, will bring unresolved disputes to a close and prevent the same circumstances from occurring again.
I will conclude by saying that over the past year Sir Ross has taken considerable time to discuss sensitive and often distressing matters with customers; he has had 49 meetings with 62 customers, alongside his adopting a detailed and forensic approach to the cases he has reviewed, so I thank him for his efforts.
I welcome the commitment of Lloyds to implementing the recommendations of the Cranston review, and I will follow progress closely. I note the points made by the hon. Member for Glasgow Central (Alison Thewliss) and others, and I will reflect on them carefully.
The establishment of the Business Banking Resolution Service provides a further means of redress, and I look forward to seeing it bring closure to many long-running disputes. I am confident that we can continue to build on the good work that industry, small business representatives, regulators and Government have begun to rebuild trust, so that small businesses can access the finance they need to prosper and grow.
Mr Philip Hollobone (in the Chair)
I call Kevin Hollinrake to sum up the debate.
Bilateral Loan to Ireland
John Glen Excerpts(4 years, 11 months ago)
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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 eight tranches, and 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 3 February, in line with the agreed repayment schedule, HM Treasury received a total payment of £404,714,183.56 from Ireland. This comprises the repayment of £403,370,000 in principal and £1,344,183.56 in accrued interest.
As required under the Loans to Ireland Act 2010, HM Treasury laid a statutory report to Parliament on 3 October 2019 covering the period from 1 April to 30 September 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://www.gov.uk/government/collections/bilateral-loan-to-ireland
The next statutory report will cover the period from 1 October 2019 to 31 March 2020. HM Treasury will report fully on all repayments received during this period in the report.
[HCWS89]
Counter-Terrorism Asset Freezing Regime
John Glen Excerpts(4 years, 11 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 July 2019 to 30 September 2019.
This report also covers the UK’s implementation of the UN’s ISIL (Da’esh) and al-Qaida 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 (Da’esh) and al-Qaida (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-Qaida and ISIL (Da’esh) listings.
It can also be viewed online at: http://www.parliament. uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-02-04/HCWS88/.
Tables set out the key asset-freezing activity in the UK during the quarter.
Counter-terrorist asset freezing regime Q3 2019 (TAFA Q3 2019 Table.pdf).
[HCWS88]
Draft Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019
John Glen Excerpts(4 years, 11 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 Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019.
It is a pleasure to serve under your chairmanship, Mr Sharma.
The draft order, which is being introduced under the Public Bodies Act 2011, will abolish the office of public works loan commissioners and transfer their functions, interests in land, and all other rights, liabilities and property to Her Majesty’s Treasury. The role of the Public Works Loan Board as a lender to local authorities is not affected by the draft order, which will rather ensure continuity of such lending by providing ongoing improvements in efficiency and accountability.
The Committee may be aware that the PWLB was formalised in 1817 via an Act of Parliament. It has supported England, Scotland and Wales through major historical events such as the Napoleonic wars, the formation of Trafalgar Square and our recovery after the two world wars, and through construction projects relating to vital infrastructure—projects for public utility and sanitary improvements, housing development and harbour maintenance. PWLB loans have supported employment opportunities and improved quality of life for successive generations.
Today, the PWLB is a statutory body of up to 12 independent commissioners. It issues loans to local authorities and other specified bodies from the national loans fund, and operates within a policy framework set by Her Majesty’s Treasury, while daily lending functions are carried out by the UK Debt Management Office. However, since the introduction of the prudential regime in 2004, which devolved borrowing decisions to local authorities, the commissioners retain a merely ceremonial role, carried out so that central Government lending complies with statute, rather than serving any practical purpose. Recruiting for the commissioner roles in that context has, inevitably, become more challenging.
If the PWLB is not quorate, it cannot lend or collect repayments. The result would be to freeze central Government lending, which would have a significant impact on local authority budgets and financing plans and jeopardise essential capital projects. Acute concerns about that will continue while PWLB governance remains outside the Treasury’s jurisdiction. This draft instrument will place that vital lending function on a more secure footing, so that we continue to provide a foundation for local authorities to commit to value-for-money long-term capital investment initiatives, and so reinforce the Government’s vision for levelling up.
As is usual for this type of legislation, the draft order has been put before the Secondary Legislation Scrutiny Committee, the Joint Committee on Statutory Instruments and the Treasury Committee for scrutiny. I met the Chair-elect of the Treasury Committee to inform him of this statutory instrument debate. None of the Committees requested the enhanced scrutiny procedure available under the Act.
I hope that the whole Committee will join me in thanking the public works loan commissioners—often ex-finance officers of local authorities—for the services they render, entirely voluntarily, for the benefit of the citizens of this country. I commend the instrument to the Committee.
John Glen
I am keen to respond to the points made by the hon. Members for Stalybridge and Hyde, and for Glenrothes. I stress, as I did in my opening remarks, that the order removes a purely ceremonial role. Although we are removing a function, it is one that does not exist in a meaningful sense, in terms of arbitrating on individual loan decisions.
The issue of commercial property speculation was raised. Local authority borrowing and spending decisions are made at a local level with reference to the Chartered Institute of Public Finance and Accountancy’s prudential code and the Ministry of Housing, Communities and Local Government’s statutory guidance. Those bodies revised the guidance in 2018, which makes it clear to local authorities that if they borrow more than or in advance of their needs solely to generate a profit, they are not acting in accordance with the prudential framework. MHCLG is reviewing the impact of the revisions to the prudential framework. When local authorities borrow, they must have regard to it to ensure that their borrowing is sensible and affordable.
Borrowing and capital spending decisions are devolved to local councils, but it is expected that they should not take on disproportionate levels of financial risk. PWLB finance continues to play a critical role in helping local authorities to transform services, but they cannot use that provision for day-to-day spending, which must be balanced off by the accounting officers each year.
The hon. Member for Stalybridge and Hyde asked about the interest rate rise before Christmas. I am sorry about the apparent lack of answer to any question he may have asked. The Government raised rates to slow borrowing, because of the statutory lending limit; they also raised that limit by £10 billion, to ensure that lending remained available. Let me stress that that is managed by the Debt Management Office; the rates are set daily against benchmark gilt prices, and should be seen against the spending round provision for local government. The forecast is for a 4.4% increase in real terms this coming year—the largest increase in spending power since 2010. I should also mention the additional grant funding available for adults and children in social care announced in the spending review.
John Penrose (Weston-super-Mare) (Con)
Could I press the Minister a little more on his answer about the interest rate rise? Since there is concern in the Treasury and elsewhere in Government about borrowing to invest in commercial property, as he mentioned in his reply letter to the Chair of the Treasury Committee, and as he just laid out, is he at all concerned that raising the interest rate from 1.8% to 2.8% may have a depressing effect on local authority investment in non-commercial property—that is, in genuine capital expenditure? As he rightly laid out, the Public Works Loan Board was originally constructed to enable that investment.
John Glen
All these matters are subject to ongoing review. There is no evidence that the rate is depleting the ability of local authorities to borrow to invest in the sorts of projects that the Government, CIPFA and MHCLG would deem appropriate, but as I indicated, the subject of this SI is much narrower than that. The wider issue is a separate matter, which is always under review. I would be happy to engage with my hon. Friend on any issues that he wants to raise from his experience of his local authority.
John Penrose
Since the Minister kindly makes that offer, the Treasury has raised the interest by what must be roughly 35%, from 1.8% to 2.8%. Surely that must have an impact on the amount of borrowing that local authorities are willing to do for what are presumably much-needed capital projects. Does the Minister have any assessment of the likely impact on demand for that kind of genuinely needed loan?
John Glen
It is helpful to put this in context. The rate was a function of the prevailing gilt rates last year, and the change brought it back to the level of the previous year, so we should not see this as a great leap in interest rate that will have a major effect. It is questionable whether the advantageous window offered by the relationship to the historically very low gilt rate was creating a different sort of behaviour. Again, that is outside the scope of my comments. I am happy to look at these matters, which are under ongoing review.
Let me turn to the hon. Member for Glenrothes’s remarks. He expressed general concern about any Government Minister taking control of anything, because he has no confidence in the Government. This is not a matter of Government Ministers overruling local authorities; the change is a reform of governance, with no practical effect on local authorities. It is based on the prudential code; decisions on borrowing and spending are devolved, and that continues. The Government consulted on this in 2017, and found widespread support for it. I am told that when the commissioners have met annually to sign off the annual report, they have said that they were keen for this SI to pass. The SI is quite complicated because it makes many references to primary legislation, and was delayed because of the events of recent years.
Peter Grant
I am interested to hear the Minister say that there is no practical effect on local authorities. The Government’s explanatory memorandum claims that the process will become more effective for local authorities. Is that not a practical effect? Does the Minister intend to reply to my question about whose policies will be implemented more effectively?
John Glen
The process is more effective in so far as the ceremonial role, which did not meaningfully alter any decisions on the ground, is transferred to the Treasury. There, we can ensure that we have a quorate body meeting to oversee the borrowing, but it will not make any different arbitration decisions, because the existing group of commissioners do not make those decisions. I am sorry that there has been a misunderstanding, but the order is not a power grab by the Treasury.
Transferring the powers of the public works loans commissioners to the Treasury will place that crucial function on a secure platform, enabling the continuity of lending for essential local capital projects. Those investments are often fundamental to quality of life and economic development, and by passing the SI, we will enhance the robustness and resilience of the lending facility, thereby supporting local authorities in such endeavours. I hope that the Committee has found the sitting informative and will join me in supporting the Order.
Question put.
Oral Answers to Questions
John Glen Excerpts(5 years ago)
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Marsha De Cordova (Battersea) (Lab)
The Economic Secretary to the Treasury (John Glen)
In September, the Chancellor announced a new £500 million youth investment fund to build and refurbish youth centres and deliver high-quality services to young people across the country. That will include £250 million of capital investment, which is expected to deliver 60 new youth centres, 360 refurbished facilities and more than 100 mobile units for harder-to-reach areas.
Marsha De Cordova
Over the past decade, spending on youth services has been cut by more than £1 billion. In constituencies such as mine and across London, the number of youth clubs has almost halved. Will the Chancellor finally own up to the devastating effect that austerity has had on young people in my constituency and commit to funding a proper statutory youth service in his upcoming Budget?
John Glen
What I can promise the hon. Lady is that the Government are committed to funding local government with a settlement, which was announced before the election, of an additional 4.4% in real-terms increase that will give local authorities that additional spending power alongside the youth investment fund announcement that I mentioned earlier.
Mr Steve Baker (Wycombe) (Con)
Will my hon. Friend take steps to ensure that young people in Wycombe are not disadvantaged by excessively coarse aggregate measures of deprivation, which can obscure real need in constituencies such as mine?
Christian Matheson (City of Chester) (Lab)
Mr Virendra Sharma (Ealing, Southall) (Lab)
The Economic Secretary to the Treasury (John Glen)
The Government are always willing to work with the City and interested parties to consider how we can advance investment across all those sectors, and I would be happy to discuss such matters with the hon. Gentleman.
James Wild (North West Norfolk) (Con)
Katherine Fletcher (South Ribble) (Con)
John Glen
I welcome my hon. Friend to her place. I know she has great experience as an SME leader. The Government recognise that SMEs are the backbone of the economy. We have international trade adviser networks giving peer-to-peer support to encourage more exports. The Government’s export strategy, launched in August 2018, lays the foundations of how to extend that. I hope she will be able to make use of it during her time in the House.
Karl Turner (Kingston upon Hull East) (Lab)
The “back of a cigarette packet” policy to increase road duty by more than 700% for motor homes and camper vans is reminiscent of the caravan tax of 2013, which I think was invented by the Chancellor’s predecessor George Osborne. That would have decimated manufacturing industry in Hull. Will the Chancellor meet me, colleagues and those in the industry, who are very concerned about this policy, so that they can explain directly to him how disastrous this policy will be for manufacturing industry in Hull?