Financial Statement

Stephen Hammond Excerpts

Wednesday 23rd March 2022 Commons Chamber

[Stephen Hammond (Wimbledon) (Con)]

I thank the Chancellor for his statement, which has been warmly welcomed by the people and businesses of Wimbledon, and commend him for his analysis of some of the challenges to the economy. One measure that he could move from temporary to permanent is the super deduction, so will he consider that as part of his consultation? I think it is already evident that this would be the most effective way of changing behaviour and securing greater R&D and capital expenditure.

[Rishi Sunak]

I thank my hon. Friend for what he has said, and look forward to discussing those topics with him over the coming months. The document outlines a range of options for cutting taxes on investment. Hopefully he will have a chance to digest those, and I look forward to discussing them with him.

Financial Services: UK Economy

Stephen Hammond Excerpts

Thursday 9th December 2021 Commons Chamber

[Anthony Browne]

I basically agree with the hon. Member, a fellow member of the Treasury Committee.

[Stephen Hammond (Wimbledon) (Con)]

This is a really important point that we discussed in the debate last November prior to the Financial Services Act 2021, which came into force earlier this year. The key point is that we are giving the regulator huge increases of power with almost no appropriate increase in parliamentary scrutiny of those powers.

[Anthony Browne]

I thank my hon. Friend. That is exactly the point I was about to come to.

This will give the regulators more power, as my hon. Friend said, over issues that will directly affect the lives of voters. That means that they must be made more accountable to voters’ representatives—that is, to Parliament. The Government and the Treasury Committee are considering how that might work, and the Committee has held various hearings on the issue.

One proposed solution is a stand-alone financial services committee such as exists in Washington—the US House Committee on Financial Services, a stand-alone committee that just considers financial services. However, there is a real risk that that would tread on the toes of and undermine the existing Treasury Committee, which must retain oversight of all the Treasury’s functions. Another alternative is a full Committee of both Houses—the House of Commons and the House of Lords—but that would be unmanageable on an ongoing basis. It has worked as a task and finish group, such as the Parliamentary Commission on Banking Standards, but it would be very difficult on an ongoing basis. I am coming to the conclusion that the Treasury Committee needs—I totally agree with the hon. Member for Wallasey (Dame Angela Eagle) on this—a well-supported sub-Committee, or secretariat, that can do the work in focusing on financial services regulation and holding the newly empowered regulators to account. It could include appointed expert advisers, as well as members from the House of Lords, on an appropriate basis.

Obviously, we would need to agree the governance around that. As the Government have made clear, this is an issue properly for Parliament itself to decide. The Treasury Committee will make its own recommendations in due course. Indeed, if any Members here have other thoughts on it, I would be very interested to hear them.

The regulators themselves are also changing. The Government have proposed giving them international competitiveness objectives, but that must be very much secondary to their principal objectives of financial stability and consumer protection. They must not lose focus on their principal objectives.

[Stephen Hammond]

My hon. Friend is right that we must not move away from the primary focus, but does he agree—he made the point earlier on the difference between wholesale and retail—that there ought to be a more balanced view between wholesale regulation and those two objectives if we are to remain a global centre internationally?

[Anthony Browne]

I agree. I support having a secondary objective of international competitiveness and growth. A regulator could decide on policy A or policy B and, from a UK perspective, it could make no difference in terms of consumer protection or prudential stability, but one could mean that we were more able to compete internationally. We asked the chief executive and chair of the Financial Conduct Authority about this in the Treasury Committee yesterday and they went through the details on how that might affect their thinking. But we absolutely must not lose sight of prudential stability. We have had a crisis once and we do not want it again.

We must maintain our support for innovation in financial services, as long as it brings real consumer and economic benefits. We must ensure that the fintech sector thrives. Creating a digital identity ecosystem, which the Government are looking at, will certainly help. As cryptocurrencies grow, it is inevitable that they will need some form of regulation to protect consumers, but it must be done in a proportionate way that focuses on tackling any harms. It is absolutely right that the Bank of England is exploring central bank digital currencies. We do not know whether retail customers want direct access to central bank funding, but it is absolutely right that we try to find out.

Finally, I want to cast our eyes across the world, and look at international partnerships. We are no longer part of the EU, and we do not know what our future relationship with it will be. As I said earlier, I consider any memorandum of understanding as a “nice to have” rather than a “must have”, and it certainly must not shackle the UK’s new regulatory regime. Any partnership would require both sides to agree it, and there seems little political desire for that at the moment on the other side of the channel. Rather, UK-based banks are worried that the EU is considering ways deliberately to make it more difficult to offer services to their EU-based clients, and we have to keep an eye out for that. That makes it all the more important that the UK forms meaningful partnerships with other international financial centres. I have long advocated a close financial services partnership between the UK and Switzerland, a major financial centre. We share a common approach, a global outlook and pragmatism.

--- Later in debate ---

[Stephen Hammond (Wimbledon) (Con)]

It is an honour and a privilege to follow the two speeches from my hon. Friend the Member for South Cambridgeshire (Anthony Browne) and the hon. Member for Wallasey (Dame Angela Eagle). Both of them gave us philosophical, intelligent and really interesting speeches, and I noted that both of them made the point that financial services as an industry perhaps do not get the respect or the renown they probably should have.

I was reflecting on that when I heard the remark my hon. Friend the Member for South Cambridgeshire made about the German who said financial services are not recognised. Why is that? I think it is probably for three particular reasons, yet when we look at the contribution to the UK economy, we should really be shouting out against that. The first point is that, for all too many, when we say financial services, they think of banking. They forget all the related professional services, notwithstanding the subdivisions—indeed, financial services themselves are more tightly defined—and just concentrate on banking. They think back to the financial crisis and all the attendant problems that my hon. Friend so rightly pointed out.

The second point is that, when we say financial services, people may expect the hon. Member for Wimbledon to stand up, but they should expect the hon. Member for Wallasey to stand up as well. Although, understandably, financial services account for 16% of London’s total gross value added, the reality is that in the north-west the industry is 6% of the regional economy, in the south-west it is 6%, in the west midlands it is 6% and in Yorkshire and Humberside it is 6%. The smallest contribution of financial services anywhere in the country is actually the east midlands, and that is 3%, but it is none the less 3% of that regional economy. So we should be standing up and saying that this is a UK-wide industry.

The third point—with complete respect to my hon. Friend on the Front Bench, who is establishing his reputation for being perhaps the best City Minister we have ever had—is that there are one or two at the top of this Government who have occasionally thought that fishing was more important than financial services. If one says that the total contribution to the UK economy of financial services was £67.4 billion last year, and for fishing the number is so small it is not worth talking about, correcting that and looking to that in the future would underline the point about the power of financial services. As has already been stated, there is a huge trade surplus.

My hon. Friend the Member for South Cambridgeshire talked about the opportunities and the hon. Member for Wallasey talked about the threats from the EU. It is none the less true that during our membership of the EU we established ourselves as the world’s global financial centre, and whether we like it or not 40% of UK financial services exports still go there. So my hon. Friend the Economic Secretary to the Treasury will know that in those very complex negotiations—I will not repeat what has already been said about them—we must have a sensible, diplomatic and economically viable dialogue with our nearest and dearest neighbours.

The tax contribution has already been mentioned several times, and the hon. Lady made the point that PwC estimates that £75.5 billion, or 11% of Government receipts, come from the wider financial and associated professional services sector, including insurance and legal. So there cannot be any doubt that this is a hugely important industry and a powerful industry for the UK, and if we want a globally successful Britain we need a globally successful, renowned and well-regulated industry. It is noticeable that in the last few years we have very slightly slipped in the global financial centres index to second place and we must recognise that there are threats as well as opportunities from leaving the EU. It is of significance that on the first trading day of this year we lost £6 billion of activity out of London, and that is a continual threat. So I say yet again not only that we need those important negotiations to be conducted in a manner that is to London’s benefit but that we equally need to recognise of course that the threat is also now once again from New York, Switzerland, Singapore and Hong Kong. In the global alliances that we strike in financial services it is perfectly possible to recognise that, with some economic diplomacy put into deepening regulatory engagement, we could find ourselves in a powerful international regulatory alliance with the Americans, the Swiss and some of the far-east countries. Andrew Bailey some years ago when I was serving on the Treasury Committee raised this as an opportunity we should consider. Building those new trade and investment ties, and underpinning international agreements with financial services, is key to a globally successful Britain.

I want to briefly talk about two other points. First, as has been said, there is a difference between wholesale regulation and retail regulation. The Financial Services Act 2021 says that the Financial Conduct Authority must have regard to the relevant international standards and the effect of the rules on the UK’s international standing. That is hugely important, particularly in wholesale regulation where we hope to ensure that the UK is an international powerhouse. I accept that that will always be a secondary objective of the rules and the obligations on the regulator, but it must not be deviated from. I hope that my hon. Friend the Economic Secretary will set that in place. In terms of the history of regulation in the UK, a large number of people think the system, while rightly seeking to ensure extensive consumer protection, has come at the cost of overspecification for the wholesale markets to no benefit at all and to the diminution of our standing.

The other point has also been raised, but it is important. The 2021 Act has given a huge increase in power to the regulators in a way that we have seen with very few other regulators, by which I mean the lack of scrutiny in this House. I note that the financial services document “Future Regulatory Framework (FRP) review” has come out and it talks about this, and my hon. Friend the Member for South Cambridgeshire referred to evidence to the Treasury Committee. Because of the importance of this industry to the country, I urge the House to consider very carefully establishing a Select Committee of both Houses or indeed a standing sub-committee of the Treasury Committee. I do not accept the argument that several have put that there is not the expertise or capability within this House, or that this House is not able to get the necessary resources and capability brought into it to undertake that proper and appropriate parliamentary scrutiny.

Finally, in the last minute of my speech I want to talk about two other matters. We have talked a lot about the past and what financial services has done, but it could do a lot more to help in what this Government and this country want to achieve. If levelling up means anything, it means bringing opportunity to the regions of this country. Financial services is already a powerful industry in the regions of this country, and bringing in those high-paid, high-value jobs also brings in skills. We should be doing all sorts of things to encourage that, not necessarily just within Government; universities should specialise in master’s degrees in financial capabilities and regulation. We should be focusing heavily on developing the UK as a centre of financial skills. That way we would not only drive UK levelling up but bring the talent to make London and the other global centres of this country into the powerhouse of financial services.

Finally, the Government have done a huge amount of good work already in delivering the net-zero economy from financial services. Financial services can do much more in that area; all sorts of things, particularly using the tax system, have been done already, but we can do much more, and the financial services sector must play its role to deliver that objective.

Oral Answers to Questions

Stephen Hammond Excerpts

Tuesday 7th September 2021 Commons Chamber

[Rishi Sunak]

I am not sure that I entirely recognise the aggregate picture that the hon. Gentleman presents. Rail investment over the course of this Parliament is at record levels, under CP5—control period 5—and then CP6, to give the technical terms. I am very happy to take away the specific schemes. He will understand that those are a matter for the Welsh Government, but I am happy to facilitate with the Department for Transport as required.

[Stephen Hammond (Wimbledon) (Con)]

I commend my right hon. Friend for his commitment to infrastructure, and I particularly welcome the UK Infrastructure Bank. Will he consider introducing an infrastructure bond so that long-term pension funds can invest in the future of this country too?

[Rishi Sunak]

My hon. Friend is right. He has previously highlighted the importance of unlocking pension fund capital to invest in long-term assets such as infrastructure in the UK. He will know that the Prime Minister and I wrote to pension funds just recently discussing that, and my hon. Friend the Economic Secretary is actively working on creating a long-term asset fund, a new vehicle to unlock exactly the investment that my hon. Friend the Member for Wimbledon (Stephen Hammond) wants in exactly the type of infrastructure that this country needs.

Finance Bill

Stephen Hammond Excerpts

Report stage & 3rd reading
Monday 24th May 2021 Commons Chamber

[Madam Deputy Speaker (Dame Eleanor Laing)]

The House has become familiar with having a time limit for every item of business, but I hope that we can manage to consider this stage of the Bill without a time limit. I appeal to Members who are taking part to have consideration for other Members, and not to speak for too long. How long is too long? More than five minutes is too long, but if somebody takes five and a half minutes because they are making some important points, that would be fine. If the occasional person take interventions and it comes to six and a half minutes, that would be fine. But if people take longer than is necessary, I will have to impose a time limit, which makes for a less good debate. Let us try to behave like parliamentarians and not take too long. That puts a tremendous amount of pressure on Stephen Hammond.

[Stephen Hammond (Wimbledon) (Con)]

Thank you, Madam Deputy Speaker. I am sure the House will benefit from your strictures towards my speech, and I welcome the opportunity to make a short contribution on the amendments. As the hon. Member for Ealing North (James Murray) rightly says, the OECD-Biden proposals are an attempt to ensure a multinational, legal framework to ensure that multinational countries pay tax in the countries from which they derive that revenue. Unlike him, I think any sensible look at history will show that this Government have led the way on this since 2010. There can be no suggestion that they have not led the way on ensuring that multinationals should not be able to shift profits to avoid taxation. They have tried to lead the arguments on securing, over many years, a multinational, multilateral agreement on where revenues and profits are derived and how those are taxed. Across the House, we ought to recognise that the Government have been trying to achieve that and that they support it. It has been true since 2010. One of the former Chancellors, George Osborne, led the way on the matter.

The OECD proposals, as the hon. Gentleman put it, are in two pillars, as we all recognise. Pillar one rightly seeks to address the matter of base erosion, as the UK Government have done historically and continue to do. Pillar two, however—I think he failed to recognise this point—would go well beyond what is normally considered to be within the ability of national states, in terms of using the flexibility of fiscal policy to ensure that investment and incentives are properly rewarded within their economies, and may well have some perverse effects on a number of multinational industries, such as the insurance industry. Given your strictures, Madam Deputy Speaker, I shall not give my long peroration on that matter.

However, the key point is that there is a difference between what the Government have been trying to achieve—a multilateral, multinational agreement on the need for a combined approach, which I have no doubt that the Prime Minister and the Chancellor will wish to speak about at the G7—and a legal, minimum international tax rate. It is right that Governments still retain the ability to set fiscal measures according to their economic circumstances. Therefore, I wholeheartedly support—as the Government do—the international agreed approach to ensure that we tax multinational companies on where they derive their revenues and profits.

The problem with new clause 23 is that it talks about a review of the impact of the global minimum tax, but in reality, it is superfluous, because many of the consequences of setting a tax rate of 21% can easily and readily be calculated. The OECD discussions on the precise nature of the agreement are still under review. Therefore, speculating about how that might assess and impact on different economies could hinder the global efforts to achieve that aim.

Finally, as I am sure the Financial Secretary will wish to assure the House, the Government have already agreed that as, when and if there is a global agreement on minimum taxation, they will—when they are a party to that—ensure that the Office for Budget Responsibility assesses the impact for the UK economy and globally. So while this new clause is an interesting amusement for the House tonight, it is superfluous and I wholeheartedly encourage the Government not to accept it.

The hon. Gentleman spoke a bit about the need for investment and for addressing the historical UK underperformance in that area. We all agree with that. As we seek economic recovery post-pandemic and, in the longer term, as we build a cleaner, greener and stronger economy, clearly, the problem of underinvestment has to be addressed on a long-term, sustainable basis. However, it is clear that what the Chancellor has done, with what is popularly known as a super deduction, is likely to bring forward investment in the economy at just the time it is needed. There is an element of saying that, of course, we want to concentrate that on any number of small businesses that may not benefit from investment relief and this may or may not be at the margin, but it may or may not be at the margin that it has the greatest impact. I think the super deduction, which the Opposition seek to criticise, will do exactly that. They want the OBR to assess the impact in other areas of the Finance Bill, but the OBR has already made an assessment of this particular measure in the Bill, which is that it will derive at least 10% extra investment in the UK economy. At this stage of our economic recovery, that seems to me to be fundamentally important, so I hope that the Government will push ahead with the super deduction, as they are doing in this Finance Bill, and even consider it on a longer-term basis as well, because it is hugely important that we address the under-investment in both physical and human capital. Therefore, Government amendment 2 to clause 9, which will allow leased buildings to qualify for that super deduction, seems to be eminently sensible.

Given your stricture, Madam Deputy Speaker, although I could share with the House another 15 minutes of brilliance, I shall now sit down.

[Alison Thewliss (Glasgow Central) (SNP)]

I will also bear in mind what you have said, Madam Deputy Speaker, and keep my comments fairly brief.

I wish to start with the words of the US Treasury Secretary, Janet Yellen. She said:

“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids…It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”

That is something that this Government ought to be getting behind, as it makes absolute sense. It is exciting to see that the Biden plan for a global minimum corporation tax rate is gathering pace. It is reported that the G7 is close to a deal, perhaps paving the way for an OECD deal later on in the year. The action is described in the Financial Times as

“the largest shake-up in corporate taxation for a century.”

As the shadow Minister set out, the Government have been ducking questions on this and ducking responsibility. It feels to me at the moment that an agreement will take place in spite of the UK Government’s hesitancy—less global leadership, more like pulling teeth. Why would the UK Government be in favour of the types of profit shifting that this international co-operation is trying to stamp out? Why would they let our businesses be undercut? Why would they forgo valuable tax revenues?

Our new clause 12 is asking the UK Government to prepare a report on an OECD agreement, which seems very much like the direction of travel, as it would cover 135 countries and the largest corporations in the world. It is important that the UK Government fully understand the impact of such an agreement on each and every part of these islands: on business investment, employment productivity, GDP growth and poverty. The impact of not reaching a deal has been included in new clause 12, too, as it is important that we can fully understand the impact should the UK pursue some kind of crazy isolationist stance against this global growing consensus.

The SNP has great sympathy with new clause 22 and amendment 31. Those using tax havens and with a history of corporate tax avoidance should not seek to obtain benefit from schemes intended to support businesses that already pay their fair share. I ask Treasury Ministers what safeguards they intend to put in place if they do not accept these sensible and logical amendments.

I am glad that, in Government amendment 2, there is some recognition of the issues facing those who have background plant and machinery in leased properties, allowing them to qualify for the super deduction. I remain hugely frustrated that there is yet to be any wider support and any wider recognition of the many businesses both involved in leasing and those that lease machinery themselves. I seek assurances from Ministers that they will continue to hold the door open on this issue and to look at it, because there are so many companies that would benefit from the super deduction if it were not for the fact that they have always leased machinery. They contribute hugely to the productivity of this country and there should be some recognition of that within the Government’s proposals.

Finance (No. 2) Bill

Stephen Hammond Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[Stephen Hammond (Wimbledon) (Con)]

It is a pleasure to follow the hon. Member for Swansea West (Geraint Davies). Before I begin my short remarks on the Finance Bill, I would like to put on record—because I was not able to be here yesterday—my condolences and those of my constituents to Her Majesty the Queen on the death of the Duke of Edinburgh.

This Finance Bill follows a year of unprecedented economic disruption unknown in the modern era, as well as a year of unprecedented support from the Government to business and individuals, ensuring not only their jobs but their lives and livelihoods. That has been true for millions of citizens, including those in my constituency of Wimbledon. This Finance Bill therefore needs to enact measures that ensure not only that our economy is in a place from which to recover and bounce back, but in one from which we can also see sustainable future growth—growth that is clean and green.

We all know the OBR forecasts that were set out in March; I will not reiterate them now. What is clear to me from reading economic commentators since then is that people are now expecting the economy to grow more quickly and more strongly, and for that recovery to be more sustained. That must be in large part due to measures in the Finance Bill that build the necessary confidence and give people necessary security for the future, including the extension of the universal credit uplift; the one-off £500 to those on working tax credit; the job retention scheme; and the self-employment income support scheme. All those measures are combined with the restart grants of up to £6,000 for non-essential retail and £18,000 for hospitality businesses. Those provisions are now extended to my constituency; initially the £51,000 threshold was not in place. I have to say to the Treasury Bench that I am extremely grateful on behalf of the hospitality industry in Wimbledon.

My hon. Friend the Exchequer Secretary to the Treasury will not be surprised that I wish to make two very quick points about the people who have been left out. First, I make the plea yet again on behalf of the English language teaching sector. Those schools received no support and are hugely important to constituencies across the country. Secondly, I know that my hon. Friend will have read clause 117 and schedule 29 on the prevention of tax avoidance and promoters of tax avoidance schemes. The explanatory notes state:

“This clause and Schedule have also been introduced in order to see the responsibility for the obligations within POTAS, and for any failure to comply with them to be placed on the people and entities behind the schemes.”

I have to say to my hon. Friend that a number of us have stood up for what we believe to be hard-working small businesspeople who have been in those schemes and recommended those schemes, and we feel that if that clause had already been in place, many of those people may not be suffering from the problems of the loan charge now. Even at this late stage, if she has the chance to talk to colleagues about this issue, we would be very grateful.

It is clear that we need a Finance Bill that looks at investment and improving infrastructure, so that we see improvement in productivity. I listened carefully to the remarks of my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), who set out the clear economic rationale for the super deduction. It is a vital measure to encourage business to invest now. Historically, the UK has underperformed; we have failed to invest at similar levels to our economic peers. It is investment that drives some of the factors that I mentioned a moment go when it comes to improving productivity. Therefore, supercharging investment through a super deduction means that we are likely not only to strengthen, but to lengthen the economic recovery. That seems an entirely sensible, welcome and rational economic measure.

It is also likely that we want to see measures that improve not only physical infrastructure and capital formation, but human formation. I particularly welcome the support for new apprentice hires in the Bill. I encourage the Government to think a bit more about this, as it is the way of the future. Could we not link the new apprentice scheme to, for instance, the length of the super deduction? The super deduction is in place for two years, while the new apprentice scheme is in place for six months; I encourage the Government to think about linking the two. I know that my hon. Friend the Minister will recognise that human capital formation and investment in skills are as important as physical formation.

Like many colleagues, I was fascinated to hear the contribution from my hon. Friend the Member for Mid Norfolk (George Freeman), who spoke at length about driving growth through innovation and the adoption of new technologies. Of course he is right. When one talks to a number of the people at whom the super deduction is aimed, one learns that it will be commonplace—it almost is now—that they will be investing in things such as AI, 3D printing and big data. Alongside that, we will need a workforce that has in-demand skills, so I particularly welcome the investment in digital skills and the lifetime skills allowance that the Bill will introduce.

Many Members have referred to the freeports policy, which clearly brings the opportunity to boost jobs in regions and to boost economies through the use of differing tariff regimes for different sectors. My hon. Friend the Minister will know the principal criticisms of freeports—that they merely redirect economic activity and investment.

May I talk about next year’s Finance Bill, Madam Deputy Speaker, just for a very brief moment?

[Madam Deputy Speaker (Dame Eleanor Laing)]

This is a debate on this year’s Finance Bill.

[Stephen Hammond]

I urge the Government to think about learning the lessons of economic history in respect of the power of putting wider economic development zones and the encouragement that they bring alongside freeports. We all recognise that such zones need seedcorn grants from the Government; that could give the Government the opportunity to consider local recovery bonds. We have already seen the prospect of the green infrastructure bond; why do we not see some local recovery bonds to sit alongside that work and boost economic development zones? That would seem to me to be a perfectly sensible development.

The Chancellor is absolutely right to focus on infrastructure spending and investment. Infrastructure is not an end in itself—it is the driver of growth and productivity—so the policies coming through and the measures in the Bill to allow the increase in transport spending and in departmental spending limits are welcome. I also welcome the establishment of the UK infrastructure bank. It is the private sector that will drive the investment that is necessary.

As I said a moment ago, the green gilt is welcome, but just as I urge the Government to think about local recovery bonds, I urge them to think about an infrastructure bond. As many will know, there is a consultation on the capital cap for pension funds; if that change is combined with an infrastructure bond, we could see a wealth of pension funds looking to invest in the UK’s economic recovery.

Finally, the jewel in our crown is undoubtedly financial services. A few moments ago my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) talked about the need for mutual banking and to encourage small banks. I urge the Government to think about a review of the regulation of financial services and banking to ensure that the regulation with regard to conduct and capital is competitive and appropriate. That will drive not only those sectors but the investment that will sustain the economic recovery that everyone in this House seeks.

Oral Answers to Questions

Stephen Hammond Excerpts

Tuesday 26th January 2021 Commons Chamber

[Jesse Norman]

I think that it is well-understood that the Chancellor will be setting out further plans in the March Budget. It is normal for this time of year for different decisions to be consolidated into that important fiscal event for well-known reasons.

[Stephen Hammond (Wimbledon) (Con)]

What discussions he has had with his EU counterparts on equivalence recognition for financial services.

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

Equivalence is an autonomous technical process that each side is undertaking separately. Officials have had a number of meetings with their counterparts in the Commission over the past 12 months to discuss each other’s processes, and we remain open and committed to continuing dialogue with the EU about its intentions for equivalence.

[Stephen Hammond [V]]

I thank my hon. Friend for that answer.  Clearly, it would be disappointing if the EU could not follow the UK’s offer on equivalence, given the relative starting positions. Will my hon. Friend comment on the Government’s ambitions with regard to mutual recognition of professional qualifications? What are those ambitions and does he hope that they will be achieved by the signing of the memorandum in March?

[John Glen]

My hon. Friend has a lot of expertise in this area. He will know that, alongside the trade and co-operation agreement, we had a joint declaration to establish a structured regulatory co-operation for financial services and to discuss a whole range of matters around equivalence determinations going forward. The memorandum of understanding will be agreed in discussions between the EU and UK by March 2021. That will establish a framework for that co-operation. It would not be appropriate for me to give a running commentary on that, but the plans will come to fruition over the coming weeks.

Oral Answers to Questions

Stephen Hammond Excerpts

Tuesday 1st December 2020 Commons Chamber

[Jesse Norman]

I think the right hon. Gentleman is slightly unclear on this. HMRC takes careful steps to ensure that the people whom it deals with as agencies employ on a proper and appropriate basis. When, in very rare cases among hundreds and hundreds of contractors in a fast-moving market, it may become clear that someone has in fact been hired under such a scheme, it takes immediate steps to end that relationship and then to follow up, of course, and to pursue as may be required under law. If he is concerned about the interests of taxpayers, may I remind him that many of the people who benefit from disguised remuneration have not been paying tax, from which our public services benefit, and it is those taxpayers whose interests we are also seeking to protect.

[Stephen Hammond (Wimbledon) (Con)]

What steps his Department is taking to support people who are subject to the loan charge.

[The Financial Secretary to the Treasury (Jesse Norman)]

Revenue and Customs has been clear on its commitment to support all taxpayers who might need help paying their loan charge liabilities. Where someone cannot afford to pay in full on time, it will seek to agree payment by instalments. Revenue and Customs has a dedicated helpline for those seeking to leave avoidance schemes, and the disguised remuneration and debt management teams are trained to identify taxpayers who may need extra help and support, and to refer them, if necessary, to outside organisations for support.

[Stephen Hammond]

As my right hon. Friend rightly recognises, there are a number of people who cannot pay the amount either in full at the beginning or in instalments. Given that HMRC has now recognised that many of these people were victims of mis-selling, is it not time to have another review of the people who have been mis-sold these schemes, and would it not be right and appropriate for those who mis-sold the schemes to make some contribution to those demands?

[Jesse Norman]

As my hon. Friend will be aware, a long and detailed review process has been conducted by Sir Amyas Morse. It is, of course, the individual’s responsibility to ensure the accuracy of their tax returns and to understand the consequences of their decisions, although of course the Government very much sympathise with people who have been caught in that position. My hon. Friend may have noticed that we have been taking very vigorous action against promoters of tax avoidance schemes—most recently, in an announcement we made last week, HMRC and the Advertising Standards Authority are getting together to crack down on misleading promoting of tax avoidance schemes.

Financial Services Bill

Stephen Hammond Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Monday 9th November 2020 Commons Chamber

[Stephen Hammond (Wimbledon) (Con)]

It is always a pleasure to follow my hon. Friend the Member for Strangford (Jim Shannon), as I have on many occasions in this House.

The ambition of the Bill is clearly stated:

“To make provision about financial services and markets; to make provision about debt respite schemes; to make provision about Help-to-Save accounts; and for connected purposes.”

The Minister was absolutely right in his opening remarks that financial services are a key industry for this country. If we are to have a global Britain and a globally successful Britain, financial services—and services in the widest sense—must thrive.

It is also right that the Bill is an important part of trying to ensure that we have the right regulatory framework at the end of the Brexit transition. If we are to remain a world-leading financial centre, it can be guaranteed only by having financial services that are underpinned by a strong and proportionate regulatory framework. The Bill, as the Minister conceded, is the start of that, not the end. I suspect that this is the first of several Bills that will come before us.

If the framework is to do anything at all, it must protect the consumer, enhance competitiveness and, as the Minister said, make the UK an attractive place in which to invest. I welcome the Bill because that is necessary, but it is right to recognise at the outset that, notwithstanding the equivalence regime or the new equivalence criteria that the Chancellor rightly set out this afternoon, as recently as February a briefing paper from the Government stated that the UK hoped to secure “permanent equivalence” that would last for “decades to come”. Indeed, at the time, the Governor of the Bank of England was campaigning for super-equivalence in order to allow a new standard to be set for multilateral collaboration. That would have been a better context in which to be considering these matters this evening; none the less, the Chancellor’s statement this afternoon was welcome. Everyone in this House must now deal with the world as it is, not the world as we would like it to be if it were more economically rational.

This Bill is necessary and it does a number of things to ensure that the regulatory regime is in place at the end of the transition period, and to allow financial services to prosper. It makes a start on sorting out the relationship between Parliament and the regulators, starts to define the accountability and objective of the regulators, and ensures that the regulation and legislation are in place. That will be important as we look forward to 1 January.

A specific of the Bill that I particularly welcome—the Minister touched on this in his opening remarks—is the prudential regulation of investment firms. That recognises, quite rightly, the differing risks between banking businesses and investment management businesses. The Bill aims to put in place a prudential regime that is fit for purpose. That in itself has been widely welcomed across the financial services industry. It sets out four principles, as well as how the implementation of that prudential regulation may recognise the differing capital risks. However, there are some concerns, which I hope the Minister might address later, or about which we will be reassured in Committee.

The first concern is how Parliament is going to scrutinise the principles. I will return to that point in a bit more depth later. The specific issue raised is that Her Majesty’s Treasury intends to revoke the capital requirements regulation with a view to replacing it with standards set out by the PRA that are to be guided by Basel II. However, the Bill contains little clarity on exactly what will be in the PRA regime, how it would differ from the capital requirements regulation or how the Government intend to implement these new measures. I trust that the Minister will set that out today or that it will be clarified in Committee, because it is hugely important to the success of those provisions.

I welcome the provisions on the onshored EU PRIIPs regulation. This has been widely welcomed. It gives the PRA powers to make clarification, but there is an important duty to ensure not only that the regulations put in place are effective, but that they help the investing community and the public, ensuring protection for the consumer. It is not yet clear how those powers are going to be enacted and what is going to be there.

As the Minister has acknowledged, this is a wide-ranging Bill, so I want to touch on a couple of other issues of concern that can probably be cleared up now or in Committee. It is clear that we need to safeguard the ability of our world-renowned investment management industry to offer investment funds from overseas jurisdictions into the UK post transition. As the Minister set out, that is the aim of the Bill. If that were not so, it is clear that 9,000 individual funds would have to seek separate registration. From my reading of the Bill, it is not yet clear whether the temporary permissions regime—the regime which would allow that to continue—must be extended or whether a new, fully functioning regime is to be put in its place. That is important, because it signals the free flow of capital into the UK and signals that the UK remains open for investment and business. I have spoken to a number of those in the investment management industry over the weekend, and there is still some concern in the industry that it is not fully clear how that will operate.

The Bill also clearly states that it is meant to maintain a world-leading regulatory system and, among other things, enhance the competitiveness of the financial services sector, yet if we look at the history of regulation in the United Kingdom, a large number of people believe that the system has often rightly sought to give the consumer extensive protection, but with the cost of over-specification, a lack of accountability and, in terms, a narrowness of focus from the regulator. If the Bill is to achieve its ambitions, the Government need to look at those faults and be clear about how they are going to change them during the Bill’s passage.

The Bill allows for the transfer of hugely increased powers to regulators. The question for us therefore is how we balance the extra powers with the necessary scrutiny and accountability, without encroaching on the necessary independence or eroding consumer protection. I suggest that the Treasury needs to consider carefully what performance objectives it sets the regulators and how it will then manage their measurement. Previously, it has been clear that the overriding objective has been competition, but secondary objectives have been in place, and all too often regulators have not given those the regard that many would have expected. The regulators’ attitude to risk will need further definition if the Bill is to achieve the objective of enhancing and maintaining the UK’s international competitive position.

Who exercises the judgment on whether the criteria are being met and how the trade-off of benefit and risk is determined will be key. Schedule 2 is the key part in determining that. New sections 143G and 143H link to the broader questions of the FCA’s mandate, role and accountability. The Treasury has rightly just recently published a consultation document on the broader review of the framework for financial regulation, so this Bill is the first exploration of the issues around the oversight of the FCA.

New section 143G identifies a number of “Matters to consider” and therefore matters that the FCA must “have regard to”, including the relevant international standards and the effect of the rules on the UK’s international standing. Those are all to be welcomed, but are they really effective? I suggest, first, that the obligation is too weak, as it only requires the FCA to “have regard to”. Secondly, the obligation is too narrow. A number of other issues, such as sustainable growth and employment across regions, should also be part of the mix and part of the consideration. Therefore, I suggest we need to be prepared to go further and consider changing the FCA’s primary objective, or at least strengthening the secondary objective, such that it ranks almost pari passu with the primary objective.

There also needs to be rigorous scrutiny of the regulators’ rule-making powers by Parliament. As I said earlier, the Bill puts in place some major increases in powers for regulators, so it is completely appropriate that Parliament sets the scrutiny and accountability objectives. There are many ways to do that, and I know colleagues will suggest other methods later, but it is clear that one of the great successes has been the OBR, which analyses, scrutinises and gives an independent verdict on financial policy. It may well be appropriate that one of the ways that Parliament holds financial regulators to account is a similar body for financial regulation.

I was encouraged to be short, and I have already taken rather longer than the Whips wanted me to take this evening. I think the Bill is absolutely necessary. Therefore, notwithstanding some of the issues I have raised, and others that I am sure the Minister recognises and will want to address as the Bill progresses, I wish the Bill well and look forward to supporting its Second Reading.

Lockdown: Economic Support

Stephen Hammond Excerpts

Tuesday 3rd November 2020 Commons Chamber

[Steve Barclay]

The hon. Lady is conflating several different issues. First, the furlough had not expired; it was running until the end of October. It applied universally until that point, so the suggestion of it being applied differently is simply not the case. Secondly, the purpose and the design of the job support scheme is different from the furlough. The furlough is a response to the need for people to stay at home. The job support scheme is intended to try to encourage them back. That is why the design is for at least 20% of hours—one day in the office. Thirdly, as my right hon. Friend the Chancellor has set out on a number of occasions, the two-thirds support is dynamic in its interaction with the wider support through the £9 billion of additional welfare spending. One needs to look at the fact that there are two different purposes behind these two schemes, but the fundamental point is that there is no gap between the furlough that was due to expire on 30 October and the new furlough extension.

[Stephen Hammond (Wimbledon) (Con)]

I thank my right hon. Friend and the team for the package of support, which will save jobs and livelihoods across Wimbledon. He will know that since March, I have been raising the plight of people who are excluded from the scheme because they have been forced to close their businesses, so I support a number of the comments made about the self-employed. May I raise yet again with him industries such as events, exhibitions and hospitality supply, which are all excluded from the business rates scheme and the business grants scheme? They need that support if we are to have those vibrant contributors to the economy in the future.

[Steve Barclay]

I am aware of the concerns that my hon. Friend has raised. I point him to the fact that, to date, the Treasury has spent more than £200 billion as part of our comprehensive package of support. We have applied a universal approach in terms of the furlough, loans, business grants and so forth, but I am happy to have further discussions with him in the weeks ahead.

Public Health Restrictions: Government Economic Support

Stephen Hammond Excerpts

Tuesday 13th October 2020 Commons Chamber

[Steve Barclay]

We did address this issue; I recognise that many hon. Members in the House have raised it on behalf of those councils where the initial estimate was at odds with the actual number of grants issued, but for the same reasons I gave earlier I do not think that would be equitable. Where there are pressures with tier 3, as with the conversations that took place for example between the Secretary of State for Housing, Communities and Local Government and leaders in Merseyside, among others, over the weekend, it is right that the needs are addressed pertaining to tier 3, not that the underspend on funding that was allocated in a previous period is then used in that way. If the Government were to agree that, many hon. Members across the House would feel that that was unfair.

[Stephen Hammond (Wimbledon) (Con)]

I thank my right hon. Friend for the package of support that was put in place yesterday, but may I raise again with him companies in the supply chain for the hospitality industry and the events and exhibition industry? He mentioned a moment ago the discretionary criterion available, but unfortunately local councils are not often using that. I ask him to look at the eligibility criteria for grants and support, which were raised yesterday. Many in the events and hospitality industry want to reopen, so will he meet me so we can arrange how it can be done safely?

[Steve Barclay]

First of all , I am always happy to meet my hon. Friend and I welcome the constructive approach that he always takes on these issues. In terms of eligibility, part of the design of the discretionary grant was to give discretion to local authorities to apply it in different ways, and it would be slightly at odds with that for the Government to say that there must be a particular way of applying it. However, he speaks to a sector that I know has been particularly hard hit by covid; we recognise that, and it is a factor that has shaped a number of the approaches we have brought forward, particularly on things such as cash flow. I am very happy to speak with him.