Bradford & Bingley plc

Sajid Javid Excerpts

Wednesday 27th November 2013 Westminster Hall

[The Financial Secretary to the Treasury (Sajid Javid)]

I welcome you to the Chair, Mr Betts. It is a pleasure to serve under your chairmanship.

I thank my hon. Friend the Member for Shipley (Philip Davies) for securing the debate and for his continued commitment and effort in tirelessly pursuing the issue on behalf of his constituents. I have not been long in Parliament, but one thing I noted right from the start, which has been reaffirmed today, is that few colleagues so assiduously pursue their constituents’ causes as my hon. Friend. He is an example to us all. I also thank my hon. Friend the Member for Calder Valley (Craig Whittaker) for his tireless work on behalf of his constituents, as we have seen today.

Before I get into the specifics of Bradford & Bingley, I will give some context on the time, the policies that we have heard reference to today, which contributed to the banking crisis, and this Government’s response, which hon. Members have spoken about during the debate.

The nationalisation of Bradford & Bingley was one of the key outcomes of the financial crisis. The crisis was the biggest failure of economic management and banking regulation in this country’s history. Let me remind hon. Members of the events preceding the crisis. Over the decade before the crash, Britain experienced the biggest increase in debt of any major economy in the world. The total of household, corporate, financial and public sector debt reached a staggering 500% of GDP. UK banks became the most leveraged in the world.

None of that, however, caused concern or invited intervention under the failed tripartite system of regulation created 16 years ago. The Bank of England was stripped of its historical responsibility for regulating the banking system, which was given to a new Financial Services Authority. Let me quote a warning from 16 years ago by the then shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). During the passage of the Bank of England Act 1998, which created the failed tripartite system, he said:

“The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day.”—[Official Report, 11 November 1997; Vol. 300, c. 732.]

Sixteen years later, the consensus is clear. There were fundamental flaws in the tripartite system right from the start, which are today painfully apparent to the whole world.

I respect the comments of the shadow Treasury Minister, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), and I accept that she was not responsible for the actions of the previous Government. However, she was close to some of the key decision makers at the time, and I hoped that we would hear an apology from her on behalf of the previous Government—that was wishful thinking.

The situation that I have described is why this Government have embarked upon a fundamental reform of our system of financial regulation. We have introduced domestic legislation to increase the resilience of financial institutions to shocks. The Financial Services Act 2012 fundamentally reformed the previous, failed tripartite system by giving the Bank of England clear responsibility for maintaining financial stability; establishing the Financial Policy Committee within the Bank as a strong and expert macro-prudential authority; creating the Prudential Regulation Authority, a new micro-prudential regulator, as a subsidiary of the Bank of England; and creating a new independent conduct of business regulator, the Financial Conduct Authority.

[Martin Vickers (Cleethorpes) (Con)]

The Minister is outlining a tightening up of the regulatory regime, which I am sure all our constituents would welcome. However, does he recognise that those who have been let down by the Bradford & Bingley scandal and other financial scandals feel that regulators go native, stand back and, instead of being on the side of consumers, are too close to the people they are supposed to be regulating?

[Sajid Javid]

My hon. Friend makes a good point that has been brought up by many hon. Members. With the reforms we have implemented, and some that we are still in the process of implementing, the Government have created a stronger, more rigorous system, with regulators with a lot more teeth and a greater degree of independence.

The Government have also set up the Independent Commission on Banking, or ICB, to recommend further reforms to enhance financial stability. The Government accepted the recommendations of the ICB and are putting them into law this year through the Financial Services (Banking Reform) Bill. The Government also supported Parliament in setting up the Parliamentary Commission on Banking Standards and have accepted that commission’s main recommendations.

I turn now specifically to Bradford & Bingley. Following the difficulties Bradford & Bingley experienced in 2008, the previous Government transferred its retail deposit taking business and branch network to Abbey National after a competitive process; its mortgage business was brought into public ownership. At the time of the nationalisation of Bradford & Bingley, the UK was in the grip of a rapidly evolving crisis, as we have heard today. I cannot speak for the actions that the previous Government took to deal with the crisis, as I was not privy to the relevant discussions; nor, rightly, have I seen the papers that relate to the previous Administration, although I understand that the Treasury is handling all freedom of information requests in the proper manner.

Extensive information is already in the public domain: events leading up to the nationalisation have been looked at by both the National Audit Office and the Treasury Committee. But on the matter of information, I have to agree with the comments made by my hon. Friend the Member for Shipley, and, in particular, with the request made by my hon. Friend the Member for Chippenham (Duncan Hames), who asked the shadow Minister to use her good offices to speak to the former Prime Minister, the former Chancellor and others who were Ministers under the previous Government and closely involved in events at that time. That is a reasonable request; I hope she will act on it and get back to my hon. Friend about it. It could lead to further information that many stakeholders would find useful.

Following the transfer of Bradford & Bingley into public ownership, the previous Government made the Bradford & Bingley plc Compensation Scheme Order 2008, which was debated and approved by each House. The order provided for a mechanism through which compensation for former shareholders would be assessed by an independent valuer. As we have heard, after conducting a robust and rigorous process the independent valuer determined that no compensation was payable.

My hon. Friend the Member for Shipley asked whether it was right that the valuer should have been asked to work on the basis that there was no Government support. I believe that it cannot be right, or in the best interests of the taxpayer, that the valuer should have been asked to compensate for value that existed only by virtue of support that taxpayers themselves were providing.

Following the determination, all affected parties had the opportunity to submit requests for the valuer to reconsider his decision. The valuer considered all requests before concluding that no compensation was payable. That decision was further upheld in the upper tribunal review.

I believe that due process has been followed at every stage. Transparent and independent arrangements for compensation have been put in place and there has been a proper process in the courts. As I mentioned, there have also been investigations by the NAO and the Treasury Committee. I have to say to my hon. Friend that I have looked at the matter closely using the limited information available to me, and from what I have seen I am not persuaded that there is a case for a further investigation or inquiry.

Before I conclude, I want to respond specifically to a number of my hon. Friend’s questions. He talked about the rights issue that took place just before nationalisation. From the information I have seen, I can tell him that the Treasury had no involvement in that rights issue at all; as we have heard, the rights issue was conducted in the summer of 2008, prior to nationalisation, and was a matter solely for Bradford & Bingley’s board and senior management. Like many banks and building societies at that time or thereabouts, Bradford & Bingley was required to meet FSA regulatory capital requirements in order to continue with those regulated activities.

My hon. Friend also raised the issue of accounting standards, and in particular IAS 39, which he said was problematic and could perhaps take some blame for the financial crisis. He is right to raise accounting standards and the contribution they could have made to the crisis. The issue has been looked at extensively by authorities around the world, including the International Accounting Standards Board. The board has proposed a series of changes to IAS 39 and other, similar accounting practices. Those changes essentially mean that, in future, banks will have to hold more capital or take losses earlier on problematic loans.

My hon. Friend also rightly expressed his concerns about the future of a number of his constituents who were transferred to UKAR during nationalisation and are currently UKAR employees. He was absolutely right to say that those people have considerable expertise and experience in an important sector. My understanding is that currently over 2,000 staff are still employed in managing the closed mortgage books of both Bradford & Bingley and Northern Rock, and are doing an excellent job.

My hon. Friend may take some comfort from knowing that those people’s skills are such that it seems they will face growing demand for them: the Council of Mortgage Lenders recently said that mortgage lending in the third quarter of this year was at its highest level since 2007 and is growing strongly thanks to the Government’s policies and the economic growth we are experiencing. I am sure that the value of the skills they hold will give some comfort to the constituents he mentioned.

[Philip Davies]

I am grateful to my hon. Friend for his comments, although clearly I am disappointed that he does not believe that there is a need for an inquiry: we are still no further forward when it comes to knowing why Bradford & Bingley was treated so differently from other banks and building societies.

In the light of the comments my hon. Friend has just made about the future of Bradford & Bingley, will he go away and think about whether a new Bradford & Bingley could be born out of what is there at the moment to be a new challenger to the banking sector on the high street and to introduce the competition that we all want?

[Sajid Javid]

I will give a commitment to my hon. Friend that I will think about that further. In fact, I will do more: he will know that UKAR is part of United Kingdom Financial Investments Ltd, the agency that acts as the Government’s shareholder in the former assets of Bradford & Bingley, and of the Royal Bank of Scotland, Lloyds and others. I will write to the head of UKFI and to the head of UKAR to ask them to consider the case that my hon. Friend has made today.

I congratulate my hon. Friend once more on securing this debate. This is an issue that he, rightly, feels very strongly about. I assure him that we are taking what we believe are the right steps to ensure the future stability of our banking system.

[Mr Clive Betts (in the Chair)]

I now suspend the sitting until 11 o’clock, although if the hon. Member responsible for the next debate and the Minister responding both arrive a little early, I am happy to start the debate a few minutes earlier.

ECOFIN

Sajid Javid Excerpts

Friday 22nd November 2013 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

A meeting of the Economic and Financial Affairs Council was held in Brussels on 15 November 2013. Ministers discussed the following items:

Savings taxation

Council discussed a proposal on taxation of savings income in the form of interest payments. The UK and the majority of member states supported an agreement of the amending proposal to the EU savings directive and an adoption of the mandate as soon as possible. Austria and Luxembourg could not support the proposal and the presidency concluded that it will need to return to a future ECOFIN.

Standard VAT return

Council heard a presentation by the Commission on the recently published proposal for an EU-wide standard VAT return. The presidency noted the Council’s working group is expected to start examining the proposal in December.

EU Statistics

Council adopted conclusions on EU statistics as part of an annual review of statistical governance. The package sets out the need for and nature of future developments with regard to the European statistics system.

Report from Special Adviser Philippe Maystadt on the EU’s contribution to international accounting standards

Mr Maystadt, Special Adviser to the Commission, presented his report on the EU’s contribution to international accounting standards. Council held an exchange of views on the report and asked the Commission to look into these and report back at a future ECOFIN.

Banking Union

Council agreed a statement on backstop arrangements in anticipation of a comprehensive assessment of banking institutions to be launched by the European Central Bank.

Anti-money laundering

There was a state of play discussion on a proposal for a directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.

Single Resolution Mechanism

Council held an exchange of views on the single resolution mechanism proposal. The presidency mandated the working group to continue examination of this matter, which will return to ECOFIN in December. The Government will seek to ensure the proposal is fit for purpose and that there is equal treatment of member states inside and outside the banking union.

Any Other Business: Current legislative proposals

The presidency provided an update on the following financial services dossiers: deposit guarantee scheme directive (DGSD); omnibus II; markets in financial instruments directive (MiFID); central securities depositories regulation (CSDR); and bank recovery and resolution directive (BRRD).

Oral Answers to Questions

Sajid Javid Excerpts

Tuesday 5th November 2013 Commons Chamber

[The Financial Secretary to the Treasury (Sajid Javid)]

The Government want the United Kingdom to become the first sovereign state outside the Muslim world to issue an Islamic bond. The Treasury is therefore working on the practicalities of issuing about £200 million of sovereign sukuk as early as next year. The Government see sukuk issuance as an excellent opportunity to promote London as the leading centre for Islamic finance.

[Roger Williams]

As chairman of the all-party group on Islamic finance and diversity in financial markets, I welcome the Government’s decision to issue a sukuk. It is something the group has campaigned on. I also congratulate the Government on their part in hosting the World Islamic Economic Forum in this country, the first time it has been held in a non-Muslim country. What else are the Government doing to promote Islamic investment in this country and sustain the Islamic banking sector?

[Sajid Javid]

I thank my hon. Friend for his continuing work in promoting Islamic finance and diversity in financial markets. London is already a global player in Islamic finance, which brings in significant investment and creates thousands of jobs. Last week I also announced that we are bringing together a global Islamic investment group. This group will have the expertise to help Islamic finance grow globally, as well as developing London as one of the leading centres for Islamic finance.

[Keith Vaz (Leicester East) (Lab)]

May I also welcome what the Government have done? It will make this country the first anywhere in the western world to provide sharia-compliant bonds. We do not just want people to invest from outside, however. Although the last census showed that Brecon and Radnor had 116 Muslim people, I have 21,075 in my constituency. How does the Minister intend to sell those bonds to the people of Leicester East?

[Sajid Javid]

I thank the right hon. Gentleman for his warm words. Britain already has 20 banks offering Islamic financial products. We also have 49 sukuk listed on the London stock exchange, valued at over £25 billion, and 25 law firms that have significant Islamic practices. We will bring all this experience together to further develop Britain as an Islamic finance centre, and I am sure that will help his constituents with their investment decisions.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

4. If he will introduce a time-limited exemption from air passenger duty on new long-haul routes from uncongested airports.

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[The Financial Secretary to the Treasury (Sajid Javid)]

The Government are committed to making the aspiration of home ownership a reality for as many people as possible. That is why we recently announced that participating lenders will be able to offer high loan-to-value mortgages supported by their Help to Buy mortgage guarantee schemes three months earlier than planned. I was pleased to hear that Lloyds Banking Group recently announced that the first such mortgage was taken out by a first-time buyer in Dartford, Kent.

[Alec Shelbrooke]

Will my hon. Friend update the House specifically on helping the hard-working people in my constituency, where there is 77% home ownership, which is increasing, compared with 65% across the UK?

[Sajid Javid]

Under Labour, the number of first-time buyers fell to its lowest level for 25 years, from an average of 470,000 a year in the early 2000s to around 190,000 by 2008. That destroyed the hopes and aspirations of many hard-working families. This Government’s two Help to Buy schemes will help thousands of hard-working people to get on the housing ladder, including those in Elmet and Rothwell and those throughout the UK.

[Ann McKechin (Glasgow North) (Lab)]

16. Is it fair for taxpayers in my constituency to subsidise a London property bubble that has already increased by 10% since the introduction of this scheme?

[Sajid Javid]

The hon. Lady should know, as she would if she looked at the facts carefully, that the Help to Buy scheme is priced on commercial terms; it is designed to break even and it will not cost the taxpayer anything.

[Andrew Selous (South West Bedfordshire) (Con)]

Does the Minister share my concern that, reportedly, some young people have actually given up saving for a deposit, and will he ensure that those of us on the Government Benches will stand with those people who have a dream of home ownership to make sure it can be fulfilled?

[Sajid Javid]

My hon. Friend is absolutely right. Some Opposition Members believe that only people who have rich parents that can help them meet some of the large deposit requirements should be able to buy their own home. That is not the policy of this Government, who support hard-working families.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

On the issue of fiscal steps to help people buy homes, the Chancellor of the Exchequer said last year that people buying homes through a company to avoid tax was unacceptable, and he would come down on it

“like a ton of bricks”.

Has he investigated reports that the Under-Secretary of State for Transport, the hon. Member for Wimbledon (Stephen Hammond), has avoided tax in that way, and will he come down on him like a ton of bricks?

[Sajid Javid]

I welcome the hon. Lady to the shadow Front Bench team. I look forward to debating with her. The Government have already taken steps to ensure that property buyers pay more in tax, by increasing stamp duty and by dealing with purchases through companies, and it would not be appropriate for any Minister to make a comment on any individual’s tax circumstances.

[Jason McCartney (Colne Valley) (Con)]

8. What recent steps he has taken to increase investment in infrastructure.

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[David Mowat (Warrington South) (Con)]

13. What representations he has received on Yorkshire bank and lending to small and medium-sized businesses.

[The Financial Secretary to the Treasury (Sajid Javid)]

All meetings between external organisations and Treasury Ministers are published on the Government’s website. However, it is not the Treasury’s practice to provide details of all representations Ministers receive. Lending to small and medium-sized businesses is an important issue, and I can assure my hon. Friend that it receives the Government’s highest attention.

[David Mowat]

I thank the Financial Secretary for that answer. He might be aware that two years ago the owners of Yorkshire bank announced their intention to downsize in the UK and invest more money in Asia. Since then they have aggressively reduced the size of their UK loan book, despite assurances made to small businesses. That has affected many businesses across the country, including Arley Homes in my constituency, which has been forced into administration, with the loss of many jobs. Is there more we can do to make them behave responsibly?

[Sajid Javid]

I know that my hon. Friend raised this issue with my predecessor on behalf of his constituents, and he was absolutely right to do so. The way in which a bank structures its business is a commercial decision, as I am sure he appreciates, so I am unable to comment on it. However, if a bank decides to restructure its business in a certain way, I would expect it to pay due regard to the interests of all its customers and to treat them fairly.

[Bill Esterson (Sefton Central) (Lab)]

Small businesses in my constituency used to borrow from Yorkshire bank, and many have told me that they never missed a repayment, but now the bank simply will not lend to them, despite excellent credit histories. Why are the banks refusing to lend to small businesses that have a strong history of repayment?

[Sajid Javid]

May I give the hon. Gentleman some advice on how he can help small businesses in his constituency and elsewhere? The SME appeals process that the Government set up with the banking sector has been very successful, with 40% of businesses that appeal finding decisions overturned. He can help to advertise that, as the Government will be doing shortly to banks.

[Philip Davies (Shipley) (Con)]

The point of capitalism is that people who take risks should be rewarded when they are successful and should lose money when they fail. Yorkshire bank has been among the worst for penalising its good customers to try to make up for its own losses. That is an abuse of capitalism. I hope that the Minister will take steps to ensure that Yorkshire bank treats its customers fairly, because in too many cases it has been treating them terribly unfairly.

[Sajid Javid]

My hon. Friend has made a number of representations on this issue, and he is right to do so. As I have said, we want all banks to treat their customers fairly, and the Government are absolutely committed to that.

[Mr Clive Betts (Sheffield South East) (Lab)]

I agree with the comments made by the hon. Member for Warrington South (David Mowat). Following an article I wrote for the Yorkshire Post, I have received dozens of complaints about Yorkshire bank from small businesses, particularly about being locked into tailored business loans with very high interest rates and very high redemption clauses and payments to get out of them. Will the Minister look at involving the Financial Conduct Authority to see if there could be an investigation into what has been going on?

[Sajid Javid]

I believe that my predecessor raised this issue with the FCA, but I would be more than happy to do so again.

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

14. What recent comparative assessment he has made of trends in real wages in the UK and in similar economies.

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[Sir Tony Baldry (Banbury) (Con)]

15. What recent steps he has taken to increase competitiveness in the banking sector.

[The Financial Secretary to the Treasury (Sajid Javid)]

The Government are driving a wide-ranging and ambitious programme of reforms to make the banking sector more competitive and to give consumers a better deal. This includes reducing market barriers, encouraging current account switching, and putting competition at the heart of the regulatory system.

[Sir Tony Baldry]

Will my hon. Friend commend the Church Commissioners for their investment in Williams and Glyn’s as a new competitive bank that intends to have the highest ethical standards? As well as increasing competition in banking, is it not also crucial that we have a system of banking regulation with clear accountability and responsibility, avoiding mistakes in the system designed by the previous Administration?

[Sajid Javid]

I congratulate the Church Commissioners on their role and the expertise that they bring. Given that my hon. Friend is a commissioner, I take this opportunity to congratulate him too. He is right to highlight the fact that the previous Government’s changes to financial regulation contributed significantly to the banking crisis in 2008. That caused misery and hardship for millions of hard-working families, yet I notice that the Opposition have yet to apologise.

[Mr George Mudie (Leeds East) (Lab)]

The Minister will agree that a level playing field is important for competition. Why, then, did the Chancellor make the misguided offer to the Chinese Government to give light-touch regulation to Chinese banks operating in this country? If we are going to have competition, will that approach be extended to all other banks?

[Sajid Javid]

The hon. Gentleman will know that such decisions are made by the independent regulators—in this case, the Prudential Regulation Authority, which has made the reasons for the decision absolutely clear.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

Interest Rate Swap Derivatives

Sajid Javid Excerpts

Thursday 24th October 2013 Commons Chamber

[The Financial Secretary to the Treasury (Sajid Javid)]

First, let me take this opportunity to welcome you to your new Chair, Madam Deputy Speaker. It is a great pleasure to see you in your place. I also welcome the hon. Member for Birmingham, Ladywood (Shabana Mahmood) to her new role and wish her luck with it.

I start by thanking all the hon. Members who secured this debate and by congratulating everyone on presenting their case well. Special thanks must go to my hon. Friend the Member for Aberconwy (Guto Bebb) for the time, energy and passion that he has put into this issue and for the leadership he has shown. We can see from this debate that this issue is very serious; 17 of my hon. Friends and four other hon. Members have spoken today. I am sure that everyone in this Chamber, like all those others watching in the Public Gallery, at home and elsewhere, including the hundreds watching in the Central Methodist hall from the many businesses that have been affected, is keen to see a quick conclusion to the FCA review and to see that those businesses that were mis-sold financial products are compensated accordingly.

When I was growing up, my father ran a small family business in Bristol, so I was made aware from a young age about the importance of cash flow and the dangers of unexpected costs. As such, I sympathise wholeheartedly with the small businesses that have been affected by this mis-selling scandal and have put such energy into lobbying on this issue. This Government have made it clear from the beginning that the mis-selling of financial products is totally unacceptable. We take extremely seriously the abuse that has taken place, and we are determined that any wrongs that have been inflicted on businesses should be righted.

I share the disappointment of fellow hon. Members about the progress made under the FCA review to date. I stood up in a Westminster Hall debate about four and a half months ago to discuss this very issue, and the fact that the FCA has not made any significant progress since that debate is, frankly, not good enough. As we have heard today, the FCA said in January this year that the full review process would begin, but it has since confirmed that the full process did not start until May this year. That delay has been disappointing, and the FCA should have been much clearer about exactly when this full review actually started. However, the review is now up and running, with the large majority of cases being looked at. I understand from the FCA that it believes that about 85% of cases are now under review, but hon. Members are absolutely right to say that it is time for the banks and the FCA to do more to speed up the process and get redress out the door. As such, the Government will continue to push the banks and the FCA to complete the process as quickly as possible. As the motion says, the redress scheme’s progress has been too slow. That is costly and has caused further undue distress to the businesses involved. The FCA and banks need to get on with the job.

[Mr McFadden]

Before the Minister leaves the issue of the FCA, will he say what he thinks of the FCA’s reply to some businesses in distress—that it will not consider individual cases?

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[Sajid Javid]

The FCA has set out a clear process and is publishing more and more information on it. It is important that the FCA and the banks should stick to that. Equally, however, Martin Wheatley, the head of the FCA, has not ruled out any further action, including taking enforcement action if he deems that the redress process has not worked as intended.

A number of Members have mentioned redress payments. Of course we need to be confident that the scheme provides the correct level of redress for affected businesses. I understand why concerns have been raised about the FCA’s decision to allow the banks to settle with customers for a single redress offer, covering both basic redress and consequential losses.

It is right that the FCA, as an independent regulator, should decide such details. However, I agree that it is sensible for the initial payment for basic redress to be made to provide much-needed relief to the businesses. That is why I welcome the announcement this week, from HSBC and RBS so far, that they will now make an initial redress payment to businesses and then discuss consequential losses separately. Back Benchers should take credit for that move. Under the leadership of my hon. Friend the Member for Aberconwy (Guto Bebb), they have put pressure on the banks and we have seen the results already.

However, I want things to go further—I would like all the other banks to join the move announced by HSBC and RBS, and I shall be watching closely to see whether they do. That should help prevent any further undue distress for the businesses and give them much-needed cash-flow relief.

[Ian Swales]

I well understand that consequential loss calculations are probably unique to each business. However, the redress payments surely form a pattern, given that they are all based on similar products. Does the Minister believe that the banks should be able to move very quickly with the redress part of the compensation?

[Sajid Javid]

I agree. The banks should move much faster. Today’s announcement from the two banks is welcome, but other banks should take a serious attitude to not only the amounts but the timing of redress payments.

Hon. Members have also voiced concerns about the large number of businesses that have been assessed as sophisticated and so fall outside the scheme. My understanding is that the FCA used as a starting point the criteria for non-sophisticated customers set out in the Companies Act 2006. As such, the test reflects the fact that larger businesses would have greater resources to seek advice on the products in question, both at the time of sale and subsequently. Moreover, I understand that the FCA then amended the sophistication test in January to ensure that certain companies, which were classified as sophisticated under the Companies Act test but which might reasonably be considered to be non-sophisticated, were also brought into the scope of the review.

Throughout this debate, the Government have been clear that when a business lacked the necessary skills and knowledge to understand fully the risks of the products, it should receive the appropriate redress. We do not agree that all businesses should have access to the FCA review; there needs to be a defined cut-off point beyond which more sophisticated businesses take responsibility for understanding the products that they entered into. I am confident that the FCA has found the right balance to ensure that all non-sophisticated businesses fall inside the scheme.

I will not be able in the time available to address all the questions raised, but I might be able to help with a couple in particular. Some Members asked whether insolvency could be a reason for banks to try to delay the redress process. I assure the House that that could not be a reason. No one wants businesses to go insolvent, but if, sadly, they do, they will still be part of the review process. If mis-selling is found to have happened, banks will still be liable and on the hook—they will gain no advantage from the insolvency of a company.

Hon. Members, including the shadow Minister, asked whether the FCA could consider setting a deadline. There is a good case for the FCA to consider that, but it would have to be its independent decision. Due regard must be taken of the fact that it might take longer to sort out the most complex products, but it would be good for the FCA to consider whether setting a deadline would help to speed up the process.

[Steve Brine]

A number of colleagues have mentioned this. Does the Minister have a view on a truly independent appeals process? Given that 93% of the cases looked at thus far have been non-compliant, the number involved would not be massive.

[Sajid Javid]

As my hon. Friend will know, there is a necessary degree of independence in the process. However, he raises a good point, which, as he said, has been raised by others today. It is important to make sure that there is confidence in the process. If confidence does not come about in the coming months, the FCA may have to review things and the process that my hon. Friend suggests could be taken forward.

I end by reiterating that the Government take extremely seriously the abuse that has taken place in very many cases. I sympathise wholeheartedly with campaigners in the Chamber and beyond. I am determined that any wrongs inflicted on businesses should be put right and want a quick solution to the mis-selling of interest rate hedging products.

Small businesses are the backbone of our economy and they should be allowed to draw a line under this issue and get back to what they do best—working hard, creating jobs and creating growth for the UK economy. Once again, I thank hon. Members, particularly my hon. Friend the Member for Aberconwy, for bringing the issue to the attention of the House. I assure them that I will make sure that the issue continues to receive the highest level of attention from the Government.

[Guto Bebb]

With the leave of the House, I should like to make a few concluding remarks. This has been a positive and necessary debate, and we have seen significant progress as a result of it. Members from across the House have made it clear that they want a step change in the progress made by the FCA review process. That is necessary; we need a significant increase in the number of businesses offered redress. There are real concerns about an expansion of the scheme. Speeches have highlighted the issue of embedded swaps and the concerns about the sophistication test, which I would like to discuss in further detail with the Minister in due course if I can.

The other pretty obvious thing from this debate is that we need the banks to provide support for the businesses while they wait to be reviewed. We want the banks to show forbearance and to understand that the difficulties faced by many businesses were created by the banks’ own mis-selling. No further businesses should be lost to the UK economy as a result of the mis-selling of these products, which were inappropriate in the vast majority of cases. This has been a positive debate, but we still need to see the proof of the pudding in the way in which the scheme delivers from now on.

[Sajid Javid]

May I tell my hon. Friend that I would be more than happy to meet him and other stakeholders to discuss this further?

[Madam Deputy Speaker (Mrs Laing)]

If the Minister has finished his intervention, the hon. Gentleman may conclude his speech.

Counter-Terrorist Asset-Freezing Regime

Sajid Javid Excerpts

Wednesday 23rd October 2013 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

My noble friend the Commercial Secretary to the Treasury, Lord Deighton, has today made the following written ministerial statement:

Under the Terrorist Asset-Freezing etc. Act 2010 (“TAFA 2010”), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council Resolution 1373.

This is the 11th report under the Act and it covers the period from 1 July 2013 to 30 September 2013. This report also covers the UK implementation of the UN al-Qaeda asset-freezing regime and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU. Under the UN al-Qaeda asset-freezing regime, the UN has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under the Al-Qaeda (Asset-freezing) Regulations 2011. Under EU Regulation 2580/2001, the EU has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

Annexes A and B to this statement provide a breakdown, by name, of all those designated by the UK and the EU in pursuance of UN Security Council Resolution 1373.

The following table sets out the key asset-freezing activity in the UK during the quarter ending 30 September 2013:

Money Services Businesses

Sajid Javid Excerpts

Thursday 10th October 2013 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

Annual remittances from the UK stand in excess of £15 billion with up to 65% flowing to developing countries. The UK has one of the largest money transfer markets in Europe and the largest number of money transfer operators (MTOs).

Globally, some major banks are withdrawing bank accounts from MTOs because of the reputational and regulatory concerns. A number of UK banks have recently chosen to close accounts for a number of money transfer companies which has resulted in concerns being raised about the continued viability of remittance flows to a few developing countries, including Somalia.

The Government are acutely aware of the importance of remittances to these countries and to UK residents. The Government are committed to doing the utmost to ensure that remittances continue to flow through secure, legitimate channels.

We recently asked our officials to convene stakeholders to discuss possible actions the Government could take. A round table was held at the Department for International Development (DFID) on Friday 27 September 2013. The round table was co-chaired by senior officials from HM Treasury and DFID. It was attended by Government, the money transfer industry, NGOs and international organisations.

The purpose of the round table was to agree a set of actions to be taken by Government, supervisors and industry to promote a safe, secure and compliant UK money transfer sector that continues to support legitimate remittances while maintaining effective measures against money laundering and terrorist financing.

As a result of this meeting, and the continued cross-Government effort to find solutions, the Government can today announce a range of actions which they are committed to taking forward. These actions include:

The UK Government will form an action group on cross-border remittances, which will include relevant stakeholders.

The action group will draft guidance on applying a risk-based approach to anti-money laundering and countering the financing of terrorism when banking money transfer companies.

The National Crime Agency will provide more detailed and specific risk assessments and alerts about the sector to banks and money transfer companies, to help differentiate the risks involved in dealing with different money transmitters.

DFID will take forward a pilot project to help develop secure remittance channels to Somalia.

HM Revenue and Customs (HMRC) will increase “days of action” with law enforcement and the number of risk-targeted supervisory visits they undertake to provide further confidence that non-compliant money transmitters are being required to improve or are removed from business.

HMRC will also provide further training to money transmitters to help them achieve an effective level of compliance.

The full list of Government and supervisor actions with respective timelines has been placed in the Library of the House.

Securing a sustainable future for the UK remittance market will require all of the stakeholders to work together. The Government remain committed to playing their part in this and we hope these clear actions will be a key step in the right direction.

Opening up UK Payments

Sajid Javid Excerpts

Wednesday 9th October 2013 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

In March 2013 the Government published a consultation, “Opening up UK payments”, which set out the Government’s proposal to introduce a new, competition-focused, utility-style regulator for retail payment systems in the UK. This proposal reflected the Government’s concerns about the market for UK payment systems, in which strong network effects and vertically integrated ownership structures give rise to problems in three main areas: competition, innovation and delivery against end-user needs. The consultation presented a set of questions identifying the key issues on which the Government sought views. The consultation closed on 25 June.

The Government are publishing their response to the consultation today. The Government are introducing amendments to the Financial Services (Banking Reform) Bill to establish the new payment systems regulator as a separate body under the FCA. The payment systems regulator will have objectives to promote competition, innovation and the interests of end-users. The regulator will be able to oversee any payment system operating in the UK that is brought into scope by being designated by HM Treasury. Once a payment system is designated, the payment systems regulator will have a range of powers over its participants—operators, infrastructure providers and payment service providers that provide payment services using the system—in order to advance its objectives.

The payment systems regulator will have powers to make requirements regarding rules for the operation of designated systems, and to give directions to participants in such systems. It will also have specific powers to require direct and indirect access to designated systems, and to vary agreements relating to such systems, including fees, charges and terms and conditions. The payment systems regulator will also have enforcement powers to publish details of compliance failure, to impose financial penalties in respect of a compliance failure, and to require owners of payment systems to dispose of their interests in them, subject to HM Treasury approval. The regulator will also have concurrent Competition Act powers to enforce the Competition Act 1998 prohibitions against anti-competitive agreements and abuse of dominance, and to make market investigation references to the Competition and Markets Authority.

I am placing copies of this document in the Libraries of both Houses.

Equitable Life Payment Scheme

Sajid Javid Excerpts

Wednesday 9th October 2013 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

The Government announced today that the Equitable Life payment scheme (“the scheme”) will be extended to 2015.

The Government are taking this action to make sure as many Equitable Life policyholders as possible receive the payment they are due for the injustice they suffered. The scheme’s latest progress report confirmed that policyholders have already received £734 million in payments, and since then payments continue to be made.

Despite this good progress, the Government want to maximise the number of people who receive their payment. This has been our aim from the start of the scheme, but because the address information received from Equitable Life can be up to 20 years old, or non-existent in some cases, the scheme has been unable to trace a number of policyholders.

We will shortly launch a national advertising campaign to encourage eligible policyholders to come forward and claim their payment. This work will complement the ongoing work the scheme is doing to trace policyholders. By extending the scheme we are giving this work a greater chance of success.

Any policyholder who believes themselves to be eligible for the scheme, but has not yet been contacted, is encouraged to call the scheme directly on 0300 0200 150 where they will be advised of the next steps to take.

Loan to Ireland

Sajid Javid Excerpts

Tuesday 8th October 2013 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

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

Ireland completed the 10th quarterly review of its International Monetary Fund and European Union programme of financial assistance on 9 May 2013, following which, the utilisation period for the final instalment of the UK bilateral loan began. HM Treasury and Ireland mutually agreed that the utilisation period would conclude on 30 September 2013.

Upon request, the Treasury disbursed the last instalment of £403.37 million on 26 September 2013, with a maturity date of 26 March 2021.

The interest rate charged on the loan is calculated as set out in the loan agreement as the UK’s cost of funds plus a service fee of 18 basis points per annum, creating an effective per annum interest rate on this tranche of the loan of 2.740%. The UK more than covers its cost of funds.

HM Treasury has today provided a further report to Parliament in relation to Irish loans as required under the Loans to Ireland Act 2010. The report relates to the period from 1 April 2013 to 30 September 2013.

A written ministerial statement on the previous statutory report on the loan to Ireland was issued to Parliament on the 25 April 2013, Official Report, column 60WS.

The Treasury will provide a further report to Parliament in relation to the bilateral loan as required under the Loans to Ireland Act 2010 as soon as is practicable following the end of the next reporting period, which ends on 31 March 2014.

The Government believe that it is in our national interest that the Irish economy is successful and its banking system is stable. The Government continue to support Ireland’s efforts to improve its economic situation.

Payroll Giving

Sajid Javid Excerpts

Friday 13th September 2013 Written Statements

[The Economic Secretary to the Treasury (Sajid Javid)]

The Parliamentary Secretary, Cabinet Office, my hon. Friend the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), with responsibility for civil society and I, are pleased to announce that following a consultation undertaken earlier this year, the Government are today publishing their response and outlining a package of measures to improve the operation and increase awareness of payroll giving. These measures demonstrate the Government’s continuing commitment to increasing the amount raised through payroll giving.

The Government have provided strong support to the charitable sector since 2010, having introduced a number of measures including the gift aid small donations scheme, the cultural gift scheme, measures to simplify the process for charity shops to claim gift aid on donated goods and introducing a reduced rate of inheritance tax for estates that leave a significant donation to charities.

As part of this continuing support, the Government ran a consultation between 24 January 2013 and 19 April 2013 on how to increase the amounts donated to charity through payroll giving. Payroll giving is a tax efficient means of donating and a valuable source of income for charities. The Government were delighted to receive over 100 responses, and thank everyone that responded.

Payroll giving provides an important platform to those who actively promote charitable giving in the workplace. Donors have already given well over £1 billion through payroll giving since it began in 1987 and the Government believe there is scope to see yearly donations increase further.

Having listened to respondents, and considered the options available, the Government will be taking forward a package of reforms targeted at four key areas. The Government have targeted the areas that can make the greatest difference, while avoiding placing additional burdens on those involved, or risk increasing the cost of payroll giving. These include improving the process for charities and payroll giving agencies, making it easier for employers and employees to use payroll giving, raising awareness of payroll giving among employers and incentivising employers with non-financial measures. Further details on these reforms can be found in the response document published today on: www.gov.uk.

Taken together this package of measures reflects the Government’s determination to unlock the potential payroll giving has to become an even more important source of support to charities and the fantastic work that they do.

The Government recognise that payroll giving works best when championed passionately from within an organisation and the Government will empower and encourage those who do this.

The Government will work closely with charities, payroll giving agencies and the payroll giving supporters in businesses up and down this country to implement these changes. With their help, payroll giving will continue to grow across workplaces, providing even greater support to the vital work done by charities.