Budget Responsibility Bill

Andrew Griffith Excerpts

Committee of the whole House
Wednesday 4th September 2024 Commons Chamber

[Nigel Huddleston]

Thank you very much, Madam Chair. May I first take the opportunity to congratulate you on your election? I promise to try not to try your patience over the coming weeks, years and so on, but we will see how things go.

I wish primarily to speak today to amendment 9 and, of course, consequential amendment 10, which effectively seek to ensure that the fiscal lock proposed in the Bill should also include any changes to the fiscal rules and would require the Office for Budget Responsibility to produce a report on their effect on public finances. The Office for Budget Responsibility was of course constructed by a Conservative Chancellor following the poor forecasting record of the previous Labour Government. Between 2000 and 2010, the then Labour Government’s forecasts for economic growth were out by an average of £13 billion, and their forecasts for the budget deficit three years ahead were out by an average of £40 billion. Their forecasts therefore lacked credibility, and to re-establish confidence and credibility the OBR was created by the Conservative Government.

Labour lacked economic credibility in the past, and I am afraid it still lacks it now. The facts simply do not stand up the false claim that the Government have inherited the worst economic circumstances since the second world war; they transparently have not. Contrary to the rewriting of history that the current Labour Government are attempting, when we took over from Labour back in 2010, inflation was 3.4%. When they took over from us, it was 2.2%. The annual deficit is half what we inherited in 2010, unemployment is about half what it was in 2010, and we handed Labour the fastest economic growth in the G7. The dominant political and economic narrative since the second world war is in fact, as has been widely commented on, that every single Labour Government end up with unemployment higher at the end of their time in power than when they took over from the Conservatives preceding them.

The British public should not be taken for fools. Just because Labour keeps claiming something, that does not mean that it suddenly becomes true, which is why clarity over plans and rules is so important. The fiscal rules are of course restrictions on fiscal policy set by the Government to constrain their own decisions on spending and taxes. The fiscal rules set by the previous Government said that the debt to GDP ratio should be falling within a five-year horizon, and that the ratio of the annual budget deficit to GDP should be below 3% by the end of the same period. Labour’s manifesto for the election proposed the following fiscal rules: balancing the current budget, so that day-to-day costs are met by revenues, and that debt must be falling as a share of the economy by the fifth year of the forecast. On the surface, therefore, the debt rules appear to be broadly the same under the new Government. The Government have even said that they have an “ironclad” commitment to reduce Government debt. It is therefore critical what definition of debt is used for the fiscal rules. Clearly, any changes to the fiscal rules are financially significant decisions because they affect how much the Government can borrow and spend.

On Second Reading, the Exchequer Secretary to the Treasury said:

“Our fiscal rules are non-negotiable.”—[Official Report, 30 July 2024; Vol. 752, c. 1263.]

Great, but why then has the Chancellor repeatedly failed to rule out that she will change the definition of debt in her fiscal rules to allow, presumably, for massive borrowing? The Government cannot run from the scrutiny that they should be subjected to if they are considering making such a change. We believe that our amendment requiring an OBR report on changes to the fiscal rules is entirely consistent with the Government’s stated policy intent, and should therefore be fairly uncontentious. After all, on Second Reading, the Chief Secretary to the Treasury said that

“the announcement of a fiscally significant measure should always be accompanied by an independent assessment of its economic and fiscal implications, in order to support transparency and accountability.”—[Official Report, 30 July 2024; Vol. 752, c. 1211.]

We agree, and not accepting our amendment would be contrary to those goals, because clearly changing the fiscal rules would be a fiscally significant measure in anybody’s book. Furthermore, the Chief Secretary said that

“fiscal discipline and sound money is the bedrock of our plans.”—[Official Report, 30 July 2024; Vol. 752, c. 1213.]

Well, changing the fiscal rules would be changing the foundations and that bedrock.

Transparency and clarity are important in relation to the public finances, because Ministers should never forget that it is not their money that they are spending; it is the public’s money. The public have a right to know how their money is being spent, and government is about making difficult choices with limited resources. With Government spending being above £1.2 trillion per year, the British public recognise that the Government clearly have choices. It is not an endless supply of money, but it is a very, very large amount. In the last few weeks, the new Labour Government chose to spend the public’s money on pay settlements for their union friends rather than on supporting pensioners. Those settlements are estimated to cost about £10 billion. They also chose to spend £8.3 billion on a public energy company and £7.3 billion on a national wealth fund, so far from inheriting a £22-billion black hole, they have actually just spent £25 billion creating one within their first few weeks of coming to power.

[Andrew Griffith (Arundel and South Downs) (Con)]

My hon. Friend is making a fantastic speech on the importance of being responsible with our public finances. Much of the Bill is concerned with responsibility and transparency. Does he know whether the Government published an impact assessment when they took away the winter fuel allowance?

[Nigel Huddleston]

I thank my hon. Friend for that point. My understanding is that the Government have not published an impact assessment, as would normally be the case for something with such a significant impact. I think that speaks to the whole narrative that we are hearing from the Government: claiming one thing when the facts speak differently. As I said, far from inheriting a £22 billion black hole, they have actually spent, or committed to spending, an additional £25 billion. That is a choice that they made, so the claim that the Labour Government are having to take the winter fuel allowance away from millions of pensioners as a response to unexpected financial constraints simply does not stack up against the facts, or indeed the words of the Chancellor herself, who on 25 March 2014—yes, a decade ago—said:

“We are the party who have said that we will cut the winter fuel allowance for the richest pensioners and means-test that benefit to save money”.—[Official Report, 25 March 2014; Vol. 578, c. 174.]

That is a direct quote in Hansard from the current Chancellor, so no, the Government’s restriction of winter fuel payments is not a response to financial circumstance; it is a long-established, clearly stated Labour policy intent—a deliberate policy choice, but a policy that they conveniently forgot to tell the public about in the run-up to the last election.

I hope, however, that the Government can be straight with the public on this point about the fiscal rules, accept the amendment that we are proposing, and provide assurance to all Members and the outside world that there is no sleight of hand here. We want the Bill to work as they say it is intended to, and to include financially significant decisions, such as on the levels of Government borrowing and the fiscal rules. I would therefore appreciate it if the Chief Secretary to the Treasury confirmed in his wind-up that the Government do not intend to change the definition of debt in their fiscal rules or practise some accounting trick to hide the level of Government borrowing, and that they do indeed wish to be clear and transparent about the public finances. If Labour Members vote against our amendment, it will merely prove that they are planning to change their fiscal rules in the Budget to borrow more money, increase debt, and run away from independent OBR scrutiny—the very opposite of the stated intent of the Bill.

--- Later in debate ---

[The Chairman of Ways and Means (Ms Ghani)]

A very strong maiden speech, without a script in hand—your parents will be proud.

[Andrew Griffith]

It is a delight as ever to serve under your chairmanship, Ms Ghani. I congratulate the hon. Member for Loughborough (Dr Sandher) on his maiden speech and his kind comments about his predecessor Jane Hunt, a great colleague of this House. It was one of my great pleasures in my previous role as Minister for science and research to visit the fine university he now represents; I wish him and them well, and I wish him all the best of luck with those on his Front Bench in procuring the financial support he seeks.

This is a disreputable Bill, if we are brutally honest. It is a piece of political theatre, which all of us on both sides of this House should think very strongly about giving our support to. This history of this place is of legislation made in haste, which this House subsequently repents at leisure. I say this in all seriousness and in the spirit of this place: at a time when there is low trust in politics, did our constituents—did the hon. Gentleman’s constituents, when they trooped to the ballot box and returned him to this place only weeks ago—seriously expect that our role would be to give away even more of our responsibilities? Can any of us, hand on heart, say that our constituents know what and who the OBR is? Did the electors of Bristol North West, Hampstead and Highgate, Richmond Park or, indeed, Arundel and South Downs send us to this place only to give away our duties and responsibility to the unnamed, unknown and unelected officials—well-meaning, no doubt—of the Office for Budget Responsibility? Hands on the face of a stopped clock are sometimes more accurate than the OBR forecasts, as they are at least correct twice a day for sure.

In truth, this legislation, put together at breakneck speed, has more holes than a Swiss cheese. If we look at clause 1(3), who decides the “costing”? Proposed new section 4A exempts any measure that is intended, at the time of its introduction, to be temporary. Members of this House will be familiar with the fact that income tax itself, one of the largest ever fiscal measures, was intended to be temporary; perhaps the Minister will address that fact when he winds up. Income tax was introduced by Pitt the Younger in 1799 as a temporary measure. Well, here we are, 225 years later, and that temporary measure is still going extremely strong.

Who defines what is and is not a fiscal measure—a measure with a potential impact on the GDP of this country? Many things decided in this House will have a direct or indirect impact on the GDP of this country; the decision by Tony Blair to take us to war without a vote in this House undoubtedly had an impact on our GDP. Decisions to introduce a four-day working week—if this House so chooses to make them, as is its right—would have a material impact on the GDP of this country. The Centre for Business and Economic Research estimates that every bank holiday costs this country a sum approaching £3.6 billion. Three, four, five or six bank holidays add up to a 1% impact on GDP, which I speculate may be the threshold for the OBR to intervene.

On trade deals, if those on the Government Benches fulfilled their ambition to realign with Europe—to federate and once again abrogate our trade to Europe—that would potentially have a material fiscal impact on GDP. There are very few domains of this House—very few of the decisions that our constituents have sent us here to legislate and decide on their behalf—that would not potentially fall foul of this rule.

[Ms Stella Creasy (Walthamstow) (Lab/Co-op)]

I will delight the hon. Gentleman, because, as I am sure he saw on the amendment paper, I have tabled an amendment that would look at trade deals. One of the reasons why I felt compelled to do that, and explore this question that he raises about the economic impact, is that while he was in government and, indeed, a Treasury Minister, the Government did not publish any information for the very trade deals he is talking about. I will always welcome a sinner who repenteth but, for the avoidance of doubt, is he saying that he now believes there should be independent scrutiny of things such as the trade and co-operation agreement?

[Andrew Griffith]

It is good to have a proper debate. I certainly think that if we want and seek good government—which, like the human condition, is not a perfect state, but a state that we should seek constantly to perfect—the highest levels of transparency and the very important exercise in Government publishing of impact assessments when they make material decisions, as required by Cabinet Office guidance, are things that the whole House should join hands and agree on. It is one of the reasons why I asked my colleague, my hon. Friend the Member for Droitwich and Evesham (Nigel Huddleston), whether the Government had published an impact assessment on their callous decision to withdraw the winter fuel allowance from so many pensioners. The hon. Member for Walthamstow (Ms Creasy) will well know that the process of trade deals undergoes extensive scrutiny in this House, and I took one of those trade deals through that process of scrutiny in a former life.

I will conclude, because I simply want to alert hon. Members to what they are potentially doing as they seek to support this Bill. It is not for partisan or political advantage, but about the important role of Parliament, which has been litigated many times in this Chamber and in debate.

[Graham Stringer (Blackley and Middleton South) (Lab)]

Unsurprisingly, I have listened to the hon. Gentleman’s speeches on a number of occasions, and I agree with quite a lot of what he is saying about transparency. Does he agree that the burden of his argument is that we cannot make a Government behave better or govern more effectively by quango? This quango was set up by George Osborne to trap an incoming Labour Government and restrict and slow them down, and it is an odd thing that we see this quango being gilded.

[Andrew Griffith]

As ever, the hon. Member makes an important and weighty contribution. He is exactly right about the direction of travel. On both sides of the House, we will all find our own particular point on the envelope when it comes to the balance around organisations that can hold us to account and, in particular, hold a mirror to Government and ensure that this House acts with the best, most accurate and well-meaning data.

My core point is that we are sent here by our constituents. I again congratulate the hon. Member for Loughborough, who has been sent here on behalf of his constituents and has given a fine speech today, but I do not believe—he may intervene and correct me—that the citizens of Loughborough, whether they voted for Jane Hunt or for him, intended that one of the very first actions he and we would take as legislators would be to award more of our powers and place more fetters on ourselves. This is the right Chamber for accountability. We should hold ourselves to account; we have a number of ways in which to do that to ourselves. The hon. Member for Blackley and Middleton South (Graham Stringer) makes a very real point about quangos, arm’s length bodies and how we hold ourselves to account.

That is my point. I understand that many colleagues wish to get in. I support the amendment put forward by my hon. Friend the Member for Droitwich and Evesham, because it is quite right that we have rules. I was an accountant by training, and the first thing we learn—whether someone is an accountant or in performance sport—is that we play by the rules as they are; we do not seek to rig the rules in our favour.

[Ms Creasy]

It is a pleasure to speak in the same debate as the maiden speech given by my hon. Friend the Member for Loughborough (Dr Sandher). I am sure other speeches are coming that will show just how impressive the new generation of MPs is across the House.

It is also a joy to follow the hon. Member for Arundel and South Downs (Andrew Griffith), because I have always enjoyed the experience of listening to him. When he was a Treasury Minister in the previous Government, I watched him, debated with him and tried to encourage him to take on the buy now, pay later lenders—that is related to what I will say about legal loan sharking. But I have to be honest: being lectured by former Conservative Ministers about fiscal probity is a bit like being lectured by Toad of Toad Hall about safe driving, given the experiences of many of our constituents, which have led to the need for this legislation.

I put on record my support for this legislation, because frankly anybody who has had to renegotiate a mortgage since the Liz Truss Budget knows exactly why it is needed and why we must protect the British public from the consequences of bad decision making at a national level. As we saw in many examples under the previous Administration, the public have paid the price for that and will continue to do so.

[Andrew Griffith]

Of course, the legislation does not fetter previous Governments, but it would fetter the discretion of the hon. Lady’s own Front Benchers. In that context, does she not have the same confidence in her Front Bench that many others seem to enjoy?

[Ms Creasy]

I am a bit disappointed that the hon. Member did not seek to call me Ratty. I am also quite struck by the fact that he, a former Conservative Treasury Minister, rises not to hold himself accountable for the consequences of decisions made by the previous Government, or indeed to defend them, but simply to say, “You will be held to a higher fiscal standard.” We on the Labour Benches welcome a higher fiscal standard; that is the purpose of the legislation. Political decisions will still be made, but we will make them with the benefit of independent information. He will know that there were many debates in the previous Parliament, and indeed in those before it, in which independent information about and verification of the economic impact of policies mattered but were missing. Indeed, he mentions trade deals, which are an example of where we did not have independent information. I will comment on that only briefly, because my amendment has not been selected—he will be as disappointed as I am about that.

--- Later in debate ---

[Andrew Griffith]

Will the Minister give way?

[Darren Jones]

Briefly.

[Andrew Griffith]

The Minister can answer this briefly as well. Could he confirm that he has no plans to change the fiscal rules?

[Darren Jones]

The hon. Gentleman is enjoying himself, but he knows the answer: wait for the Budget.

The amendments from the official Opposition are therefore not necessary. To answer the question from the shadow Financial Secretary, the hon. Member for Droitwich and Evesham (Nigel Huddleston), as I have been invited to do so, the Chancellor has already confirmed that the Government will set out the precise details of our fiscal rules at the Budget on 30 October, alongside an updated OBR forecast.

amendments 6 and 7, tabled by my hon. Friend the Member for Walthamstow (Ms Creasy), focus on the definition of “fiscally significant” measures to which the fiscal lock will apply. They would extend the definition to include measures that have a cumulative effect on public sector net debt or contingent liabilities. I welcome my hon. Friend highlighting this issue, on which I know she has worked for many years. The draft charter text states that measures will trigger the lock when the combined costing is at least 1% of GDP in any year, and specifically:

“The costing of a measure is the direct impact of a policy decision on the public finances”.

It is difficult to set and interpret a threshold consistently for contingent liabilities as they can often be large in maximum exposure, but low in expected or reasonable worst-case losses. Effective management of contingent liabilities is important, and transparency is key to good fiscal management. The Government plan to announce new significant contingent liabilities at fiscal events to make sure there is transparency with Parliament. We will of course continue to notify Parliament of new contingent liabilities, as set out in “Managing Public Money”.

The amendments would also place a condition on policies with a cumulative impact on public sector net debt, and my hon. Friend noted public-private partnerships as an example. She was referring to PFI and PF2 models, which the previous Government had no longer proceeded with, and there has been no change to this policy. As the Chancellor said in her Mais lecture earlier this year, we will also report on wider measures of public sector assets and liabilities at fiscal events to ensure transparency across the whole balance sheet, which includes non-debt liabilities. Reporting transparently on the Government’s stock of contingent liabilities is key to ensuring we do not take excessive risk. I can therefore confirm today that the Government will publish a report on our contingent liabilities. I expect the contingent liability central capability to do this in early 2025. Having said all that, I recognise the issues my hon. Friend raises, and I will arrange to meet her to discuss them further.

Moving on to the Liberal Democrat amendments, amendment 2 was tabled by the hon. Member for Richmond Park (Sarah Olney). As she said, it would enable the OBR to notify the independent adviser on Ministers’ interests if the fiscal lock was triggered. I remind hon. Members that the purpose of this Bill is to ensure that never again do we find ourselves in a situation, like at the 2022 Liz Truss mini-Budget, in which fiscally significant measures are announced without accompanying OBR analysis. If a future Government were to act in this way, the Bill provides a clear remedy. The OBR is empowered to independently notify the Treasury Committee and to produce its own report. This would be available for full scrutiny by stakeholders and Parliament, which would be able to hold Ministers to account in the normal way. We therefore do not consider the amendment necessary.

Amendment 1, also tabled by the Liberal Democrats, would broaden the definition of fiscally significant measures to cover anything that is likely to have an impact on the cost of Government borrowing, interest rates or economic growth. The Bill is focused on preventing irresponsible large-scale fiscal announcements that could undermine macroeconomic stability, such as at the mini-Budget. To support that, we need clear and robust legal frameworks that ensure the provisions are triggered only when appropriate. This requires precise definitions that everyone, including the OBR in particular, can understand clearly and work with practically. It would therefore not be helpful, in the Government’s view, to have a broader, vaguer definition that might repeatedly trigger the fiscal lock under many different circumstances.

Amendments 3 and 4 would require the Treasury to consult the OBR and the Treasury Committee before the charter can be updated for the purposes of the fiscal lock, and to publish a report on the outcome of any such consultations. It is of course important that the views of the OBR and of Parliament are taken into account when making changes to the charter. However, I hope the hon. Member will accept that it will not be necessary to set out this specific process in primary legislation, because the Bill already includes an important safeguard on the fiscal lock, which is the requirement that any changes to the charter for budget responsibility are published in draft at least 28 days before they are laid in the Commons. That will ensure that the OBR, the Treasury Committee, this Parliament and all stakeholders will have a clear opportunity to make representations to the Treasury and to publish their views, as they see fit.

Amendment 5, tabled by the hon. Member for North Herefordshire (Ellie Chowns), would require the OBR to take net zero targets into account when preparing a report on fiscally significant announcements. Strong legal frameworks are already in place in the Climate Change Act 2008 to support the transition to net zero in 2050. The Act legislates for interim five-year carbon budgets, and requires the Government to report on those periodically. Parliament and its Select Committees already scrutinise that in great detail. The Green Book, the Treasury’s guidance on how to appraise policies, projects and programmes, requires Departments to assess the climate and environmental impacts of policy proposals, with major bids and proposals at fiscal events being assessed accordingly in that way. We therefore do not consider the amendment to be necessary.

Treasury

Andrew Griffith Excerpts

Monday 23rd October 2023 Ministerial Corrections

The following is an extract from the debate on Business Banking: Undesignated Client Accounts in Westminster Hall on 18 October 2023.

[Andrew Griffith]

I am also happy to give my right hon. Friend the assurance that she seeks. She has been very patient and tolerant. I understand her and her constituents’ frustrations, but there will be no further delays. After having consulted earlier this year, we intend to look at how we can improve and reform the anti-money laundering procedures.

[Official Report, 18 October 2023, Vol. 738, c. 120WH.]

Letter of correction from the Economic Secretary to the Treasury, the hon. Member for Arundel and South Downs (Andrew Griffith):

An error has been identified in my response to the debate secured by my right hon. Friend the Member for Rochester and Strood (Kelly Tolhurst).

The correct response should have been:

[Andrew Griffith]

I am also happy to give my right hon. Friend the assurance that she seeks. She has been very patient and tolerant. I understand her and her constituents’ frustrations, but there will be no further delays. Through consultation this year, we intend to look at how we can improve and reform the anti-money laundering procedures.

Public Sector Exit Payments (Limitation) Bill

Andrew Griffith Excerpts

2nd reading
Friday 20th October 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

Thank you, Mr Deputy Speaker, and I thank my hon. Friend the Member for Christchurch (Sir Christopher Chope) for raising this important topic. If I may say so in passing, we did not debate today his thoughts about children’s clothing, but I am very happy to meet him about that on behalf of my Treasury colleagues.

My hon. Friend and indeed I and all my colleagues believe passionately in people keeping more of what they earn. To do that, we need to ensure that Government money is spent as if it is our own. We need to ensure it is always spent prudently and delivers the maximum return possible for ordinary taxpayers. It is also true, and I hope he would join me in recognising, that many of our public sector workers are a source of real pride to this country—from our healthcare workers in the NHS to our armed forces on the front line and those local government officials who do such important work for our local communities. Their services are paid for by the taxpayer, and indeed they are taxpayers themselves, and all of us seek to take a responsible and balanced approach to the conditions offered to public sector workers. We as a Government have sought to do that in every pay round. For the 2023-24 round, we accepted the headline pay recommendations of the independent pay review bodies in full for the armed forces, teachers, prison officers, the police, the judiciary, medical workforces and senior civil servants. For most workforces, accepting these recommendations has resulted in the highest pay uplifts for three decades, providing a fair reward for workers and a fair deal for taxpayers and employers alike.

Exit payments, such as for redundancy, are an aspect of this. They help employers to make necessary organisational change, just as regularly happens in the private sector, and they support individuals and uphold employment law as they leave employment. However, my hon. Friend is absolutely right that the taxpayer ultimately foots the bill for these individual payments. They can be many times larger than average earnings elsewhere in the public sector, and it is absolutely right—I hope to have support for this across the House—that we look at how fair and how proportionate these payments are, particularly at a time when it falls to the Government to make difficult but responsible decisions about the public finances. The Government share his concern about the overall level of spending on exit payments, particularly the number of very large exit payments made to individuals in recent years. That is why we are committed to limiting large exit payments and making provision for the recovery of those payments when that is appropriate.

[Philip Davies (Shipley) (Con)]

Can the Minister also give an assurance that large exit payments will never be agreed for public sector workers facing disciplinary proceedings who choose to leave instead of facing those disciplinary proceedings? Can he assure me that no big exit payments will be given in those circumstances?

[Andrew Griffith]

I thank my hon. Friend, who is a doughty champion of the value of taxpayers’ money, and he makes a very important point. The commitment I can give goes rather more broadly than that, which is that the Government will seek to make sure that any exit payments always offer value for money and that every pound of taxpayers’ money should be well spent. In responding ultimately to the consultation that the Government conducted almost a year ago, I will ensure that the point he raised is fully addressed.

[Sir Christopher Chope]

My hon. Friend says that the Government are committed to doing something, but we are now in 2023, and it was in 2015 that the Government first resolved that something must be done about obscenely high public sector exit payments in excess of 95k. In the intervening period, the Government have been all over the place, and I wonder whether the Minister could tell me the result of the most recent action, which was a consultation paper in August 2022. The closing date for that was 17 October 2022, more than a year ago. What has happened to that?

[Andrew Griffith]

My hon. Friend makes a fair point about the pace with which the Government have been able to proceed. I will write to him, following his important intervention, with the latest on the prognosis for that. I hope he will also recognise that it is not correct to say that the Government have done nothing. The Chief Secretary to the Treasury, my right hon. Friend the Member for Salisbury (John Glen) is, as we speak, leading an important piece of work about productivity across all public sector spending. All my colleagues in government are endeavouring every day to ensure that every pound of Government money is well spent. My hon. Friend will recall—this is why it is so important to get this right—that past attempts have not always delivered the desired results.

In 2020, the Government laid legislation—notwithstanding his own prolific endeavours on this, I know that my hon. Friend is not in general a big advocate of the Government constantly legislating—but in 2020 the Government legislated to introduce a cap on payments. That was subsequently withdrawn following unintended consequences, and the risk of overriding and conflicting with people’s contractual entitlements. Let me be clear: my hon. Friend is absolutely right in his intention.

[Sir Christopher Chope]

The Minister says that he will write to me—I always love receiving letters, particularly from him—but the Government have known that this Bill has been on the Order Paper. It was introduced in June last year, and in August last year the Government issued a consultation paper and said, “Everybody must respond to this paper by 17 October 2022”, thereby indicating some sense of urgency. What has happened to the response to that consultation? Surely the Minister can give an answer now, rather than saying that he will write to me later.

[Andrew Griffith]

As so often is the case, it is sometimes better to be right than to be quick. Given that the Government absolutely understand and share my hon. Friend’s concerns, it is much better that when they bring forward that response to the consultation, we celebrate. I acknowledge today the first anniversary of the closing date for that, and it would indeed be unfortunate for there to be a second anniversary. Notwithstanding that, it is not the case that the Government are not making progress on this matter, and if my hon. Friend really supports the cause that he has so nobly championed over so many years, chronicling the period since 2015 that he talked about, we must do it right. We are dealing with a complex interplay between existing public sector arrangements, consultation with impacted bodies, including the unions, and the potential role of legislation. I said I will write to my hon. Friend. He will have to contain his excitement as to the specifics of my letter, but it will follow in due course.

[Sir Christopher Chope]

Only “in due course”—it is not being promised for next week, even. Perhaps it will be next year sometime? Will my hon. Friend accept my interpretation of what has happened, which is that we have had eight years since the Government committed to doing this, and the score now is eight to the blob and nil to the ordinary people of this country, who are the taxpayers.

[Andrew Griffith]

I will not accept that construction, but what I will accept is my hon. Friend’s entreaties that every day it is the duty of this Government—indeed, it is the proud philosophy of this party—to spend taxpayers’ money wisely. There are many, many ways in which we can do that. I have referred to the productivity review by right hon. Friend the Chief Secretary. Local government has a significant responsibility. Local government was not in scope of that consultation, but separate guidance has been given to local government, and it is the duty of us all to ensure, for example, that the many arm’s length bodies that are so important to the delivery of government in this country are entirely responsible with their pay arrangements. The Government have also separately legislated and taken action to curtail the use of non-disclosure agreements and confidentiality agreements that prevent the transparency of daylight and oxygen intruding into this space, and that is an important measure, too.

To conclude—unless my hon. Friend the Member for Christchurch wants to intervene further—this is a very important topic. The Government and my hon. Friend are at one in terms of the destination. I understand that he would like more velocity in reaching that destination. As I say, not only will I write to him, but I am happy to meet him or other colleagues on this important Bill that seeks to achieve the right balance of fairness between those who serve our community in the public sector and protecting the interests of the taxpayer.

Business Banking: Undesignated Client Accounts

Andrew Griffith Excerpts

Wednesday 18th October 2023 Westminster Hall

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve under your chairmanship, Mrs Cummins. I thank my right hon. Friend the Member for Rochester and Strood (Kelly Tolhurst) for highlighting this important issue. She has been tenacious, and I convey my distress at the frustration suffered. The industry is an historic one and is important to us. She and I have worked together in the past to support the small and medium-sized enterprises of this great nation, but not until today had I realised the importance of the yacht broking industry. I also know about her passion for sailing, which is reflected in her role as patron of the Medway and Swale Boating Association. I am sure that all her members are metaphorically, and probably physically, cheering her on today. I reassure her that I share her concern about the issue.

Earlier this year the Treasury requested that the FCA lead a review into the wider matter of de-banking, to ensure that the sector was not overreaching itself through the unfair denial of banking services—in one case, based on a customer’s political beliefs. That is not the matter before us, but it highlights my concern, and the action that I took then is replicated when we find other instances in the financial sector. A bank account, as we know, is a vital part of the way in which we operate in society.

We try to get the balance right with a commitment, which I know my right hon. Friend understands, to tackling illicit finance. It is important that we get that balance right and do not put a disproportionate burden on legitimate businesses and customers. Indeed, the world of financial regulation is fraught with well-intentioned regulations that nevertheless have deleterious unintended consequences. This is an example. Pooled client accounts have many virtues. They protect customers so that when a firm fails, their deposits and moneys are segregated. They are a vital part of how we protect consumers. It is a concern that we see banks perhaps having a misperception about the risk of those accounts and the regulation.

It is wrong—I am happy to share this with my right hon. Friend—to say that pooled client accounts are not eligible for simplified due diligence. Last year, my predecessor wrote to the chair of UK Finance, the relevant industry body, to reiterate the importance of that when it came to looking at the Joint Money Laundering Steering Group, the industry group that deals with that. My predecessor convened a roundtable with banks and the Association of Brokers and Yacht Agents to help to develop and improve mutual understanding and iron out the issues.

Banks can apply simplified due diligence to pooled client accounts where they assess the risk of money laundering and terrorist finance to be low. My right hon. Friend gave us some really good examples of that. I am not sure that there are many Russian oligarchs sailing up and down; delightful though Medway and Swale Boating Association is, I am not sure it is the destination of choice for illicit ill-gotten gains. We will, at my right hon. Friend’s urging, continue to work to improve the guidance notes and work with the industry to make sure we can achieve the objectives that she talks about.

I am also happy to give my right hon. Friend the assurance that she seeks. She has been very patient and tolerant. I understand her and her constituents’ frustrations, but there will be no further delays. After having consulted earlier this year, we intend to look at how we can improve and reform the anti-money laundering procedures. As I say, we are dealing here with the law of unintended consequences. I believe that we can reconcile both objectives through better guidance and greater clarity and, where necessary, adjusting the regulations.

My message to those banks and financial intermediaries is that they should continue to engage. I know that they also do so with my noble Friend Baroness Penn. I hope that by so doing, and with that collaborative approach, we will “chart a route”—someone has been getting creative—to an effective resolution that steers us into calmer waters and that, once we are through this, it will be plain sailing.

Question put and agreed to.

Oral Answers to Questions

Andrew Griffith Excerpts

Tuesday 5th September 2023 Commons Chamber

[Fleur Anderson (Putney) (Lab)]

3. What recent assessment he has made of the potential impact of the growth plan of 23 September 2022 on mortgage interest rates.

[The Economic Secretary to the Treasury (Andrew Griffith)]

Over the course of 2022, high inflation from Putin’s illegal invasion of Ukraine saw interest rates increase across most western economies. The path to lower rates is through low inflation, which is why the Prime Minister made halving inflation one of our five priorities for this year. I am pleased that the latest Bank of England forecast shows that we are on track.

[Fleur Anderson]

Mortgage and associated rental costs are soaring in Putney, Roehampton and Southfields, and the Government like to claim it is all due to global shocks or the war in Ukraine, but the latest Bank of England data from July shows that the cost of lending to buy a home remains higher in the UK than in Germany, Italy or France. Will the Minister finally concede that this difference is because those countries did not have the devastating growth plan or mini-Budget last year, and that it is because of this Government’s wider economic failure that my constituents face these costs?

[Andrew Griffith]

I am glad that the hon. Lady’s constituents, among many others, will benefit both from our mortgage interest support and from there being almost double the number of mortgage products on the market now than in October 2022. I repeat the comment of my colleague, the Exchequer Secretary to the Treasury: if the hon. Lady is so worried about her constituents, what better way of helping them with the cost of living than to do away with the Mayor’s ULEZ tax?

[Anthony Browne (South Cambridgeshire) (Con)]

In the UK, homebuyers are overwhelmingly dependent on short-term fixed rate mortgages of just two, three or five years, which means that in times of rising interest rates, as we have at the moment, they are hard hit by massively increasing mortgage bills. In most other countries, homebuyers have long-term fixed rate mortgages of 10 or 20 years, or of the entire length of the mortgage. Does my hon. Friend agree that the regulators should ensure a level playing field between short-term and long-term mortgages to give homebuyers a free choice of the sort of mortgage they want, so they can choose to have greater protection against rate rises if they want?

[Andrew Griffith]

My hon. Friend has great knowledge of these matters. It was a privilege to work with him and the sector on how we can offer consumers and homebuyers more choice. That choice includes the opportunity of long-term fixed-rate mortgages, and my officials and I continue to work on how we can reduce frictions and barriers to those mortgages.

[Mr Speaker]

I welcome Darren Jones, the new shadow Minister.

[Darren Jones (Bristol North West) (Lab)]

It is estimated that 140,000 households will face a rise in their mortgage bills this month. If someone in a random constituency, say Mid Bedfordshire, were to remortgage their house in the next six months, they could pay an average of £300 more per month compared with before the disastrous Tory mini-Budget this time last year. What can the Chancellor and his team do to reassure the country that, if the Conservatives were to win the next election, they would not just mess up the economy all over again?

[Andrew Griffith]

I am sure the constituents of Mid Bedfordshire will be very pleased to know that more than 90% of mortgage providers have signed up to our mortgage charter, which offers the opportunity for relief, to term-out mortgages and to have interest-free periods, if they face adversity at this time when interest rates are high across the world. What will not help the constituents of Mid Bedfordshire is unfunded spending promises that we know will push up the cost of borrowing and defer the point at which inflation falls.

[Darren Jones]

That is a bit rich from the Government, and it is no answer whatsoever to the people of Mid Bedfordshire who will not be able to afford to pay their bills over the coming months. It is one year ago today that the former Tory Prime Minister took a huge ideological gamble and sabotaged Britain’s economy. They crashed the pound, put pensions in peril and exploded a Tory mortgage bombshell under the homes of millions of working people. Will the Minister take this opportunity to apologise to the British people, on behalf of the Conservative party, for wrecking their hopes and aspirations?

[Andrew Griffith]

I welcome the hon. Gentleman to his position. He has had a feisty morning reading his Walworth Road brief. Let me offer him the opportunity to correct the record, because Labour has spent the past 12 months talking down our economy but it is now larger than it was when we entered covid and it has recovered and grown faster than the economies of both France and Germany.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

4. What recent assessment he has made of the potential impact of withdrawal from the EU on the economy.

--- Later in debate ---

[Marco Longhi (Dudley North) (Con)]

8. What discussions he has had with representatives of the financial sector on freedom of speech.

[The Economic Secretary to the Treasury (Andrew Griffith)]

The Government have been clear that debanking customers on the basis of political views is unacceptable. During recess I met banking executives to discuss debanking and lawful freedom of expression, and they have committed to comply with the changes I published on 21 July. In parallel, the Financial Conduct Authority is conducting an urgent review of debanking practices, which will report back to the Chancellor in the next couple of weeks.

[Marco Longhi]

Last week the Met Police chief finally seemed to confirm that the job of the police should be to police and not to seek to align themselves with entities or ideologies. Does the Minister agree with me that banks and the corporate world should follow that example and focus their efforts on their core business, rather than play the sinister cancelling agenda of the woke brigade that saw Nigel Farage have his account wrongfully closed?

[Andrew Griffith]

My hon. Friend represents the views of his constituents in this place clearly. He is quite right; although they are private entities, banks benefit from a privileged place in society and they should focus on doing their core functions brilliantly, treating customers fairly and making a sustainable return for shareholders, rather than taking sides on politically contentious matters.

[Jim Shannon (Strangford) (DUP)]

Today it is because some people may have a different political view; tomorrow it could be the fact that someone has a different religious viewpoint. I am a Christian, and as chair of the all-party parliamentary group for international freedom of religion or belief, I stand up for those with Christian beliefs, those with other beliefs and those with no beliefs, because I believe sincerely that they have a right to have that belief. If ever the day came when banks censured anybody because they had a different religious belief, I would stand up against that. Does the Minister agree?

[Andrew Griffith]

Let me be clear: yes, the Government agree with that. No one should be debarred from access to banking facilities in our society because of a lawfully expressed view. If he and other hon. Members wish to make representations, the Financial Conduct Authority is currently conducting a review of this matter.

[Caroline Ansell (Eastbourne) (Con)]

9. What assessment he has made of the effectiveness of the plastic packaging tax.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

10. What steps his Department is taking to incentivise pension schemes to invest in the UK.

[The Economic Secretary to the Treasury (Andrew Griffith)]

At Mansion House, the Government presented a series of pension reforms that will increase returns for savers and enable the financial sector to unlock capital for some of the UK’s most promising industries. The Department continues work to build on the initial package of measures and will set out further details in the autumn.

[Nigel Mills]

I thank the Minister for his answer and welcome those measures. Have the Government considered what more can be done to unlock surpluses in defined-benefit schemes to allow employers to use that money more effectively, rather than having it end up going into insurance companies on buy-outs? There is a huge tax penalty on unlocking surpluses. Is there a way of relieving that to encourage the money to be invested more efficiently?

[Andrew Griffith]

My hon. Friend makes an important point. With the right precautions, it is right that we look at that to incentivise employers to deliver the highest returns for pension savers.

[Stephanie Peacock (Barnsley East) (Lab)]

The Government have to date taken £4.4 billion from the mineworkers’ pension scheme. The then cross-party Business, Energy and Industrial Strategy Committee concluded that the Government should not be “profiting from mineworkers’ pensions.” How does the Secretary of State justify their continued profiteering?

[Andrew Griffith]

I am not familiar with the issue that the hon. Lady speaks about. I would be very happy to meet her to understand it in more detail.

[Katherine Fletcher (South Ribble) (Con)]

11. What steps his Department is taking to help support pubs through the tax system.

--- Later in debate ---

[Craig Tracey (North Warwickshire) (Con)]

T6. As the Minister knows, free access to cash is a vital lifeline for many people, including some of the most vulnerable in all our constituencies. Can he confirm what steps he is taking to ensure that free access is protected and continues to be available across the country, particularly in North Warwickshire and Bedworth?

[The Economic Secretary to the Treasury (Andrew Griffith)]

During the summer, we announced that we have given directions to the Financial Conduct Authority in respect of access to cash: it should be no more than 1 mile in an urban area, and no more than 3 miles in my hon. Friend’s rural constituency of North Warwickshire. That is the first time that the statutory right of access to cash has existed in law.

[Mary Glindon (North Tyneside) (Lab)]

T8.   Prison officers tell me that they are at breaking point. A key source of despair and anger is their pension age of 68, which we should all agree is far too late. As the Treasury leads on public sector pension scheme policy, will the Chancellor allow the Ministry of Justice to restart negotiations to resolve this grossly unfair and dangerous situation?

--- Later in debate ---

[Caroline Lucas (Brighton, Pavilion) (Green)]

Will the Chancellor consider introducing a windfall tax on banks’ excess profits? The profits of the big four banks for the first half of this year were up 700% compared with 2020, yet the Bank of England is forecast to pay out as much as £42 billion in interest on reserves to banks in 2023, at the same time as the Government have cut the level of surcharge on banks’ profits by 60%.

[Andrew Griffith]

With millions of British jobs dependent on financial services, including an estimated 20,000 jobs in Brighton and Hove, I hope the hon. Lady will join me in celebrating a sustainably profitable financial sector. It is only that that gives us the ability to invest in skills and technology.

[Mr Speaker]

I call the Chair of the Treasury Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

Will the Economic Secretary update the House on the progress he is making to enable our constituents to access personalised financial guidance if they are among the 93% of our constituents who cannot afford regulated financial advice?

[Andrew Griffith]

My hon. Friend, the Chair of the Treasury Committee, makes a really important point about what is called the advice gap. Treasury officials, the FCA and I are consulting on that, and I will publish an update this autumn.

[Richard Thomson (Gordon) (SNP)]

It has been revealed that Integrated Debt Services, a company set up by the UK Government to recover personal debt, saw its profits increase by a staggering 132% last year. Do Ministers think it is right that this company should be able to profit to that extent out of the misery of the cost of living crisis?

--- Later in debate ---

[Sir Stephen Timms (East Ham) (Lab)]

I welcome the new focus on engaging pension funds with productive investment, after many years when regulation has pushed the funds into Government gilts instead, but does the Minister have proposals specifically to secure those investments for UK businesses rather than their going overseas?

[Andrew Griffith]

The right hon. Member makes a significant contribution to the debate about the nation’s pension funds. Our objective to increase investment—to drive increased returns for pension savers, but also to benefit the wider economy—stops short of mandating. There is a philosophical difference between this side of the House and the Opposition. We do not believe it is right for the Chancellor to tell pension funds where to invest, but it is our job to knock down barriers, frictions and impedances to pension funds investing in brilliant British companies.

[Mr David Davis (Haltemprice and Howden) (Con)]

The Economic Secretary told my hon. Friend the Member for North Warwickshire (Craig Tracey) that he is going to underwrite the statutory right of access to cash, but 6,000 bank branches will have closed by the end of the year, leaving only 4,000 in place, and 15,000 ATMs have closed in the last five years. How is he going to make sure that this actually happens, rather than it just being an empty promise?

[Andrew Griffith]

The FCA has significant sanctions in respect of the closure of ATMs that would leave communities without the right of free access to cash. On the closure of bank branches, we are seeing a significant change, and I hope my right hon. Friend would respect the fact that technology is changing and consumer patterns are changing. During the recess, I had the privilege of visiting the excellent community banking hub in Brixham, which I think is a brilliant opportunity. There should be more than 100 on their way, and that is my objective.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Does the Chancellor accept that many people see income tax rates at the moment as exceptionally punitive, and does he also accept that there is a need to move as quickly as possible into a growth-based economy and to supercharge our economy in the United Kingdom?

[Bob Blackman (Harrow East) (Con)]

As we want to expand our financial services industry not only in this country but abroad, we need to build confidence among consumers that the right thing to do is invest. Does my hon. Friend therefore agree that it is vital that regulators respond to and deal with complaints to them and actually impose sanctions against those who breach the regulations?

[Andrew Griffith]

Yes, I agree with my hon. Friend on this matter. It is one reason why we have beefed up the role of the financial regulators review commissioner, and we will also be requiring the regulators to publish regular operating metrics on their performance, to give consumers the trust they need.

[Nick Smith (Blaenau Gwent) (Lab)]

Back in 2017, both the Treasury and the Financial Conduct Authority knew there were problems with the prepaid funeral plan market. Since then, my constituent Gary Godwin of Nantyglo lost over £6,000 to the collapse of a company called Safe Hands. Across the UK, thousands more have lost millions of pounds altogether. Will the Minister please meet me to discuss this scandal and Mr Godwin’s case?

[Andrew Griffith]

Yes, I will be very happy to meet the hon. Gentleman. What happened with Safe Hands is a scandal, and that is why we have enlarged the regulatory perimeter to bring those who seek to sell funeral plans within the regulatory conduct.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

Over the summer ports have been bidding to the Government’s infrastructure fund to help them get ready for the delivery of the new floating offshore wind industry. May I encourage Ministers to look favourably on the bids from the Celtic sea ports of Milford Haven and Port Talbot, because those two ports are key to unlocking the enormous economic benefits of this new clean energy industry?

Local Bank Branch Closures

Andrew Griffith Excerpts

Tuesday 5th September 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

I thank the contributors on both sides of the House, including my hon. Friends the Members for Dewsbury (Mark Eastwood) and for Broxtowe (Darren Henry), and of course the hon. Member for East Dunbartonshire (Amy Callaghan) for securing this debate, which has rightly given her constituents a voice on something that they feel very strongly about. I know there is real strength of feeling across the House about this subject, but it falls to me to be clear that the nature of banking is changing.

As in so many other areas of the modern world, the long-term trend, whether we like it or not, is towards greater use of digital or telephone services. According to UK Finance, last year only a third of UK adults had carried out any banking activities face to face in a branch. The hon. Lady talked about Kirkintilloch, but 94% of those who use that branch also use the app, mobile or telephone services. The bank asserts—whether this is right or not I do not know—that fewer than 10 people were regularly using the branch. In the same period of time last year, nine out of 10 UK adults banked online or through a mobile app. More than nine in 10 of us are now using contactless payment methods, including throughout this House, and only 6% of people are now solely using cash. That is not limited to any particular demographic: 80% of adults aged between 65 and 74 use online and mobile banking as well, and less than a third of that age group regularly use a branch.

[Peter Grant]

Given that the Minister and most of his ministerial colleagues are so fond of online services everywhere else, can he explain why in these first two days back in Parliament Members have spent about three hours doing nothing while trooping through the Lobbies to vote when we could have on voted online in about two minutes flat? Why is doing things in person the right thing to do here but the wrong thing to do everywhere else?

[Andrew Griffith]

In the interest of time I will stick to the topic, but I am delighted that the hon. Member is here in person, as indeed are you, Mr Deputy Speaker.

Change is not comfortable, but it does happen. Let us consider payphones. It would not surprise me if Hansard had records of similar debates about the decline of payphones. At one point, at their peak in the 1990s, there were almost 100,000 payphones in this country. Today there is just a fraction of that number. Technology has moved on, and nearly everybody has access to either a landline or a mobile phone.

By the same token, it would make little sense to force a business to keep a physical branch open when developments in the market mean that eyeballs and footfall have moved elsewhere. Nor would our high streets be particularly well served by bank branches gathering dust and lying essentially unused. We need to find new uses for them—perhaps the aspiration of the hon. Member for East Dunbartonshire for independence will produce new uses for these bank branches—in the same way that so many of our communities and villages today have a Blacksmith’s Arms public house.

[Brendan O’Hara]

What responsibility, if any, does the Minister think the Government have for these closures? This idea that we can all be digital by default might work well in London, Glasgow, Edinburgh or wherever, but digital by default does not work in rural communities. There needs to be a solution for those who cannot access these systems, as he would have us all do.

[Andrew Griffith]

This Government take responsibility, and I was just about to explain how, for the first time, we have taken the statutory right to protect the use of cash. That has been on the statute book for a number of weeks after the House passed the Financial Services and Markets Act 2023. It is also why we support the very rigorous guidance given by the Financial Conduct Authority in cases where bank branches are closing.

[Jim Shannon]

Will the Minister give way?

[Andrew Griffith]

I will take an intervention. We are on the Adjournment and should be mindful of time.

[Jim Shannon]

Rural communities are probably the larger part of my constituency, and I have lost 12 or 13 rural banks. Every one of them was a focal point for customers, which hits on the important point made by the hon. Member for Argyll and Bute (Brendan O’Hara). At the same time, every one of those banks has made extra profit and extra fees, which just does not add up. Why not keep them open and share some of that dividend with all the customers who need the banks?

[Andrew Griffith]

The hon. Gentleman is working his way towards one of the potential answers. Colleagues have mentioned the banking hubs. When a bank seeks to close a branch, the FCA process normally includes consultation with the local Member of Parliament. The financial sector now has a consumer duty to think about putting customers’ needs first, which is one of their weighty duties. As we deal with this significant change, a number of alternatives are in place. One is the local post office, and I believe there are still nine post offices in East Dunbartonshire. As the banks’ business traffic coalesces, they can help to support the economics of a post office in a particular area. That is one opportunity. Some 99% of personal banking customers can transact in their local post office, and there are over 11,000 post offices across the United Kingdom.

[Drew Hendry]

A few moments ago, the Minister mentioned the Government’s move to protect the right to use cash. What is the point of that right if people cannot access cash in their community?

[Andrew Griffith]

I do not know whether the hon. Gentleman is deliberately failing to understand, but the protection of access to cash and the ability to deposit cash—that is important if we want businesses to continue to use and accept cash—has a requirement that people will have easy, convenient access to a free ATM within 3 miles in rural areas and within 1 mile in urban areas. That is the guidance we issued a matter of weeks ago.

[Chris Stephens]

Will the Minister give way?

[Andrew Griffith]

I will take one final intervention, but hon. Members would learn more if they allowed me to make some progress.

[Chris Stephens]

I thank the Minister for being most generous; as he knows, I have been trying to intervene for a while. There is an important issue about free ATMs and those that charge. Is he monitoring that? When a branch closes, there is clear behaviour whereby the ATMs around and about start charging.

[Andrew Griffith]

I would be interested to see evidence of that. The paid-for ATMs simply do not count in any way towards the provision of free access to cash. In the constituency of the hon. Member for East Dunbartonshire, there are 51 free-to-use ATMs. Only those, not the ones that charge for withdrawals, will count towards that condition of making sure our communities have decent and continued access to cash.

I understand that access to cash is just one thing and that an ATM does not provide the full range of banking services—the post offices do—but we have started to talk about banking hubs and more than 80 have been announced to date. I know that relatively few have been delivered but they are a relatively novel feature. If hon. Members who are to have a banking hub would like to see that delivery, they should work with their local planning authorities, as the biggest single impediment to opening these new banking hubs is getting through the planning process. I know that my right hon. Friend the Member for Pendle (Andrew Stephenson) is looking forward to a banking hub in his constituency. I made it a priority earlier this year to visit London’s first banking hub, in Acton, and I recently visited the Brixham hub. The hon. Member for Ealing Central and Acton (Dr Huq) is certainly not a Conservative, but I will be happy to work with colleagues to put in place these state-of-the-art hubs, which allow people not just to withdraw and deposit cash, but to carry out a much wider range of community banking services. That is very important.

[Amy Callaghan]

I am getting frustrated with the Minister’s response—

[Andrew Griffith]

I will carry on then! [Laughter.]

[Amy Callaghan]

If the Minister wants to grow the frustration, that is fine; it feels as though that is becoming a common pattern. It feels as though the Government and the Minister are trying to place this into the hands of everyone else to deal with and that there is a lack of Government intervention to try to solve this problem.

[Andrew Griffith]

Nothing could be further from the truth. This Government have, for the first time in history, legislated for citizens of this country, including our good friends in Scotland, to have a legal, statutory right to access to cash. Moreover, we have brought forward the practical, sustainable alternative of banking hubs, to protect the ability of communities to access a wider range of banking services. We have conducted agreements for almost every bank in the country and in Scotland to be able to conduct their business through the post office network, thereby helping and saving the post offices in the communities too.

I think I have been clear. I understand that change is happening and people are not always comfortable with change. We are in the middle of a big technological shift. We all agree that people should have access to good-quality banking services. I contend that the Government are taking the appropriate action and taking this matter extremely seriously.

Question put and agreed to.

Credit Unions and the Cost of Living

Andrew Griffith Excerpts

Tuesday 18th July 2023 Westminster Hall

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve under your chairmanship, Dr Huq. I congratulate the hon. Member for Livingston (Hannah Bardell) on a thorough and thoughtful contribution to this subject. She said that one of her objectives was to raise awareness, and she should feel that she has fully achieved that. I also congratulate the West Lothian Credit Union, which I understand will be celebrating a quarter of a century since its establishment this year. All my colleagues in the Treasury and I send our congratulations to that very important institution, which does great work.

As the Economic Secretary, I am committed to supporting the credit union sector. From helping people to set aside savings—the hon. Member talked about the work done with employers as well as in schools to help to promote the savings habit—to probably its most vital role of offering credit at affordable rates, the Government really value the unique role played by credit unions for all their members, and particularly the financial inclusion agenda. The reach of credit unions is significant. There are 385 of them—not quite enough for one for every constituency, but would that not be lovely? I share the hon. Lady’s goal of having more credit unions, seeing those we have being even more successful and wanting to grow the number of users. There are 83 in Scotland, which, in this respect, is punching above its weight. Together, credit unions represent more than 2 million members and have assets of more than £4.5 billion.

The hon. Lady is right that recent cost of living challenges have proven that the trust placed in the credit union sector by their members, the Government and regulators is well deserved. That trust will be vital as people across the country continue to face cost of living pressures and must stretch every pound as far as possible. People’s money needs to work hard for them.

We know that there are global challenges, and we are not alone in facing challenging levels of inflation: in May, core inflation was higher in more than half of the countries in the EU than in the UK. Inflation erodes living standards for households, and particularly for the most vulnerable in society. That is why it is right that the Government continue to make it one of our priorities—this is one of the Prime Minister’s priorities—to halve inflation by the end of the year, and we will not hesitate to do what it takes to achieve that. Access to affordable, inclusive credit, such as that provided by credit unions, can make a real difference.

[Hannah Bardell]

Does the Minister agree that when the chips were down during the financial crisis of 2008, the Government had no choice but to step in and save the banks, but that it is now time for the banks to step up and help people who need to borrow and those who need help?

--- Later in debate ---

[Andrew Griffith]

The hon. Lady is right that people need help. Across the House, we all support that. The Chancellor has made it very clear, with the mortgage compact and in the conversations that he and I have had with all of the banking sector, that now is the time to ensure that people have fair products and that, wherever the banks are able to do so, they pass on the benefits of that.

That is one reason why it is important that we have genuine diversity and competition in the sector. Credit unions play such an important role, alongside co-operatives, mutuals and other forms of financial institution, because they are often rooted in place, people or the community. The Government are firmly on the side of credit unions, and I will try to support them. We are taking action to help them wherever there are legislative levers, although they are not the only answer. We amended the Credit Unions Act 1979 through the Financial Services and Markets Act 2023 to allow credit unions across the United Kingdom to offer a wider range of products and services. That allows them to grow, diversify, build their resilience and offer more products to their customers.

We set out Vision 2025, in consultation with stakeholders, to deliver on the sector’s priorities. That includes such things as offering hire purchase agreements, conditional sale agreements and distributing insurance services. The hon. Member for Livingston said that the West Lothian Credit Union offers funeral plans. Many people want to access that sector to give them some peace of mind, so I was genuinely interested to hear that. I will ensure that we seek the right legislative framework for that.

The 2023 Act also makes amendments to support best practice in corporate governance, including a legal requirement for credit unions to submit annual accounts to the Financial Conduct Authority. It gives credit unions permission to temporarily lend to or borrow from each other. That is about designing more financial resilience for a sector that we are on the side of and want to see grow.

The hon. Lady mentioned a number of initiatives. We are providing Fair4All Finance—that little tongue twister—which is an independent not-for-profit organisation, with significant amounts of money from the dormant assets funds. We are piloting no-interest loan schemes—another product that will be delivered hand in hand with credit unions. Credit unions, with their roots in the community and communities of interest, are a very good way of delivering that, and I will continue to work with them. There is about £145 million, in aggregate, from the dormant assets scheme.

The hon. Lady also talked about financial literacy, and a key priority as we go forward is what we can do about the real challenges of that. Wherever possible, it makes sense to work upstream and try to tackle problem debt before people get into it, because it can be a terrible place to be trapped. We are doing a lot of work on that.

Finally, as well as providing credit, credit unions are obliged to focus on financial inclusion. They have a role of advocacy in helping their members to take steps to accumulate savings. Even a small amount of savings can provide the resilience for exactly what the hon. Lady talked about: unexpected bills, white goods that fail, or perhaps the cost of a child’s uniform and a school trip falling in the same month. Even a small amount of savings can help to build financial resilience, and the Government are very supportive of that. We have the Help to Save scheme to try to help those in work and on universal credit to build a savings habit, and obviously the ISA programme is a strong part of that. Again, credit unions distribute cash ISAs as a very simple product that does not get anybody into difficulties with their tax.

I thank and congratulate the hon. Lady and those who contributed to the debate, including the hon. Member for Barnsley East (Stephanie Peacock). Across the House, we can always challenge ourselves to do more on this issue.

[Stephanie Peacock]

The Community First Credit Union in my constituency raised some issues with me about the operation of the eligible loan deduction scheme by the Department for Work and Pensions and some of the work that the Government do with credit unions. I wonder whether I could write to the Minister, because he might be able to look into some of those issues for me.

[Andrew Griffith]

I would be happy to do so. I support anything that removes a point of friction and allows credit unions to do their important work. Regardless of whether it is me or one of my colleagues in the DWP, we will certainly take that forward and do what we can to support the hon. Member.

We value the work of credit unions. In seeking this debate, the hon. Member for Livingston has built a good level of awareness, and there is consensus that we can and should do more. That is the Government’s policy, and we are very keen to engage with the sector. Maybe one day there will be an opportunity to meet or have a call with the wonderful West Lothian Credit Union, and I am certainly happy to do so. The hon. Lady has done a magnificent job of putting the credit union on the Treasury’s radar, and I will be interested in following its continued success over the years.

Question put and agreed to.

Covid-19 Pandemic: Fiscal Policies

Andrew Griffith Excerpts

Monday 17th July 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

I congratulate the hon. Member for City of Durham (Mary Kelly Foy) on securing this evening’s debate.

In debating the Government’s fiscal policies, as in so many things, it is all important to set out the context. When the Government were first elected, it was in the immediate wake of the global financial crisis. It was also after we inherited a situation that had led to the Labour Chief Secretary to the Treasury leaving a note—we all remember that note—that said, “There is, I am afraid, no money left.”

In the years preceding the covid-19 pandemic, the Government’s fiscal strategy—the only fiscal strategy—was to reduce the deficit and debt that Labour had left us. As a long-standing finance director myself before coming to this place, I know that Government need to live within their means and show responsibility when entrusted with people’s hard-earned money. That was the time to repair the nation’s finances—before a storm would strike. When the deficit reached 7.5% of GDP in 2008-09, Government decisions supported its reduction to 2.7% of GDP by 2019-20. That approach developed the financial buffers to help absorb the impact of future economic shocks, such as we saw in the pandemic. Yet despite that period, and rather belying what the hon. Lady said, we have still been able to provide departmental spending today that will be around £75 billion a year more, in real terms, by 2027 than in 2010.

It is no wonder, then, that at the time when we took that approach, it received the support of Parliament. It was in line with the recommendations then for best practice. For example, the 2017 fiscal risks report of the independent Office for Budget Responsibility said that

“the public finances need to be managed prudently during more favourable times to ensure that when these shocks do crystallise they do not put the public finances onto an unsustainable path.”

That was why, when the pandemic hit, we were well placed to borrow to provide quick, decisive and consistent support to households and businesses throughout the country, which at that time had significant support from Members on both sides of the House. Estimates from the International Monetary Fund showed that the UK’s discretionary fiscal expansion in response to covid-19—the support that we gave households—was one of the largest and most comprehensive financial support packages globally.

To fund that response, we had to borrow an additional £313 billion—a huge amount of money—across 2021 and 2022, but we could not have done that had we not made the difficult decisions. Had we not acted, the cost to the country would have been far higher. Members will remember the support that we provided, including the furlough scheme, which supported nearly 12 million jobs in total, holding our economy together in incredibly tough times. I note that some 420,000 of those jobs were in the north-east, and that since the pandemic has ended the north-east has had the third-highest increase in employee numbers relative to pre-pandemic levels. The economy in the north-east has been one of the fastest growing.

I also note that, as is sadly so often the case on such occasions, the hon. Member for City of Durham had no alternative plans to lay out. I do not know whether she agrees with the North of Tyne Mayor, Jamie Driscoll, who today said, in respect of the right hon. and learned Member for Holborn and St Pancras (Keir Starmer):

“You’ve U-turned on so many promises…in fact, a list of broken promises too long to repeat in this letter.”

I do not know whether she has seen the letter from Jamie Driscoll, or whether she agrees with the right hon. Member for Ashton-under-Lyne (Angela Rayner) or the right hon. and learned Member for Holborn and St Pancras on an issue like the two child policy. Our policy is clear. I do not think that it is appropriate for the Opposition to hold two policies simultaneously in respect of the two child policy.

When we look back on the pandemic, and on our fiscal approaches both during and in the run-up to it, the Government believe that we can be confident that we acted responsibly. We took difficult decisions on the back of the financial situation that we inherited, allowing us, when that terrible pandemic broke above our heads, to protect livelihoods up and down the country, and ensuring that we could afford to do so and could bounce back afterwards, as we have done subsequently. That was, and remains, sound, responsible fiscal policy.

I understand that not every Member of this House will agree with the decisions taken. I hope that the hon. Member for City of Durham will recognise that many people on both sides of this House did their best in those most difficult times.

[Mary Kelly Foy]

I am quite surprised and confused. I gave statistics about how many deaths there were, and specialists across the board, including the United Nations, have pointed out the damage done by the austerity programme. I have no idea why you mentioned the two child limit. It would have been really helpful if you had stuck to the point of my debate.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The hon. Lady knows that she must not address the Minister directly.

[Andrew Griffith]

I will not delay us on the two child policy—the Labour party’s two-policy policy. Perhaps it was a detour too far for the hon. Lady. I made that point just to illustrate that these are difficult decisions for those on both sides of the House, as it turns out.

I recognise the hon. Lady’s passion and congratulate her again on securing the debate. It is clearly a topic that she rightly feels strongly about, and I apologise if I have not fully addressed all her concerns. It is of course a topic that the independent inquiry is addressing, and I, and I expect the House, look forward to hearing the outcome of that inquiry in due course.

Question put and agreed to.

Financial Services Reforms

Andrew Griffith Excerpts

Tuesday 11th July 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

With permission, Mr Speaker, I will update the House on the Government’s latest efforts to make the UK the most open, innovative and competitive financial centre in the world.

We know how important financial and related professional services are to this country. They employ more than 2.5 million people and generate more than £100 billion in tax revenue. Two thirds of those jobs lie outside the south-east and London. As we lay the foundations for long-term growth, it is vital that these sectors continue to succeed.

Last night, at Mansion House, the Chancellor made clear some of the policies that this Government will pursue, building on last year’s Edinburgh reforms. The full package of policies was published this morning, and I am pleased to share some of them with the House at this first opportunity. They fall under three themes: first, through a series of measures, improving outcomes for long-term savers and increasing investment in high-growth companies by reforming the UK’s pension market; secondly, incentivising companies to start and stay in the UK by strengthening our position as a listings destination; and thirdly, reforming and simplifying our financial services rulebook to ensure that we have the most growth-friendly markets possible, without compromising our commitment to high-quality regulation.

I begin with our pensions market, which is the largest in Europe and worth more than £2.5 trillion. The market is meant to provide safe retirement income for later life. In many cases, it does a very good job of that, but it can do so much more. I pay huge tribute to the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Sevenoaks (Laura Trott), for her crucial work on this.

In laying out our plan, the Chancellor has set three golden rules: first, that in everything we do, we will seek to secure the best possible outcomes for pension savers, with their needs first and foremost; secondly, that we will always prioritise a strong and diversified gilt market as we seek to deliver evolutionary change in our pensions market; and thirdly, that the decisions we take must always strengthen the UK’s competitive position as a leading financial centre.

Today, however, UK institutional investors invest less in UK high-growth companies than their international counterparts. While many defined-benefit funds are in surplus, their returns are lower than some international peers, and some may still be underfunded. At the same time, on their current trajectory, some defined-contribution schemes may not provide the returns that their pension fund holders expect.

Critically, DC schemes also invest less than 1% in unlisted equity. Australian schemes, for example, invest around 5%. To bridge that gap, the Chancellor joined the Lord Mayor and chief executives of many of our largest DC schemes to sign the Mansion House compact. Its signatories, who represent around two thirds of the entire market, are committed to the objective of allocating at least 5% of their default funds to unlisted equities by 2030, unlocking up to £50 billion of investment in high-growth companies by that time—helping companies to grow while improving rates of return for investors.

To further boost returns, we will facilitate a programme of DC consolidation. As the Department for Work and Pensions, Pensions Regulator and Financial Conduct Authority response to the value for money framework consultation makes clear, investment decisions should be made based on long-term returns and not simply on cost. Pension schemes that are not achieving the best outcome for their members will face being wound up by the Pensions Regulator, and we will set out a road map to encourage new collective DC funds.

To help schemes access a wider range of investment opportunities, we have launched the LIFTS—long-term investment for technology and science—competition, which enables them to invest quickly and effectively in unlisted high-growth companies. Bids have already started to come in for up to £250 million of Government support, and we are considering them closely. We will also explore the case for Government to play a greater role in establishing investment vehicles, building on the skills and expertise of the British Business Bank’s commercial arm.

Meanwhile, on defined-benefit schemes, we recognise that the regulatory landscape is too fragmented and believe that there is scope for consolidation. We have launched a call for evidence on the role of the Pension Protection Fund and the part that defined-benefit schemes play in productive investment.

Taken together, our pensions announcement will have a real and significant impact. For an average earner who starts saving at the age of 18, these measures could increase the size of their pension pot by 12% over their career. That is more than £1,000 a year in retirement. That is a real upgrade to the power and the outcomes of our pension schemes.

We already have the largest stock market in Europe, and, in 2021, we attracted the most IPOs—initial public offerings—outside the US, but we want the world’s fastest growing companies to grow here and to list here. We have now published our near-final draft legislation on prospectus reforms, which will create a more effective regime than its EU predecessor, giving companies more flexibility to raise even larger sums from investors more quickly. We welcome Rachel Kent’s excellent Investment Research Review, which was published this morning, and the Government are accepting all the recommendations made to us.

As we continue to free ourselves from outdated retained EU laws, we have abolished protectionist rules, such as the share trading obligation and double volume cap, so that UK businesses can access the best and most liquid markets anywhere in the world.

Finally, we are ensuring that our financial services sector has the regulatory freedom to innovate at a speed that matches our modern world. To that end, the House recently passed the Financial Services and Markets Act 2023, which requires our regulators to facilitate growth and international competitiveness alongside their other objectives. With it, we have published today legislation to repeal almost 100 pieces of retained EU law for financial services that are irrelevant to our markets, such as payment account regulations and long-term investment funds, and we say farewell to the unloved packaged retail and insurance-based investment products. This is not divergence for divergence’s sake, but sensible reforms working with the sector.

This is a significant body of work. This Government’s vision for the UK is one of long-term growth, fuelled by strong British finance, providing returns for savers, funding for businesses, and investments for our economy. That is what we are focused on, and that is what these reforms deliver.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

I thank the Minister for an advance copy of his statement. However, after 13 years of a low growth, low investment economy, these promises are too little, too late. On this Government’s watch, far too many high growth firms, particularly in the tech sector, have been bought by foreign competitors or have chosen to list in the US, in order to scale-up and grow.

Arm holdings, a UK tech success story, is now set to float in New York rather than in London. The Chancellor has been completely silent on this. When alarm bells were ringing, the Ministers shrugged their shoulders. Capital held in pension funds is vital for the growth of our most innovative companies. In the US, approximately 70% of venture capital funding comes from pension funds, while in the UK the figure is below 20%. That is just not good enough. This Government’s failure to mobilise pension money into productive assets comes at a cost. British pension savers have not been getting the returns that they should expect. It seems that a person is more likely to own a share in UK infrastructure today if they are a Canadian teacher rather than a British citizen.

Time and again, the Conservative party has promised action to unlock the patient capital that British firms need to thrive and grow, but has failed to deliver. There would surely be greater confidence given to savers, growing firms and financial services if the Government had provided more detail yesterday on how to turn this around. The Chancellor’s compact for DC pension funds lacks any plan to ensure that this will increase investment in UK assets rather than simply going overseas. What guarantee can the Government provide that British high growth firms will be able to access the capital they need to thrive and create good jobs in every part of the UK? With no clear roadmap, how will that be achieved?

I turn to what the Chancellor said last night about wanting to make London a listings destination. It is as though his party had not been in government for 13 years now. I remind the Chancellor that he was sitting around the Cabinet table for the best part of a decade during that time. Labour has been calling for action on listing for months and the Government have refused to listen. In the first quarter of this year there were just four London listings, raising only £81 million, the sixth-worst quarter for IPOs in London since 1995. That is pitiful.

I acknowledge and indeed welcome the fact that in some areas the Government are rather belatedly starting to follow Labour’s lead, but what has taken them so long? Where was the urgency, the ambition and the drive? Can the Minister explain why there was nothing at all in the Chancellor’s speech on green finance? That complacency puts our status as a net zero financial centre at risk.

Labour is committed to ensuring that the City retains its competitiveness outside the EU, whether through creating a positive environment for fintech or reform of Solvency II, and doing so without compromising on stability. Yet the Government have promised Solvency II reform 10 times in recent years with nothing to show for it.

We, and the country, will not take any lessons on financial stability from a Government that set fire to the economy last autumn with their mini Budget. That resulted in a Tory mortgage bombshell, with families facing £240 per month in higher mortgage costs when remortgaging, through no fault of their own. The truth is that the Chancellor’s Mansion House speech was not a big bang at all—it was a small splutter. There was none of the detail required to build confidence, no responsibility taken for the last 13 years of economic failure, and no strategy to end the doom loop of Tory economic failure.

The Labour party has a plan to unlock the full potential of the private sector to get the British economy growing again in the national interest. Through our active partnership with the City, reforms to the British Business Bank and a modern industrial strategy, we will grow the economy and help Britain to become the best place to start and grow a business. This tired Tory Government are out of time. It is time for them to step aside so that we can have a Government who will favour the national British interest—[Interruption.] There is no point Conservative Members laughing. The truth is that we need a Labour Government to provide the energy, the ideas and the leadership that our country and our constituents desperately need.

[Andrew Griffith]

It is always a pleasure to listen to the hon. Lady. In general, what I learn is that the Opposition have no plan. It is all critique and no counter-proposal. She talked about this being too little, too late, but this Government are moving at pace, in what the sector acknowledges as one of the fastest rates of implementation of financial services reform for a generation, taking advantage of our Brexit freedoms and the regained control of our rulebook, which she and her party seek to oppose again and again.

The hon. Lady talked about the lack of growth, but under Labour I am told that the percentage of the workforce with a private pension declined by 20%. She also talked about patient capital, which should not be a point of disagreement between us. This Government have done an enormous amount to support British patient capital, with £2.3 billion of investment, and we have recently increased the length of the British patient capital scheme for a further period.

The hon. Lady also talked about capital going overseas, but that is nothing to the degree to which capital would be flooding overseas were her party ever to return to power, accelerating us to the point where once again the Chief Secretary to the Treasury is writing notes to remind us there is no money left. I potentially discern a point of difference between us, which perhaps in due course she will clarify, in the approach to the compact. It is not the position of this Government to mandate where people’s pensions should be invested. Indeed, the last time a Labour Chancellor decided what was good for our pension schemes, it did not end well.

Finally, the hon. Lady talked about green finance. This Government are doing a copious amount on green finance; only yesterday my right hon. Friend the Secretary of State for Energy Security and Net Zero met some of the world leaders in green finance, and earlier this year we published an ambitious green finance strategy, continuing the UK’s progression to being one of the world’s first net zero-aligned financial centres.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Treasury Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

I should probably note in this context that I am a trustee of the Parliamentary Contributory Pension Fund.

I warmly welcome the work that the Economic Secretary and the pensions Minister have done in this important area, and strongly endorse what the Economic Secretary says about its meaning that future pensioners will be able to retire with higher pension incomes. However, he will know that I have put another piece of urgent work in his inbox, about helping the 93% of our constituents who are unable to afford access to financial advice and have to rely on bog-standard generic guidance. Can he update the House on how his review of the advice-guidance boundary is going and how he will help the majority of people who save in defined-contribution schemes to get access to some sort of personalised coaching or guidance?

[Andrew Griffith]

It is always a pleasure to respond to my hon. Friend and to the work of her tremendous Treasury Committee, which rages across this broad financial sector. She is right to raise the question of access to financial advice; I am afraid the world of financial services regulation is fraught with unintended consequences, and one unintended consequence of financial regulation and a growing compensation culture is to move financial advice beyond the financial ability of so many people who would benefit from receiving it. That is called the advice gap. I and my officials continue to work on that and I look forward to sharing proposals with the House and with my hon. Friend and her Committee in the autumn.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Economic Secretary for his statement. I agree with him on regulation, where he said that regulators would be required to facilitate growth and competitiveness alongside their other objectives. However, as he knows, unless the central bank is obliged to do the same, we might end up in the rather odd and undesirable position of regulators and the central bank taking contradictory actions. I want to ask mainly about pension reform: under the Mansion House compact, potentially 5% of the DC funds are to go towards unlisted equities. There is huge potential in that for growth, for innovation, for jobs, for global competitiveness and for scaling up to compete, but that comes with a commensurate risk, which is presumably up to 5% of the value of the DC fund, should the value of that unlisted equity be wiped out.

While I hope the scheme succeeds, what liability would fall on the Pension Protection Fund should it fail? What liability might there be on the taxpayer? If the scheme works and the value of the funds increases, what guarantee is there that the pension holder will receive the entire value of that increase and it will not be gobbled up by unnecessary and excessive fees?

[Andrew Griffith]

I thank the right hon. Gentleman for his support for growth and competitiveness. We have talked regularly about the need for regulators to improve their performance and deliver better outcomes for those whom they regulate. He talked about the 5%, and I emphasise that, ultimately, it is a voluntary pact; it is for the individual trustees to make those decisions, and the Government continue to have in place a strong programme of regulation. However, I hope he respects the fact that there is risk in inaction as well—the risk that our pension beneficiaries do not receive the pensions that they deserve or the sort of performance from their pension that other international long-term savers benefit from. He raises the issue of defined contribution and the liability for the taxpayer. Of course, that does not attach to defined-contribution schemes, which is why it is so important that they continue to benefit from the highest-quality regulation. I and my colleague the pensions Minister remain very committed to that and will continue to work with TPR and the FCA to ensure that that remains the case.

[Stephen Hammond (Wimbledon) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests. Like my hon. Friend the Member for West Worcestershire (Harriett Baldwin), I warmly welcome the work that my hon. Friends on the Front Bench have done. The Mansion House compact is a huge step forward, but does my hon. Friend the Minister agree that getting the Kent investment review reforms right, particularly on unbundling, will also help us to have high-quality research, enabling better decisions and more investment into high-quality firms?

[Andrew Griffith]

My hon. Friend, who knows so much about this topic and has engaged so lucidly on it, is absolutely right about the importance of investment research. It provides access to markets, makes our UK stock exchanges an attractive international venue, narrows spreads and drives fair valuations for investors and companies seeking investment. This is one example of where we inherited a European fact pattern that was not quite right for the UK. I look forward to pensioners, investors, savers and companies benefiting from our research review.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Work and Pensions Committee.

--- Later in debate ---

[Andrew Griffith]

I thank the right hon. Gentleman for his contributions on how we can deliver the best pensions for long-term savers. There are no estimates for the share of the UK. We are mobilising an additional £50 billion of assets over time. That is evolution, not revolution. We would expect—and it is the job of this Government—to present that investment capital with a wave of attractive options across some of the fastest-growing sectors, as the Prime Minister and Chancellor have laid out, and to remove frictions and obstacles as people seek to invest in the UK, creating a conducive environment for that investment but falling short of mandating it, in the knowledge that the allocation to international investments for some of our actively managed schemes already exceeds that of other comparable companies. On the charge cap, we are this morning publishing a consultation on the new value for money framework. Clearly, we want to continue ensuring that pensioners benefit from fair charges, but also that that does not come at the expense of the underlying performance that they receive.

[Mr John Baron (Basildon and Billericay) (Con)]

I welcome this set of measures, particularly the ending of the packaged retail and insurance-based investment products regime and the introduction of the Mansion House compact, on which some of us have lobbied the Government. I will share two key concerns with the Minister. On fintech and early-stage businesses, we have a problem in this country because the pension fund industry has divested itself of UK equities, to the detriment of the London stock exchange and, ultimately, of financial services generally. It troubles me that that 5% is not focused on early-stage start-ups in the UK, unlike many other domestic pension funds, which do support their own. More generally, a bigger piece of the jigsaw is missing in my view. Pension funds have generally divested themselves of UK equities to such a great extent—some estimates suggest a 90% reduction since 2000—that we need to see more encouragement by Government to get the pension funds to use their wealth by putting it into UK equities for the betterment of the UK economy. After all, they do benefit from tax breaks.

[Andrew Griffith]

I thank my hon. Friend for his, as ever, apposite points. That encouragement is exactly what the proposals are all about: working voluntarily with the sector and encouraging it to lean in. I want people to see 5% as a potential floor, not a ceiling. Many will seek to go much further forward. The broad objective of the Government is to provide good access to capital at every stage of a Government’s life, whether it is our support for the seed enterprise investment scheme, the enterprise investment scheme or the venture capital trust; the expansion of the pool of individual investors who are able to invest directly in the stock market; and some of the opportunities that he talked about, all the way through to ensuring that our listed and private capital markets work extremely well. That is the objective of the reforms.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Public Accounts Committee.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I draw the House’s attention to the fact that I am a trustee of the parliamentary contributory pension fund. Forgive me if I am a little sceptical about Government involvement in pension funds. We have seen how the annual and lifetime allowances, announced at the Dispatch Box by a former Chancellor, have played out. It was also this Government who took us through McCloud in the public sector. The Minister said that the average earner who starts saving at 18 could increase the size of their pension pot by 12% over their career. Can he give the House examples of the assumptions behind that figure, and will he publish the modelling behind it?

[Andrew Griffith]

The Government Actuary’s Department is the source of those figures, which we published this morning—I draw the hon. Lady’s attention to that fact. Clearly, there are a number of assumptions within that. I do not think it is right to be sceptical. These are reforms that have been formed with wide consultation, including from across the House. I hope that we can form a growing consensus so that the industry receives a signal from this place that it is ultimately time to stop talking and to get on with investing. That is the outcome that we seek.

[Robbie Moore (Keighley) (Con)]

I welcome the statement, particularly the aim to unlock assets in the local government pension scheme through an acceleration of pooling with the aim of doubling existing investments in private equity to 10%, which could unlock £25 billion by 2030. Does the Economic Secretary agree that the reforms are a welcome step to improve our growth prospects and boost investments?

[Andrew Griffith]

I absolutely agree with my hon. Friend. The local government pension scheme is a huge opportunity for this country. In many cases, it is already very progressive. It is investing in local opportunities and allocating its capital to the sort of private growth assets that we wish to seek. With £365 billion under management, an increased rate of progress towards asset pooling, which, as the Government have made clear, should attract at least £50 billion, will provide the scale to invest well on behalf of beneficiaries. That is a great opportunity for us all.

[Sarah Olney (Richmond Park) (LD)]

The number of companies listed on the London stock exchange has plummeted to such an extent that the market value of Apple is now greater than the entire FTSE 100. Recently, Cambridge-based chip giant Arm decided to list in New York rather than in London. Does the Minister think that the Mansion House compact will reverse the trend of British-based companies deciding to list elsewhere?

[Andrew Griffith]

Yes.

[Sir Desmond Swayne (New Forest West) (Con)]

This is an excellent package, but one way to ensure that investment flows to productive enterprise is to prevent it from being crowded out by growing Government debt, isn’t it?

[Andrew Griffith]

Our objectives are threefold in that respect: to bear down on inflation; to reduce Government debt, with the benefits that my right hon. Friend seeks; and to grow the economy. These are long-term plans and ambitious programmes, and ultimately, the acid test will be how we can grow our economy.

[Nick Smith (Blaenau Gwent) (Lab)]

The Minister says that he wants the “best possible outcomes” for pension savers. The pensions dashboard, which is designed to help pensioners understand their pension’s performance, was promised by Chancellor George Osborne, but it is still delayed. When will the pensions dashboard be delivered to support UK pensioners?

[Andrew Griffith]

My hon. Friend the Minister for pensions is proceeding at pace to deliver that important element in people’s ability to access the most information. It is just one component. We want people to have good pension choices and to understand the ways that investments are being made. The hon. Gentleman will understand, because we have engaged in the past about pensioners not necessarily having had the best information available to them in a regulated way, that it is better to be right in this case than to be fast.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I was delighted to attend the Mansion House dinner last night as the Member of Parliament representing the City of London and to listen to excellent speeches by the Lord Mayor and the Chancellor of the Exchequer. Does the Minister agree that the Mansion House compact will do much to secure the City of London’s position as a global powerhouse in the financial services sector and will also create more jobs across the country?

[Andrew Griffith]

My hon. Friend, who knows so much and speaks so lucidly for Cities of London and Westminster, is absolutely right. These are a bold and ambitious set of reforms. They will not just help communities across the whole of the United Kingdom—I never fail to remind the House that financial services touch almost every constituency—but continue to underwrite the strong and leading position of the City of London, which she so ably represents.

[Bill Esterson (Sefton Central) (Lab)]

It is always fascinating to hear Ministers justifying their failure over the last 13 years. The Minister would do well to recognise that business investment is at a record low in this country. One way to address the record low in business investment is to listen to the professional services sector, which says that a mutual recognition agreement with the EU would increase that performance and contribution. Why have the Government made no progress on that mutual recognition agreement?

[Andrew Griffith]

I am enormously proud of the fact that we have recently reached agreement with all the member nations of the European Union on the memorandum of understanding in respect of financial services. That joins a number of such agreements, all of which have the objective of seeking access to as many of the growing markets in the world as possible for our financial and professional services. Only last week I met my opposite number, the German deputy Finance Minister, and next week I will be meeting the Luxembourg Finance Minister.

[Sir Christopher Chope (Christchurch) (Con)]

By how much will today’s announcement reduce the burden of regulation on UK business? I ask that because the Government promised that there would be no net increase in the burden of regulation on business during this Parliament, but so far we are £14.3 billion in the wrong direction.

--- Later in debate ---

[Andrew Griffith]

My hon. Friend may wish to ask that question in due course. With respect to the Secretary of State for Business and Trade, I can only speak for the financial services sector. Today we are publishing documents to repeal 100 elements of retained EU law. That builds on reforms we already had in train, such as the prospectus directive. I can certainly give him my confidence and assurance that we are significantly lightening the burden of regulation, but more importantly, making it appropriate for the unique fact pattern of the UK as an open, innovative global market.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

The Minister will be aware that the Bank of England had to intervene in the gilt market after the disastrous mini-Budget last September to restore market functioning, when sharp and rapid rises in gilt yields led to widespread selling of gilts by pension schemes’ liability-driven investment arrangements. We all recognise that we need to do more to ensure that our pensions—especially our defined-contribution schemes—are better. My question is about the risk. What risk assessment has been made of this proposed reform, particularly in terms of where the burden of risk falls?

[Andrew Griffith]

We have published today a consultation, and I hope the hon. Lady will feel that she can raise points during that. My hon. Friend the Minister responsible for pensions will always be happy to undertake engagement with the sector. Needless to say, we believe that we have the right balance of risk. The hon. Lady talks about volatility in the gilt market. That is one of the reasons we are so focused on not making unfunded spending commitments. The last thing that pensioners or the wider economy need is Labour’s £28 billion unfunded spending plans.

[Richard Fuller (North East Bedfordshire) (Con)]

I welcome the announcement of these reforms, but will the Chancellor and the Minister look further at two consequential areas? First, to make the most of the newly available capital, this country needs to attract the world’s best innovators, insurgents and entrepreneurs. The Labour party has already said that it does not want them here and will change tax policy to make sure they look to other countries. This Government need to come forward with measures that say, “We want the best and the brightest to come to the UK.”

Secondly, to make the most of these reforms, we need to ensure that our businesses can work speedily and with clarity. That means that regulators need to focus on what our companies are doing with these reforms, as well as protecting customers and consumers. Will my hon. Friend look at what further measures we can take on regulatory reform?

[Andrew Griffith]

The work of regulatory reform to make this country globally competitive and an attractive place to invest is never done, as my hon. Friend knows. He will also know that we are seeing right now the fruits of the Prime Minister’s vision and strategy, with firms such as OpenAI and Andreessen Horowitz—two of the leading technology firms changing our world—both choosing in recent weeks the United Kingdom out of the entire rest of the world as the place to do business.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

Further to the question from the hon. Member for Blaenau Gwent (Nick Smith), what assurances can the Minister give that when the pensions dashboard is launched, it will be mandatory for all providers to participate in it and will not be done on a voluntary basis, to avoid it being what one analyst described as “half-baked”?

[Andrew Griffith]

The hon. Member is quite right: it will be mandatory for all providers. That will be underwritten by legislation. The focus is to ensure that it is a usable, well regulated and well understood user experience for members.

[Mr Philip Hollobone (Kettering) (Con)]

Over the last decade, thanks to automatic pension enrolment, an extra 10 million people have been able to save more for their retirement, but until now, due to investment restrictions, those returns have been limited. What my constituents want to know is, would the reforms announced today have been possible without Brexit, and how much better off will they be when it comes to retirement?

[Andrew Griffith]

I hope that my hon. Friend can reassure the constituents he so diligently represents that on average, as supported by the Government Actuary’s Department, if they started their working life now under the new assumptions about the compact, they could be up to £1,000 a year better off in retirement. That is a meaningful difference. At the end of the day, this is about making people’s money work better for them and harder for them and delivering them better outcomes. He is also right to observe that our ambitious programme of regulatory reforms, although it will never be divergence for divergence’s sake, could not have been achieved if it were not for the ability of this place to set the corpus of regulations under which financial services operate.

[Nigel Mills (Amber Valley) (Con)]

I welcome the Mansion House compact and the focus on auto-enrolment pensions delivering a better pension for their scheme members, but if the Minister looks at the websites of the firms that have signed up to his compact, he will see that they are all still marketing themselves as being cheap and simple for employers, rather than the best quality and best return for savers. What more can we do to give individual members a choice of which scheme they are auto-enrolled in? Will he look at a clearing house scheme, under which it would be individual employees who choose where their pension savings go, not their employer a few years ago based on what was easy and cheap?

[Andrew Griffith]

My hon. Friend is absolutely right to talk about the need for that culture to change, moving away from an excess focus on cost to the detriment of performance—that is what these reforms will achieve over time. He is also right to talk about giving agency to individual long-term savers over time. Making sure that we have that usable journey for pensioners that delivers across the whole of their life is something that my colleague, the pensions Minister, is passionate about.

Points of Order

Andrew Griffith Excerpts

Tuesday 11th July 2023 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

I thank the hon. Gentleman for his point of order. From what he has said, I can understand his concern. Miraculously, he has managed to raise his point of order when he has a Treasury Minister right in front of him, and I have a feeling that Ministers may well take back his comments.

[The Economic Secretary to the Treasury (Andrew Griffith)]

indicated assent.

[Madam Deputy Speaker]

The Minister is nodding in agreement, so I think the hon. Gentleman has succeeded in raising his case effectively. We will leave it at that.