Critical Benchmarks (References and Administrators’ Liability) Bill [Lords]

John Glen Excerpts

Committee stage & 3rd reading
Thursday 18th November 2021 Commons Chamber

[John Glen]

Thank you, Madam Chairman. I am grateful to you for being in the Chair at this point.

I realise that a number of these provisions have already been considered on Second Reading, but I am keen to explain the clauses in turn. Owing to their technical nature, I will explain them paragraph by paragraph at times. I hope that the House will bear with me.

As I said on Second Reading, the Bill provides important legal certainty for contracts that will rely on LIBOR after the end of this year. All its provisions deal with how a benchmark is treated in contracts once it has been designated an article 23A benchmark under the benchmarks regulation. The Financial Conduct Authority has power to make this designation when a critical benchmark is unrepresentative, or at risk of becoming unrepresentative, of the market that it seeks to measure. For LIBOR this will happen at the end of this year when the panel banks stop making their contributions. At that point, the FCA will ensure that LIBOR will continue to be published, using the synthetic methodology that we have already discussed.

In describing the purpose and effect of the clauses, I will use LIBOR as an example because it is currently the only benchmark to be designated under article 23A, but the provisions will also apply in future to any critical benchmark designated an article 23A benchmark by the FCA, although none is envisaged at this point.

Clause 1 means that LIBOR referencing contracts can rely on synthetic LIBOR. The clause inserts two new articles, article 23FA and article 23FB, into the benchmarks regulation. They supplement the legislative framework introduced by the Financial Services Act 2021 to provide for the orderly wind-down of a critical benchmark. Article 23FA clarifies how references to an article 23A benchmark should be interpreted in contracts and arrangements. Specifically, it provides that when the FCA designates a benchmark under article 23A and imposes a change in how the benchmark is determined, contractual references to the benchmark should be interpreted as including the benchmark as it exists after the exercise of the FCA’s powers. This is called “contractual continuity”.

For example, where LIBOR settings are designated under article 23A of the benchmarks regulation, this article would provide that contractual references to LIBOR should be interpreted as including synthetic LIBOR.

Article 23FA also sets out how contractual continuity will work in practice. It provides that this interpretation applies to all references to the benchmark in contracts or other arrangements, including references that do not refer to the benchmark by name but rather describe it, for example by reference to the economic or market reality that it intends to measure. It also applies where the parties were treating a reference in a contract as a reference to that benchmark immediately before the article 23A designation. That will ensure that any legal uncertainty is minimised, even when the contract does not explicitly use the name “LIBOR”, or includes a reference to LIBOR that is out of date. Finally, it is formally retrospective, in that it also provides that the contract is to be treated as having always provided for the reference to the benchmark to be interpreted in this way once the synthetic benchmark was introduced.

In the Government’s view, for contracts that continue to refer to LIBOR, these provisions will comprehensively address the risk that parties might successfully dispute the use of synthetic LIBOR to calculate payments after the end of this year. They do so in a proportionate way while not interfering with other valid claims. The clause does not introduce a so-called safe harbour, as has been introduced in New York. The Government considered that approach and, as I said, concluded that it would not be appropriate. However, the clause does not prevent parties’ ability to seek legal redress via the courts for other matters.

I draw the Committee’s attention to paragraphs 6 and 7 of article 23FA, which provides that the Bill does not create a basis for new claims concerning actions by the parties in relation to the formation, variation or operation of the contract prior to the change to a synthetic methodology. That should ensure that if, for example, a misrepresentation claim were brought in relation to statements made before a contract was entered into, the claim is considered according to the reality at the time when the statements were made, not in the light of the Bill’s impact on the contract. It would also not be reasonable or proportionate for the Bill to extinguish existing legal claims. Paragraph 7 therefore ensures that article 23FA does not extinguish existing causes of action. Any claim that could have been brought prior to the article 23A designation of the benchmark can therefore still be brought regardless of the Bill. For example, a mis-selling claim brought on the basis that a lender had misrepresented LIBOR to the customer could still be brought and judged according to the situation at the relevant time.

I turn to article 23FB, which introduces further provisions necessary to provide legal certainty to parties to contracts or arrangements that reference an article 23A benchmark. It is designed to avoid unnecessary interference in contracts where parties to a contract have already agreed what should happen in the event that a benchmark is designated under article 23A. This new article is primarily concerned with how the contractual continuity provision will operate in contracts that already have fall-back provisions—that is, provisions that provide for the contract to operate by reference to something other than LIBOR, or to terminate in particular circumstances.

The new article provides that article 23FA does not apply if the contract expressly disapplies it or expressly provides that the reference to the benchmark is not to include the benchmark in its synthetic form. It also provides that article 23FA does not override the operation of contractual fall-back provisions, many of which are designed to cater for the wind-down of the benchmark. For example, a fall-back in a contract that is triggered by LIBOR becoming unrepresentative will not be affected by the Bill. However, article 23FB is also clear that the designation of the benchmark under article 23A, or the imposition of a synthetic methodology, will not trigger fallbacks designed for the cessation or unavailability of a benchmark. That is because the benchmark continues to exist and be available in its synthetic form, so it has not ceased.

Concern about inappropriate cessation fall-backs that were designed with only a temporary unavailability of LIBOR in mind was one of the drivers of the approach taken in the Financial Services Act 2021. It is one of the key reasons why the Government are allowing for the continuation of LIBOR under a synthetic methodology. Article 23FB also provides the Treasury with three limited powers to make regulations. The powers are intended to future-proof this legislation, allowing the Government to ensure that an appropriate legislative framework is in place to support the orderly wind-down of future critical benchmarks across the wide range of contracts and arrangements that could reference those benchmarks.

The right hon. Member for Wolverhampton South East (Mr McFadden) referenced concern about timing. As I mentioned, that provision allows for wind-down over a 10-year period. We want to continue to encourage the wind-down over the coming period. We reserve the right to make further legislative interventions, but we envisage that they would be on a smaller and diminishing pool of contracts.

I turn to clause 2. On Second Reading, I spoke to the narrow and targeted immunity that the Bill provides for the administrator of a critical benchmark for action that it is required to take by the FCA. That is the clause’s purpose. It inserts new article 23FC into the benchmarks regulation. The clause, as with clause 1, deals with the circumstance where the FCA has designated a benchmark as an article 23A benchmark. Article 23FC concerns the liability of the administrator of an article 23A benchmark. The administrator will be responsible for administering the change in methodology as directed by the FCA, and as I set out on Second Reading.

Importantly, the clause provides that the administrator of an article 23A benchmark is not liable in damages for action—or inaction—that it is required to take by the FCA under article 23D of the benchmarks regulation, or for publishing the benchmark as it exists as a result of the FCA’s direction under article 23D. In essence, that gives protection to the administrator in terms of liability related to the FCA’s direction of it.

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[Peter Grant]

I will not detain the House by repeating my comments on Second Reading. I am grateful to the Minister for his answers to a number of my questions, but one question he did not pick up, and on which I hope he can give some assurance, is what happens if something goes badly wrong with people’s mortgages. The small percentage of people who have mortgages covered by this legislation—although it could potentially be quite a big number of people—are now, through no fault of their own, quite literally staking their home on our getting this right. Although I appreciate that the Minister will not commit to a specific compensation scheme just now, will he at least give an assurance that the Government have not closed the door on that possibility should unforeseen circumstances lead to it being necessary?

I am also looking for clarity on the precise circumstances in which the administrator does or does not have immunity from legal action. The Minister has said the administrator is covered if it does something the law says it has to do, and it will not be covered if it does something it has chosen to do in a particular way. Does the administrator have discretion on the precise methodology it uses to calculate synthetic LIBOR, and can it exercise its judgment on the numbers it puts into the model? If the administrator has such discretion, nobody needs to sue it for using a synthetic LIBOR model; they can just sue it because of how it has carried out the calculation.

Given the nature of contracts of the value that the right hon. Member for Wolverhampton South East (Mr McFadden) mentioned, a slight change in the published rate can mean a lot of money. Every time the published rate is arguably a wee bit higher or a wee bit lower than somebody else thinks it might have been, one party will win and be quite happy, and the other party will lose and will potentially have a strong motivation to resort to legal action. Are administrators adequately covered against being sued simply because they have published a figure that says the current synthetic LIBOR rate is 1.2% rather than 1.25%? Are there grounds on which they might be sued because those 0.05 percentage points of difference in the published synthetic LIBOR rate either make or lose quite a lot of money?

[John Glen]

It is a pleasure to serve under your chairmanship, Mr Evans.

The right hon. Member for Wolverhampton South East (Mr McFadden) and the hon. Member for Glenrothes (Peter Grant) have raised a number of questions arising from what I said. The Government are clear that we support this transition away from LIBOR by providing additional legal certainty for contracts relying on LIBOR past the end of this year. The provisions of the Bill are vital to using the synthetic rate in an orderly winding down of LIBOR, and they provide protection to consumers and the integrity of UK markets, but there are four or five elements that I will address now.

The hon. Member for Glenrothes mentioned compensation, and we do not anticipate that being an issue. As with all matters, the Treasury keeps things under review. We will continue to monitor what happens as a consequence of this methodology.

Both the right hon. Member for Wolverhampton South East and the hon. Member for Glenrothes mentioned legal action, and it is possible that judicial review could be raised against the FCA on the synthetic methodology it is prescribing for ICE. We think that would be extremely unlikely, given that there has been an active exercise of listening to representations on designing a methodology that has broad credibility. That is fundamental to the integrity of the process. There has been no attempt to develop a methodology in isolation or separate from the consultation with the market.

The right hon. Member for Wolverhampton South East asked about both the future timetable and what will happen with contracts that have fall-back clauses overridden by the effect of this legislation. This Bill provides certainty where a fall-back provision is triggered by a benchmark ceasing to be published or made available. Neither the designation of a benchmark under article 23A of the BMR nor the imposition of a synthetic methodology would trigger the operation of the fall-back provision. Where a contractual arrangement has a fall-back provision that is triggered by other means, this Bill does not affect or override the operation of that clause. For example, it will not override a fall-back triggered by an assessment of unrepresentativeness or a prohibition on the use of the benchmark, provided that the circumstances in which the fall-back was triggered are met.

[Mr McFadden]

In layman’s terms, does that mean that a fall-back provision trumps synthetic LIBOR? That is what I am trying to get at. If there is a fall-back provision—some alternative already written into the contract—will these synthetic LIBOR continuity provisions not kick in?

[John Glen]

What we are saying is that the fall-back provisions, if they are without reference to LIBOR, would still apply. Where LIBOR is the reference, we are trying to ensure this synthetic methodology would not trigger that fall-back provision on the argument that it is distinct from the LIBOR provision in the contract. Essentially, we are trying to establish that the synthetic LIBOR methodology is synonymous with and continuous from the previous LIBOR rate, as set by the panel, but it does not intrude on the contractual issues around the fall-back on another basis. That goes back to our provisions dealing with the continuity of LIBOR rate setting through this new methodology—anything else is not the Government’s intention.

The right hon. Member for Wolverhampton South East reasonably probes me about the future timetable, and whether the provision of “moral persuasion” from the Financial Conduct Authority and warnings would be sufficient. We will keep these matters under review. What we are anticipating, and what we have seen, is a rapid and increasing move away from reference to LIBOR, and we expect that that will continue right up to the end of the year. We will look at what is required on an ongoing basis, but we think that it is quite likely that there may not be need for further legislative intervention. However, we reserve the right at a future point to legislate as needed. What we would do, as the FCA is doing, is encourage people to transition away from LIBOR.

I was also asked about the rate difference. It is possible that when the methodology of LIBOR changes from relying on panel bank contributions to using this synthetic methodology, there could be a small change in the rate of interest that borrowers with contracts that reference LIBOR will pay. I mentioned on Second Reading that we expect the synthetic LIBOR to replicate the economic outcomes achieved under the panel bank rate. Obviously, that was the intention throughout. It is difficult to say exactly what the synthetic rate will be when it replaces LIBOR. In the medium term, we would expect it to be matched to the existing LIBOR rate, but smoothed to reduce day-to-day changes.

Today’s LIBOR rate is at historic lows, and it is worth noting that the rate can fluctuate significantly. For example, if we look at the three-month LIBOR on GBP, we see that it has varied from 0.28% in September 2017 to 0.92% at the end of December 2019, and it is now 0.11%. We have seen a lot of volatility in the past few weeks because of speculation about what is happening with interest rates. So there have been some days during the past months when the synthetic methodology would have produced a lower rate than panel bank LIBOR and others when it would have produced a slightly higher one. Therefore, it is not possible to fully account for what would actually happen. I hope that that addresses the points that have been raised in Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

[John Glen]

We have had a considerable debate this afternoon, both on Second Reading and in our scrutiny in Committee. I have made clear on a number of occasions the Government’s intentions in this legislation. I wish to thank the Opposition spokesmen for their contribution and thank my officials, but I do not have anything further to add.

Financial Services: Future Regulatory Framework Review

John Glen Excerpts

Tuesday 9th November 2021 Written Statements

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

The Government have today laid before Parliament the second consultation on the future regulatory framework (FRF) review, “Financial Services Future Regulatory Framework Review: Proposals for Reform” (CP 548). The FRF review provides a once-in-a-generation opportunity to ensure that, having left the EU, the UK establishes a coherent, agile, and internationally respected approach to financial services regulation that is right for the UK.



In his speech at Mansion House on 1 July 2021, the Chancellor set out the Government’s vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the UK. Delivering the outcomes of the FRF review is a key part of achieving this vision.



An initial consultation was published in October 2020. HM Treasury received over 120 responses and has carried out significant further engagement with the sector. The consultation document laid today sets out the Government’s response to the feedback received, and the proposals to deliver the intended outcomes of the FRF review.



The consultation sets out a number of proposals to build on the strengths of the UK’s existing domestic framework of financial services regulation, including by:



Ensuring that, as the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) take on greater responsibility, their objectives continue to be appropriate. To reflect the importance of the sector as an engine for growth across the wider economy and the UK’s position as a global financial centre, the Government intend to introduce a new secondary growth and international competitiveness objective for both the PRA and the FCA.

Moving to a system where the financial services regulators take responsibility for setting many of the direct regulatory requirements which were previously set by the EU, establishing a comprehensive FSMA model of financial services regulation for the UK. This will be achieved by repealing the majority of retained EU financial services legislation, with the regulators given powers to replace the current requirements with their own rules. This will ensure a more agile regulatory framework for the future while supporting the UK’s commitment to high standards of regulation.

Ensuring that there continues to be appropriate democratic input into, and public oversight of, the regulators’ activities. This means strengthening the mechanisms through which Parliament holds the regulators to account and which underpin the regulators’ relationship with HM Treasury, in addition to proposals to improve stakeholder engagement in the regulatory policymaking process.

This publication is available on www.gov.uk and will be open for responses until 9 February 2022.



“Future Regulatory Framework Review: Proposals for Reform”: www.gov.uk/government/consultations/future-regulatory-framework-frf-review-proposals-for-reform.

[HCWS382]

Central Bank Digital Currency

John Glen Excerpts

Tuesday 9th November 2021 Written Statements

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

The UK, like many countries, is actively exploring the potential role of a retail central bank digital currency (CBDC) as a complement to cash and bank deposits. A retail CBDC would be a new form of digital money, denominated in sterling and issued by the Bank of England, for use by people and businesses for their everyday payments needs. Exploring the opportunities that a CBDC could offer is aligned with the Government’s wider agenda to remain at the forefront of innovation and technology in financial services.



Earlier this year, the Chancellor of the Exchequer announced a taskforce jointly chaired by HM Treasury and the Bank of England to lead the UK’s exploration of a UK CBDC, along with forums to engage a broad range of stakeholders from across our economy and society, including consumer groups, think-tanks, businesses, academics, financial institutions and technology experts. The taskforce will ensure the UK authorities adopt a strategic and co-ordinated approach as they explore a CBDC, in line with their statutory objectives.



No decision has been taken by the Government and Bank of England as to whether to issue a UK CBDC, which would be a major national infrastructure project. A decision will be based on a rigorous assessment of the overall case for a UK CBDC and will be informed by extensive stakeholder engagement and consultation.



Exploring and delivering a UK CBDC, if there were a decision to proceed, would require carefully sequenced phases of work, which will span several years. I am today setting out the next steps for the exploration of a UK CBDC.



The UK authorities are currently engaged in a process of research and exploration to examine the opportunities and implications of CBDC. As part of those explorations, HM Treasury and the Bank of England will publish a consultation in 2022 setting out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model for a UK CBDC.



If there is a decision to proceed following the consultation, a development phase would include the publication, by the Bank of England, of a technical specification to explain the proposed conceptual architecture for a UK CBDC. This development phase could involve in-depth testing of the optimal design for, and feasibility of, a UK CBDC.



Following this, a decision would be taken on whether to move into a subsequent build and testing phase. Given the scale and national importance of such a project, this phase would likely take several years and could involve the development of large-scale prototypes and live pilots.



Were the results of each of these phases to conclude that the case for CBDC were made, and that it were operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade.



The Government are also committed to continuing to work closely with international partners on the cross-border implications of a potential CBDC. The UK, through its G7 presidency, has been leading the global conversation on the opportunities and implications of CBDC. G7 central banks and finance ministries have developed a set of public policy principles for CBDC, and a full report capturing these principles was published in October. These international principles for CBDC represent a step change in the global conversation and are intended to support and inform exploration of CBDCs in the G7 and beyond.

[HCWS381]

Treasury Updates

John Glen Excerpts

Thursday 4th November 2021 Written Statements

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

Today the Government are publishing the Finance Bill 2021-22 which will include a clause to increase the normal minimum pension age from age 55 to age 57 from 6 April 2028. This increase in the normal minimum pension age was announced in 2014 in the response to the consultation on “Freedom and Choice in Pensions” and the draft clause was published in July 2021. The normal minimum pension age is the lowest age at which the majority of members can take benefits from a registered pension scheme without incurring tax charges, except in cases of ill health.

This change will not apply to members of certain uniformed public service schemes, nor to those whose scheme rules provide an unqualified right to take benefits before age 57. Members with these rights will have a protected pension age.

The draft clause included a window of time during which people could either join or transfer into a scheme which can offer a protected pension age. The window was designed to ensure that those in the process of transferring a pension could complete their transfer and not unexpectedly lose the right to a protected pension age. Stakeholders have subsequently expressed their concerns about this window running until 5 April 2023 as originally proposed, including possible adverse impacts on the pensions market and on pension savers.

The Government believe it is right to offer a protected pension age to those whose scheme rules give them an unqualified right to take their pension before age 57. The Government also believe it is right that those in the process of transferring their pension do not unexpectedly lose the right to a protected pension age. However, after listening to stakeholder views on the draft clause, the Government has decided to shorten the window. The window closed at 23:59 on 3 November 2021. Those who have already made a substantive request to transfer their pension to a pension scheme with a protected pension age of 55 or 56 will still be able to keep or gain a protected pension age assuming the transfer is completed in accordance with the current regulations. This shorter window will help address the issues raised by stakeholders while also being fair for pension savers.

Ordinarily this change to a Finance Bill clause would have been announced at autumn Budget 2021. On this occasion, giving prior notice of the shorter window ahead of its closure on 3 November 2021 could have led to unnecessary turbulence in the pensions market and led to some consumer detriment. Some pension savers could find themselves with poorer outcomes (or even be the victim of a pension scam) if they were rushed by rogue advisors to make a quick transfer in the short time period before the window closed.

A tax information and impact note for this clause is also being published today.

[HCWS373]

London Capital & Finance Compensation Scheme: Contingencies Fund Advance

John Glen Excerpts

Wednesday 3rd November 2021 Written Statements

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

On 19 April 2021 the Government announced the detail of a compensation scheme for London Capital & Finance plc (LCF) bondholders (HCWS922). The scheme provides 80% of LCF bondholders’ principal investment up to a maximum of £68,000 and will be open to all bondholders who hold bonds that have not already been compensated by the Financial Services Compensation Scheme (FSCS).

Now that the necessary legislation has passed through Parliament, final preparations are being made so that the scheme can begin making payments in November. The Government have appointed FSCS to run the scheme on its behalf using part 15A of the Financial Services and Markets Act. The Government and FSCS are committed to providing all eligible bondholders with their compensation within six months.

I would like to emphasise that bondholders do not need to do anything at this stage and should wait for FSCS to contact them about their compensation payment. Further detail on exactly how the scheme will operate, including the scheme rules and frequently asked questions, are available online at www.gov.uk/LCF-compensation-scheme

The Compensation (London Capital & Finance plc and Fraud Compensation Fund) Act received Royal Assent on 20 October 2021 but provision for this was not included in the main estimate for HM Treasury at the start of the financial year. In accordance with normal procedures, HM Treasury will therefore be using a contingencies fund advance to enable bondholders’ access to their compensation payments, ahead of the provision being provided in the Treasury’s supplementary estimate.

Parliamentary approval for additional resources of £120,000,000 for this new expenditure will be sought in a supplementary estimate for HM Treasury. Pending that approval, urgent expenditure estimated at £120,000,000 will be met by repayable cash advances from the contingencies fund.

[HCWS370]

Disclosure of Asset Sale Completion

John Glen Excerpts

Tuesday 2nd November 2021 Written Statements

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

I can confirm today the completion of the sale of the share capital of Bradford & Bingley (B&B) plc and NRAM Ltd, returning both companies to private ownership.

In February 2021, the Government announced the agreement of a transaction to sell the share capital of B&B and NRAM, and their remaining loan assets, to a consortium of Citibank and Davidson Kempner Capital Management. The sale of the loan assets to Citibank completed in March. Following the receipt of regulatory approvals from the FCA, the sale of the companies to Davidson Kempner completed on 29 October.



Accounting for final adjustments ahead of completion, this transaction generates a total consideration of £5.2 billion for the Exchequer.



The completion of this transaction marks a significant milestone in the Government’s work to divest the institutions and assets brought into public ownership as a result of the 2007-08 financial crisis.

[HCWS367]

Oral Answers to Questions

John Glen Excerpts

Tuesday 2nd November 2021 Commons Chamber

[Liz Twist (Blaydon) (Lab)]

3. What recent steps he has taken to help reduce economic inequality.

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

Distributional analysis published at the Budget and spending review last week shows that in 2024-25, tax, welfare and spending decisions made since the spending round two years ago will have benefited the poorest house- holds most as a percentage of income. This Government believe that work is the best route out of poverty. That is why the Government are investing £6 billion in labour market support over the next three years.

[Liz Twist]

Analysis of the Chancellor’s Budget and tax and spending plans for the next six years shows that they will cost women an additional £48 billion over that period. That is a staggering amount of money to be taken from women, and it is in contrast to the planned tax cuts for banks. Is that why the Government have failed to produce an equality impact assessment for this Budget, as they are required to—because the Chancellor knows that his tax choices are totally unfair?

[John Glen]

The hon. Lady must have missed a number of measures announced by the Chancellor in the Budget last week in which significant investment was made to support families through the household recovery fund and support for women in particular to get back into the labour market, alongside a whole range of other interventions.

[Saqib Bhatti (Meriden) (Con)]

One issue concerning me at the moment is the lack of access to cash in the north of my constituency, which suffers from significant degrees of inequality. I was pleased to be at the opening of Kingshurst post office, which will restore some cash services, but the issue remains a problem as retail banks reduce their estate. Does my hon. Friend agree that shared banking hubs are a good way forward? Will he highlight to the House what work is being done to increase access to cash?

[John Glen]

Banking hubs will absolutely be a part of the solution, alongside a whole range of other interventions. The Government have committed to legislate on this matter, but in the meantime, I am very hopeful that industry will come forward with meaningful proposals for a range of options to deal with the declining use of cash and ensure access is available everywhere.

[Tim Farron (Westmorland and Lonsdale) (LD)]

The colossal economic inequality facing rural communities is something that I hope the Government take seriously. Is the Minister aware of the collapse of local housing in communities such as mine—and indeed in the Chancellor’s next-door constituency—into the second-home and holiday-let markets? Following the Welsh Assembly Government’s example, will the Minister look at doubling council tax on second-home properties, so that communities such as mine do not lose their local populations and become riddled with ghost towns?

[John Glen]

The Government are looking at tightening up the rules around second homes and council tax. We would be very happy to engage with the hon. Gentleman on the matter.

[James Wild (North West Norfolk) (Con)]

4. What steps he is taking to increase funding for capital investment in the NHS.

--- Later in debate ---

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

15. What recent assessment he has made of the effectiveness of the Plan For Jobs in supporting people into work.

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

Some 1.6 million people have moved into work having received support from work coaches, and hundreds of thousands of jobseekers have been supported by our other Plan for Jobs programmes, such as kickstart. It is clear that this plan is working; unemployment is now expected to peak at less than half of what was initially predicted.

[Laura Farris]

Unemployment in West Berkshire has fallen in every month since April, in no small part thanks to the apprenticeship levy and the kickstart scheme. However, among the over-55s who lost their job in the pandemic the picture is more mixed. Can my hon. Friend set out what the next stage of the Plan for Jobs will do to target that group, particularly given their risk of long-term unemployment?

[John Glen]

Yes, I can. My hon. Friend is right; unemployment is at 3.5% in her constituency, as against the 5% average. On people aged 50 to 64 who unfortunately lose their job and find a return to work less likely, this spending review announced an enhanced 50-plus offer worth more than £20 million to ensure that that cohort of the workforce receive that support to remain in work and benefit from living those fuller working lives. That is in addition to the other interventions across the whole of the working age group.

[Stephen Crabb]

Right now, in this country, about 1 million children are growing up in long-term workless households. Does my hon. Friend agree that the measures the Chancellor took in the Budget last week to boost the national minimum wage and the work allowance, and to lower the universal credit withdrawal rate when people move into work, mean that we have the best opportunity in more than a generation to really bear down on long-term unemployment and improve the life chances of children growing up in homes where there is no role model of someone going out to work every day?

[John Glen]

I agree entirely with my right hon. Friend, who has been a champion in this area, throughout his experience in government and in his work now as Chair of the Select Committee on Welsh Affairs. In addition to what he has set out, we responded to the call to raise the national living wage. It may interest him to know that the April 2022 increase will mean that a full-time worker’s annual salary will have increased by more than £5,000 since the national living wage was introduced, when he was in government, in April 2016.

[Karin Smyth (Bristol South) (Lab)]

I recently visited the newly opened jobcentre in Knowle to support people back to work, and I have previously been chair of the all-party group on apprenticeships. I cannot fathom why the Government are abolishing BTECs, which are a crucial bridge for young people in Bristol South. Has the Treasury done an assessment of abolishing BTECs, and will the Government reconsider?

[John Glen]

The hon. Lady will know of the Government’s investment in T-levels and the additional investment last week in apprenticeships, as well as a number of other interventions that the Chancellor has worked tirelessly with employers’ organisations and trade unions on to develop the workforce and opportunities over the past 18 months.

[David Johnston (Wantage) (Con)]

16. What steps his Department is taking to increase wages and support the lowest-income households.

--- Later in debate ---

[Sam Tarry (Ilford South) (Lab)]

Does the Chancellor agree with the Conservative party donor, Mohamed Amersi, who once claimed that the Tories were operating an access capitalism scheme for their major donors, and described corruption as a “heinous crime”, but who was later seen to have been part of a £162 million bribe to the daughter of Islam Karimov, the awful former president of Uzbekistan? If so, can he look at this and bring forward the response to the Pandora papers, particularly the Registration of Overseas Entities Bill?

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

The Government are committed to making the UK a hostile place for illicit finance and economic crime and ensuring that all donations to political parties comply with the legislation that the Labour party enacted in Government. We have taken tough action through our No Safe Havens strategy to ensure that the correct UK tax is paid. Our landmark 2019 economic crime plan builds on that, and we will continue to work on these matters.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

T5. As my right hon. Friend may know, this week is Evidence Week. Will he therefore let the House know whether, in his opinion, the evidence still indicates that the proposed lower Thames crossing represents value for money?

Access to Cash

John Glen Excerpts

Wednesday 20th October 2021 Westminster Hall

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

What a pleasure it is to serve under your chairmanship, Mrs Miller. I commend the hon. Member for Pontypridd (Alex Davies-Jones) for her speech and for securing the debate. She set out many of the core issues and gave a very fair assessment of them, which was echoed by the 13 speeches from Back-Bench Members and three interventions that we have heard this afternoon.

I have been the Minister for this issue for quite a long time, and I very much feel the urgency in resolving it while I am still around. I appreciate having the opportunity to update hon. Members on the Government’s efforts to protect cash and, in particular, the recent consultation on legislation to do exactly that.

As a number of colleagues said, many people still rely on cash and the infrastructure that delivers it. It is changing rapidly, but we need to recognise that it is an imperative for everyone’s daily life. That is especially the case for more vulnerable groups, be it in Pontypridd or in my constituency of Salisbury. Just today, we have seen more bank branches close, including one in Amesbury in my constituency. My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) once again showed his encyclopedic understanding and depth of knowledge and powerfully expressed the urgency with which we must address the matter.

During the pandemic, there was evidence of access to cash being stretched. However, I am pleased that the Treasury was able to work closely with financial regulators, such as the FCA, and industry to maintain that access while protecting the safety of staff and customers. The vast majority of people were able to get hold of the cash they needed throughout the pandemic. Indeed, the share of the UK population who lost access to a source of cash within three miles during spring 2020 never exceeded 0.1%. In this conversation, I have always been very aware of the fact that—as the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), with whom I have met separately, said—we have to deal with a very wide range of constituency interests, with very urban constituencies and very sparsely populated constituencies. That guides me as I contemplate what next to bring forward from the Government’s perspective.

[Margaret Ferrier]

With the closure of many high-street bank branches, many communities are finding it hard to get essential access to physical money. A pilot post office bank hub in Cambuslang, in my constituency, provides face-to-face services for customers. Would the Minister agree that the scheme could be rolled out UK-wide?

[John Glen]

I am very grateful to the hon. Lady for raising that point. I visited her constituency last Thursday and saw that facility first hand, and I will say a little bit about it in a moment. It was a great example of banks coming together and working with the Post Office to find a practical solution—one that many colleagues in the Chamber have raised in previous debates.

We are in a strong position to build on our success in meeting the needs of local communities across the country over the long term. Access to cash across the UK remains extensive. Over the last year, the Financial Conduct Authority and the Payment Systems Regulator have undertaken important work to map cash access points across the UK. That has shown that access remains comprehensive, even though it is evolving. As of the first quarter of this year, more than 95% of the population were within two kilometres of a free cash withdrawal point. I would say to the hon. Member for Pontypridd that, as of August 2021, Pontypridd itself had 76 ATMs, 50 of which were free to use.

However, we are in no way complacent about access to cash. I recognise that we need a range of solutions. We understand that cash remains important for millions of people across the UK. That means that we have a responsibility to protect the cash system and ensure that it is sustainable. That means two things: being innovative in the provision of cash while ensuring that we maintain sufficient coverage.

The Government have already taken decisive action in a number of ways to support the widespread availability of cashback without a purchase from shops and other businesses, including legislative changes as part of the Financial Services Act 2021. That is a significant step change, and the industry is really on board with it. We have already seen the success of cashback without a purchase as part of the community access to cash pilots, which are trialling bespoke cash access solutions across a number of areas.

The hon. Member for Harrow West (Gareth Thomas) raised the issue of the role of credit unions. On my visit to Glasgow last week, I was pleased to meet with Glasgow Credit Union and discuss some of the legislative changes required to allow them to expand the provision of services. The notion of a bespoke solution in individual communities is very much uppermost in my mind as we move forward. It was great to hear how well received those pilots have been by the local community in Cambuslang, where I visited the post office bank hub pilot and saw at first hand the impact that innovative industry solutions can have. The hub is a post office counter service, and different bank representatives come there on different days. When a customer’s bank representative is not there, other representatives can also help them.

I am delighted by the industry’s announcement that, following the Government’s changes to the law, cashback without a purchase will be rolled out to thousands of shops over the coming months. When it comes to ATMs, LINK, which, as a number of hon. Members have mentioned, runs the UK’s largest ATM network, remains committed to protecting the broad geographic spread of free-to-use ATMs, and it is held to account against that commitment by the Payment Systems Regulator. The Government also continue to fully support the post office banking framework agreement, which allows 95% of business and 99% of personal banking customers to deposit cheques, check their balance and withdraw and deposit cash at the nation’s 11,500 post office branches. The Access to Banking standard and FCA guidance force the banks to look at their mitigation responsibilities to maintain face-to-face banking services in situations where branches close.

On top of that, the Government are doing more. As several hon. Members have mentioned this afternoon, we have been developing new legislation that will enable us to protect cash over the long term. The most recent step in that process was the consultation on proposed legislation, which closed less than a month ago, on 23 September. That consultation was designed with a simple principle in mind: finding that crucial balance between supporting the use of cash and embedding flexibility as the cash landscape continues to evolve.

At the most fundamental level, that has meant setting out proposals for new laws to ensure that people need to travel only reasonable distances to pay in or take out cash. Through our actions to date and these proposals, we seek to support the continued use of cash in people’s daily lives, including supporting local businesses in continuing to accept cash. The consultation also set out proposals on what sort of organisation should be within scope of legislation to ensure that industry, especially banks, continues to play a key role in supplying cash, be it through their own branches or through funding customer transactions at ATMs or post office counters.

It is crucial, of course, that any legislation is coupled with appropriate regulatory oversight, and that has been another important aspect of the consultation. We want regulators to have appropriate powers and responsibilities, but without imposing unnecessary burdens on businesses. We believe that the FCA is best placed to play the leading role in holding firms to account on access to cash, so that the needs of consumers and businesses are met.

The Government also intend the Payment Systems Regulator and the Bank of England to maintain their existing functions regarding retail cash. As I mentioned earlier, the co-ordinated actions by the FCA, PSR and the Bank of England on cash as part of the covid-19 response have shown that co-operation between the regulators at both strategic and operational levels works well.

For all that the Government are doing to preserve access to cash, it is also worth acknowledging that the trend away from the use of cash towards cards and other digital payments has been both significant and accelerating over the past 18 months. That brings with it many opportunities, such as the potential for cheaper and more tailored payments, as set out in the Government’s recent response to the payments landscape review call for evidence, which was running in parallel.

It is important that digital connectivity is in place to help individuals and businesses to seize those opportunities, as has been mentioned by many hon. Members this afternoon. That is just one of the reasons why the Government are striving to ensure that no one is left behind in the transition to digital. To improve digital connectivity, the Government’s £5 billion Project Gigabit is helping to deliver lightning-fast, reliable broadband, including in Wales and therefore in towns such as Pontypridd.

We are working with industry to target a minimum of 85% gigabit-capable coverage by 2025, and will seek to accelerate roll-out further to get as close to 100% as possible. Action is also being taken to improve mobile connectivity in rural areas, recognising the challenges of getting to that complete coverage. The Government are providing £510 million for the shared rural network, and by 2025 that will expand 4G mobile coverage to 95% of the UK.

Out of respect for the hon. Member for Pontypridd, I looked into what is happening in Wales. The shared rural network programme is helping to reduce partial mobile phone notspots in Wales, and in the South Wales Central area, where her constituency is located, 4G coverage from all four operators will increase from 82% to 90% by the end of the programme.

Our consultation on proposed legislation closed on 23 September and the Government will set out the next steps in due course. I hope hon. Members will understand that it was only three and a half to four weeks ago, but I acknowledge the urgency that has been expressed this afternoon. I take it to heart, and I recognise the determination to get this done as quickly as possible.

I also acknowledge the recognition by my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) of the imperative for banks to come forward with proposals. The Government are always open to constructive suggestions from the banks as to what they wish to do in the meantime, but I cannot say much more at this stage. What I will say is that the Government remain absolutely determined and committed to legislate to ensure that people have access to cash over the long term. In doing so, we need to strike a balance between, on the one hand, being open to innovation and, on the other, ensuring that people are not financially excluded by losing access to cash. That is what we will do.

I sincerely thank Members for their thoughtful and constructive advice and contributions, and I can assure them that I will continue to work with Members from across the House. I do not see this as a partisan matter at all. I will continue to hear from them and to work with them to come up with an enduring solution next year and beyond.

Fossil Fuel Industry: Regulation of Investments

John Glen Excerpts

Tuesday 19th October 2021 Commons Chamber

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

I congratulate the hon. Member for Coventry South (Zarah Sultana) on securing this debate on an issue that we all agree is of crucial importance. I will do my best to do justice to this broad and complex issue in the allotted time, focusing my remarks on my brief as Economic Secretary to the Treasury, with oversight of financial services, which the hon. Lady mentioned on a number of occasions.

Let me begin by stating the obvious: the Government take their responsibility to tackle climate change extremely seriously. That is why in June 2019 the UK became the first major economy to legislate to end our net contribution to climate change by 2050, increasing the ambition of existing commitments under the Climate Change Act 2008, which was introduced by the Labour Government in that year. Just today, we published our net zero strategy, outlining measures to transition to a green and sustainable future.

The hon. Lady is right to highlight the crucial role of finance and investment in addressing the challenge of climate change. I am pleased to reassure her that we are implementing a credible, practical plan to align that investment to climate change goals, with multiple strands of activity, including engagement with the oil and gas industry, the greening of finance and action on the international stage.

Our view is that we need actively to engage with and work with fossil fuel companies to get them to reform, and that approach is working. Earlier this year, we agreed the North sea transition deal with the oil and gas industry, to support workers, businesses and the supply chain in preparation for a net zero future by 2050, including the reduction of emissions by 50% by 2030. We also agreed joint Government and oil and gas sector investment of up to £16 billion by 2030 to reduce carbon emissions, with up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, up to £3 billion on carbon capture, usage and storage, and up to £10 billion for hydrogen production. Indeed, since 2010 more than £94 billion has been invested in clean energy in the UK.

From my perspective as City Minister, we clearly also need continuous and increasing green investment right across the board, as the hon. Lady called for. I am delighted that yesterday we published “A Roadmap to Sustainable Investing”, which will help every financial decision—and decision maker—to take climate and the environment into account.

[Zarah Sultana]

Does the Minister support the call that I made in my speech to divest from fossil fuels in our pensions fund? Will the Government support the more than 360 MPs who are supporting the Divest Parliament campaign? It is really important to make the statement ahead of COP26 that this House is committed to divesting, fully and immediately, from fossil fuels.

[John Glen]

It is absolutely the case that the UK pensions and investment sectors—asset owners, asset managers and the service providers that support them—have an important role to play, using their influence and ownership rights over investee companies while fulfilling those fiduciary responsibilities. The Financial Reporting Council’s stewardship code 2020 sets that gold standard for such stewardship activities. The Government expect asset owners, managers and their service providers to progress work on stewardship within their organisation. That will obviously be a matter for the trustees of individual funds to attend to.

The roadmap on sustainable investment sets out details of the new whole-economy sustainability disclosure requirements—the legislative and regulatory changes that will be made to deliver world-leading reporting standards for environmental sustainability. Under these changes, companies and investment products will, for the first time, need to set out the environmental impact of the activities that they finance according to a universal definition of green. At the same time, products must clearly justify any sustainability claims that they make. It is our expectation that firms will use this information to actively engage with investee companies and encourage businesses and shareholders to set, and act on, credible net zero transition plans.

But I recognise that Government too must take action. Another part of our strategy has therefore been to establish markets to mobilise private capital. That is the thinking behind our green gilt, the first issuance of which last month was the largest ever sovereign green bond issuance, of £10 billion, and was 10 times over-subscribed. It is also part of the rationale for the creation of the UK Infrastructure Bank, which has a specific mandate to help tackle climate change, particularly the transition to net zero by 2050. I was pleased just last week to meet John Flint, the chief executive, who is putting together the team at the UK Infrastructure Bank in Leeds to move forward the investment decisions, and that organisation, as quickly as possible.

Looking at the financial numbers, there are already some grounds for optimism. The UK’s world-leading investment banks are consistently ranked at the top of the global green and sustainable debt underwriting league tables. In the UK, almost half—49%—of the £9.4 trillion in assets were integrating ESG, or environmental, social and governance, in their investment processes last year, up from a reported 37% the previous year. In other words, as City Minister I see a sector that is increasingly innovating and investing in green. On the hon. Lady’s point, that does not mean that we are complacent, but it does demonstrate the irreversible direction that has been set and the progress that is rapidly being made.

We need to remember that this is also a global problem requiring a global solution, as the hon. Lady acknowledged. That is not an excuse for inaction but rather a simple acknowledgement of the reality. The Government are acting nationally and internationally, and here there are some further reasons for optimism. As a country, we need to be part of a global effort to turn this around, and we are, including as host of next month’s COP26 conference. About 70% of the world’s economy is now covered by net zero targets, up from less than 30% when the UK took on the presidency of COP26. Under the UK’s presidency, all G7 countries committed to put an end to funding fossil fuels and coal power this year. Japan and South Korea have said that they will end public financing for overseas coal-fired power plants, with China then committing to not building any new coal power plants overseas.

When it comes to transitioning the finance sector, too, we are part of an international effort. In April, the UK played a key role in the launch of the Glasgow Financial Alliance for Net Zero. When the UK assumed the COP presidency in partnership with Italy 18 months ago, $5 trillion of private financial assets were committed to net zero. Now 300 financial institutions across 40 countries, controlling balance sheets of $100 trillion, are co-ordinating their efforts under this alliance.

I agree with the hon. Lady that the stakes are high, but I hope I have shown that the Government are acting on many fronts in engaging, legislating and investing. I am certainly not complacent, just as the Government as a whole are not complacent. We will continue to do all that we can and all that needs to be done to address this global and significant challenge.

Question put and agreed to.

UK National Risk Assessment of Proliferation Financing

John Glen Excerpts

Thursday 23rd September 2021 Written Statements

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

As a major global financial centre, a key component of the UK’s economic strength and prosperity is our openness to investment and trade. However, this quality also makes the UK economy vulnerable to illicit finance activities, including proliferation financing. Despite robust controls in place in the UK to tackle proliferation financing activity, actors involved in proliferation financing look to exploit the UK’s position in the global economy and international financial system to raise funds to develop chemical, biological, radiological, and nuclear (CBRN) programmes which counter UK national security objectives and threaten international peace and security.

On 23 September, the Government published the UK’s first national risk assessment (NRA) of proliferation financing risks. This assessment, published by HM Treasury using views and evidence from Government, the private sector, and academic and research partners, provides a comprehensive review of the proliferation financing risks facing the UK. The UK is one of the first jurisdictions to carry out an assessment of this kind.

The key findings of the UK national risk assessment of proliferation financing are:

The UK’s financial sector is at high risk from proliferation actors. It is highly likely that proliferation actors will target the UK to gain financing for CBRN proliferation despite the robust controls in place to prevent this. The UK’s financial services industry, particularly the banking and insurance sectors, is especially at risk.

The Democratic People’s Republic of Korea (DPRK) and Iran are the most significant proliferation financing actors at state level. The DPRK seeks to evade international sanctions regimes to obtain financing for its unlawful weapons of mass destruction and ballistic missile programmes, and Iran for its nuclear programme.

There is limited awareness in the private sector of proliferation financing compared to other risks, including money laundering and terrorist financing. A lack of awareness of proliferation financing in parts of the UK economy can lead to a lack of understanding of how certain industrial products, for example, may be manipulated for hostile use or for use in a CBRN programme.

Despite the above threats, the assessment highlights the robust counter-proliferation legal framework in place in the UK to protect the country from proliferation financing. The UK's autonomous financial sanctions regimes targeting CBRN proliferation, as well as UN sanctions regimes implemented in the UK, export control regimes, and other tools available to the UK Government, limit opportunities for proliferating actors to exploit the UK to obtain financing for CBRN capabilities.

The report is available on gov.uk www.gov.uk/government/publications/national-risk-assessment-of-proliferation-financing.

The national risk assessment demonstrates the UK’s ongoing commitment to counter proliferation financing, set out in the integrated review of security, defence, development, and foreign policy 2021. We also committed to publishing a proliferation financing NRA in the Government’s economic crime plan. Moreover, the UK is at the forefront of international efforts to counter proliferation financing, particularly at the Financial Action Task Force (FATF) where we have led progress on updating FATF recommendations focusing on proliferation financing.

This is the first NRA the UK has produced evaluating the threat posed by proliferation financing. Under proposed amendments to the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations (MLRs), HM Treasury will be required to review and update this NRA on a regular basis. This would offer opportunities to further refine the assessment and its methodology going forward and ensure that the UK is proactively seeking to address new threats and trends posed by proliferation financing. In this proposed amendment of the MLRs, which is currently out for public consultation until October 2021, the Treasury also plans to set requirements on relevant persons to take appropriate steps to identify and assess the risks posed by proliferation financing, and to establish strategies to mitigate and manage these risks effectively. The findings of this assessment will also provide the UK with further opportunities to develop its counter-proliferation financing policy.

[HCWS307]