Mortgage Market

Andrew Griffith Excerpts

Tuesday 13th June 2023 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer what assessment he has made of developments in the mortgage market in recent days.

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

The Government recognise the anxiety that people feel about mortgages, and are using the tools at their disposal to limit the rise in rates. We are not an outlier in this regard: as Opposition Members will know, central banks around the world are raising interest rates to combat high inflation driven by the pandemic and Putin's war.

Given that inflation is the No. 1 enemy, we are focused on delivering the Prime Minister’s pledge to halve it this year. Nevertheless, I know that mortgage rates and the availability of mortgages are a concern right now. Mortgage arrears and repossessions remain below pre-pandemic levels, but if a borrower falls into financial difficulty, guidance from the Financial Conduct Authority requires firms to offer tailored support and to deal with customers fairly. The Government also offer loans to help eligible homeowners to cover the interest on their mortgages through the support for mortgage interest scheme from the Department for Work and Pensions, and make it clear that repossession must be a last resort for lenders through the pre-action protocol.

As long as economic challenges exist, we will continue to stand by families. To date, Government support to help households with rising bills in 2022-23 and 2023-24 totals £94 billion. That is equivalent to an average of £3,300 per household, as well as a record 9.7% increase in the national living wage, which I am sure that the Opposition support. While we are taking action to halve inflation and help families, the Opposition would make it all worse. The Institute for Fiscal Studies has been clear that Labour’s £28 billion a year borrowing plan would risk even higher interest rates and higher inflation, and even the shadow Chancellor has admitted that its position is reckless. This is a Government on the side of the British people and that is why, as we shelter people from rising prices, our task remains getting inflation down and getting the economy growing and debt falling.

[Mr McFadden]

The UK’s homeowners are under increasing financial stress, with two-year fixed rates at 5.86%—up by over 0.5% in just a month—products being withdrawn, and the Resolution Foundation saying that the average mortgage holder is facing an increase in payments of £2,300 this year. This is not just about homeowners; it is about renters too, because the landlords they rent from are also facing increased borrowing costs and that in turn is forcing up rents.

All this pressure was multiplied by the irresponsible decision of the Conservative Government last year to use the country for a giant economic experiment that put booster rockets under mortgage rates. While they enacted their teenage right-wing pamphlet fantasies, using the country like lab rats, homeowners and renters were left to pay the price. Since then, because inflation in the UK has been higher for longer than in many similar economies, the expectation is that interest rates will be higher for longer too, and that is what is driving up mortgage rates and piling on the pressure.

While the Ministers responsible rack up speaking fees around the world, the British public are still paying the price for the economic irresponsibility and recklessness of the Conservative party. Will the Economic Secretary now apologise for the Conservative mini-Budget last September and the lasting effect it has had on homeowners and renters around the country? Will the Government take responsibility for the decisions that they made and the consequences that followed, or is it, as they always claim, someone else’s fault? Now, instead of trying to help hard-pressed homeowners, the Conservatives are fighting like rats in a sack over an honours list and a disgraced Prime Minister. It is clear that they cannot focus on the problems of the country; the only way to do that is to change the Government and let them fight it out in opposition.

[Andrew Griffith]

We enjoy, as ever, the hon. Member’s rhetoric, but he did not address what his plan would be. He also did not acknowledge that this has an international factor. Perhaps he or one of his colleagues would like to explain why we have seen similar interest rate increases in the USA, where the 30-year rate—the market is somewhat different there—has increased from 4% at the start of 2022 to more than 6% today.

[Mr Speaker]

In fairness, the right hon. Member for Wolverhampton South East (Mr McFadden) is right honourable. But there we are. I call the Chair of the Select Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

The Government have given the Bank of England the task of targeting inflation at 2%, and our Committee has regularly held the Bank of England Governor’s feet to the fire over its performance on that inflation target. Mortgage rates have been increasing because inflation has been higher for longer than expected. In fact, the Governor said in his evidence to our Committee last November that from now on, our grumpy constituents who are having to pay higher mortgage rates should complain to him rather than to the Government. Will the Economic Secretary endorse the Treasury Committee’s campaign to ask the banks why, instead of just raising mortgage rates on the day the Bank of England raises rates, they do not also increase the savings rates that are paid to our constituents?

[Andrew Griffith]

The independent Governor of the Bank of England is, of course, right. Today we have seen strong print on wage growth, in part due to the 9.7% increase in the national living wage, on which I hope Members will join me in congratulating the Government. My hon. Friend is, as ever, right to highlight the impact on savers. It is important to me and to this Government that savers get a fair deal, which is one of the reasons why National Savings and Investments continues to offer savers an attractive range of products in the market.

[Mr Speaker]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

Millions of households are now struggling as their fixed-rate mortgages end and they are moved to much higher variable rates. We also know that only a third of the households that are expected to move from cheap fixed-rate deals have done so, so there is a great deal of pain to go, with 116,000 households a month coming off fixed-rate deals.

Some in the City are suggesting that what we are seeing is a complete reset of the mortgage market, which would imply that there should be a complete reset of the Government’s approach. Given that changes to mortgage rates are driven by changes to the base rate, and that the base rate is the central bank’s primary tool to meet the 2% inflation target handed to it by the Government, what discussions have the Government had with the Governor of the central bank about the effectiveness, or the appropriateness, of an inflation target being the primary target that the central bank works towards?

[Andrew Griffith]

At his spring statement, the Chancellor was very clear about the Bank of England’s continued remit, beyond which it remains operationally independent. It has been a long-standing feature of this House that Treasury Ministers do not tell the Bank of England how to run monetary policy. Three of the Prime Minister’s five priorities are getting the economy growing, reducing debt and halving inflation.

[Mr Speaker]

I congratulate the now Sir Simon Clarke.

[Sir Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

That is very kind, Mr Speaker.

I pay tribute to the right hon. Member for Dundee East (Stewart Hosie) for the previous question, which was extremely interesting and perceptive. Of course, it should escape nobody’s attention that, today, gilt yields are higher than they were when my right hon. Friend the Member for South West Norfolk (Elizabeth Truss) was forced from office in the autumn. I agree entirely with the Minister that it is important to avoid the inflaming of inflation that the Opposition would do, but does he also agree that ultra-low interest rates cannot be seen as the sole benchmark of economic success and that we ought to aspire to higher trend growth as much as low interest rates?

[Andrew Griffith]

I add my congratulations to my right hon. Friend, who is right that a stable fiscal environment and the lowest possible interest rates are two ingredients and prerequisites for success, but so, too, is a supply-side economy that works to support growth and having the most competitive fiscal environment, which is one reason why the Chancellor has asked the Chief Secretary to the Treasury to look at public sector productivity, with a view to achieving that.

[Dame Angela Eagle (Wallasey) (Lab)]

To hear the Minister talk about a stable economic environment after the disaster of the mini-Budget and the catastrophe it caused in the bond markets takes some cheek. I commend his cheek, because it is unbelievably cheeky.

Does the Minister acknowledge that households have shelled out over £1 billion in extra mortgage payments since the Government’s disastrous mini-Budget? Does he also realise it is estimated that, in the next two years, £9 billion will have to be shelled out by those with mortgages because of his party’s economic mismanagement? Is he proud of that record?

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[Andrew Griffith]

It may cause the hon. Lady some distress, but I am enormously proud of the £94 billion the Government have provided to support households in these difficult times. I am proud, too, of the Government’s response to the covid pandemic and to Ukraine—would it ill behove any Opposition seeking office to mention those things a little more when talking about the economy? Above all else, I am enormously proud that when any Conservative Government leave office they do not leave notes behind saying, “Dear Chief Secretary, I am afraid to tell you that there is no money left.”

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

Inevitably, the level of Government borrowing itself is a determinant of interest rates, isn’t it?

[Andrew Griffith]

My right hon. Friend—I congratulate him as well—is right to say that one factor is the level of Government borrowing. This Government have had to borrow unprecedented amounts due to the covid pandemic and the war in Ukraine, and to provide households with that support of about £3,300 over this year and last. That is one reason why one of our key priorities is to reduce the level of debt.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

The Minister likes to point out, as he has done again, that this is about international factors and covid—there are lots of other reasons given. However, the Government fail to mention the mini-Budget fiasco caused by the previous Chancellor and the former Prime Minister, with its direct consequence of mortgage increases, with millions of people suffering. Why does the Economic Secretary not come clean on this, as the former Prime Minister and former Chancellor, who presided over that chaos, have done? It is not time that he stopped whitewashing and faced the reality of what he and his Government are responsible for, which is causing misery to people’s lives?

[Andrew Griffith]

The hon. Lady needs to look at the facts and the numbers. Despite moving in alignment with other international markets—and interest rates have increased over time—interest rates even today for mortgage holders are lower than those reached in October last year. So we are dealing with a macroeconomic international trend, which we are seeing across all western economies. We are moving in alignment with them, but this Government will always prioritise support for households, which is one reason why we have come forward with such significant economic packages in the past two years.

[James Sunderland (Bracknell) (Con)]

I would love to be able to pass on some good news to my constituents about their households bills. We are seeing wholesale energy costs fall but they are not being translated to the consumer. So how long after inflation falls will we see interest rates come down?

[Andrew Griffith]

My hon. Friend is a diligent champion for his constituents in Bracknell and I am sure it will not be too long before he has good news to talk about on prices that consumers face. We have seen the cost of fuel coming down and as we achieve the Prime Minister’s objective of halving inflation this year, so some of the cost of living pressures that his constituents face will abate. In the meantime, he should know that this Government are on the side of households and we have been willing to support them to the tune of about £3,300 every year. I wish his constituents all the best.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Interest rates are up and mortgage deals are being pulled left, right and centre, yet the Minister has had to be dragged here to answer this urgent question. Will the Government please refocus on this mortgage crisis, rather than on the latest round of Conservative infighting, and give the public the reassurance they desperately need?

[Andrew Griffith]

I can give the hon. Lady the reassurance that the wellbeing of the nation’s mortgage holders, savers, pensioners and investors is the whole of my focus, as it is of all of my colleagues on the Treasury Bench. As Members on both side of the House will know, it is a feature of the UK mortgage market that from time to time mortgage deals are withdrawn from the market and repriced. As of now, there are more than 5,000 mortgage offers from different suppliers, at different tenures, in the market. It remains my focus to ensure that those who seek to buy a first home or to remortgage their home have the most competitive offers available.

[Miriam Cates (Penistone and Stocksbridge) (Con)]

One of the biggest challenges facing our country is the inability of young people to afford to buy a home because of inflated house prices. Although recent interest rate rises have compounded the problem, is not the real problem that interest rates were far too low for far too long, turning savers away from saving and into property investment instead, and thus pushing up the price of property as an asset? Does my hon. Friend agree that this is not an easy problem to solve, but that one possible answer would be for local authorities to build homes that can be bought at a reduced rate, not by investors, but by local young people?

[Andrew Griffith]

I thank my hon. Friend who does a wonderful job of advocacy for her constituents, including those who seek to buy their first home. This Government, through a variety of measures to support householders in general, have helped more than 800,000 people, of all types, to purchase a property since 2010. That represents a city of approximately the size of Liverpool, such is the scale of the endeavours. It is of course important that we get the nation building, and part of that is about providing the economic stability whereby people are willing to make investments for the longer term.

[Sarah Olney (Richmond Park) (LD)]

The Government’s economic mismanagement has caused low growth, soaring food bills and record mortgage costs. Millions of hard-working people are being penalised for getting a foot on the housing ladder, in places such as Mid Bedfordshire, the area with the third highest share of mortgage holders in the country. The Minister mentioned the support from the mortgage interest scheme. [Interruption.] In this time of hard-pressed families, will his Government commit to converting that from a loan to a grant?

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[Andrew Griffith]

I did not hear fully what the Member for Richmond Park aligned with Mid Bedfordshire was saying, but I am sure that residents in Mid Bedfordshire have welcomed the stability that we have brought to the economy and the fact that we have supported householders through the past two difficult years, making tough decisions and supporting households to the tune of about £3,300. They will also have welcomed the fact that we have the sort of responsible stewardship of the economy that means that we are not a Government who have historically left power with unemployment higher than when we arrived, leaving notes saying, “There is no money left.”

[Mr Louie French (Old Bexley and Sidcup) (Con)]

My hon. Friend is correct to highlight that we are facing international challenges and that monetary policy is the responsibility of the independent Bank of England. However, does he agree that Labour’s £90 billion-worth of unfunded spending commitments would make inflation and the cost of borrowing even worse?

[Andrew Griffith]

I thank my hon. Friend the Member for wonderful Old Bexley and Sidcup (Mr French) for that. I recall that last October Opposition Members were never shy of citing the Institute for Fiscal Studies, but they do so much less today, because the IFS has said that Labour’s £28 billion borrowing plan would cause both interest rates and inflation to rise. I do not see how that would help the nation’s mortgage holders.

[Nick Smith (Blaenau Gwent) (Lab)]

The value of mortgage arrears has risen by a troubling 10% in the past quarter, so what is the Minister’s assessment of the likely level of arrears in the next quarter?

[Andrew Griffith]

I talked about the focus on the level of mortgage arrears, which are at an historic level. My Treasury colleagues and I are tracking them extremely closely. We have talked to all the lenders and the Chancellor has brought them all in to ensure that they have responsible policies in place so that repossessions are a last resort.

[Nick Fletcher (Don Valley) (Con)]

Does the Minister agree that although the Opposition like to blame the Government for this situation, the real problem lies with covid and the Bank of England? The Bank kept on putting money into the economy when the world had stopped producing everything, which meant that there was more money and fewer goods, and so inflation was obviously going to rise. Does he also agree that even though we are in this situation where the Bank is trying to do what it is doing and the Government are doing everything they can, continually putting up interest rates puts people in a really difficult position? Does he believe that we should see what the interest rate increases have done so far in the economy before the Bank of England keeps putting them up month on month?

[Andrew Griffith]

My hon. Friend speaks wisely and regularly on behalf of his constituents. I will not follow him quite so far as to comment on what the Bank of England should do next.

Just in response to the previous question, Mr Speaker, the level of arrears in residential mortgages, as reported by the FCA, was 0.8% compared with 3.3% back in 2009.

[Ben Lake (Ceredigion) (PC)]

The Resolution Foundation has estimated that around 1.6 million households will see their fixed-rate deals come to a conclusion before the first quarter of 2024 and, therefore, will obviously feel the impact of increased rates. What is the Treasury’s assessment of the impact that this hit to households’ disposable incomes will have on the wider economy?

[Andrew Griffith]

We all want interest rates to fall as rapidly as possible. The Bank of England needs to conduct its monetary policy against the target that the Chancellor has set. The Government need to do everything we can to try to reduce the level of debt by controlling our spending, even when that creates difficult decisions for us to make. We will do that so that the day when interest rates fall comes more quickly. In the meantime, this Government are trying to shield households from the pressures of the cost of living, which is why we have deployed that £94 billion this year and last.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

Does my hon. Friend see any consistency in the Opposition’s analysis that suggests that the primary cause for interest rate rises is unfunded borrowing, while making significant unfunded borrowing pledges themselves? Will he continue his focus on fiscal discipline and ensure that Government support is targeted at those who need it most in this period of astonishing international instability?

[Andrew Griffith]

My hon. Friend is absolutely right: the last thing that the economy needs at the moment is any party coming forward with more unfunded spending cuts. It is why the Institute for Fiscal Studies has raised concerns about an increase in interest rates and inflation if Labour were to come to power and spend an additional £28 billion, which I believe even the shadow Chancellor herself has confessed would be reckless.

[Janet Daby (Lewisham East) (Lab)]

When would the Minister say the Tory party gave up being the party of home ownership? Was it when it crashed the economy last autumn, or was it when it scrapped house building targets?

[Andrew Griffith]

The hon. Lady is, I am afraid, completely incorrect. The Conservative party is absolutely on the side of home ownership. It is why we have always supported the right to buy, in the face of opposition not just from the Labour party but from Labour-controlled local councils. It is also why we continue to have a wide range of schemes in the market to help first-time buyers.

[Liz Kendall (Leicester West) (Lab)]

Santander is the latest major bank to temporarily pull its mortgage deals for new borrowers, just days after HSBC did the same. The Minister shrugs his shoulders as if to say that there is nothing to see here, but is it not the truth that this degree of turbulence is not normal, that inflation is significantly worse here than in Europe and the United States, and that ordinary people across the country will look at his denials today and wonder what planet he is living on?

[Andrew Griffith]

I honestly think that contribution from the hon. Member is unworthy. I would not go so far as to ask her to withdraw it, but if she looks at my comments she will see that I absolutely understand the anxiety that people have about their mortgages. It is a very significant part of people’s household finances. That is why we are using all the tools at our disposal: both providing public spending to protect and shield households at this difficult time, and making the tough decisions to get the economy growing again and to keep debt under control, which is the action that will result in interest rates falling sooner.

[Rachel Hopkins (Luton South) (Lab)]

People from Luton have moved into Mid Bedfordshire to get on to the housing ladder or to raise their families. [Interruption.] It is true. Due to this Conservative Government’s economic failure, they are now facing soaring mortgage repayments, and we are even seeing banks withdrawing mortgage deals for new borrowers. How can voters trust the Government and the Conservatives to address the mortgage crisis when they are the ones who caused it?

[Andrew Griffith]

I am deeply intrigued by the concept that the hon. Lady’s constituents have hitherto been moving to the neighbouring Conservative-held seat of Mid Bedfordshire. Perhaps they recognise the better economic potential—the better opportunity to bring down rates as a result of our making the tough choices. Perhaps they welcome the sheer amount of support that we have provided for homebuyers. I wish her constituents well and hope that those who have moved to Mid Bedfordshire enjoy their next Conservative Member of Parliament.

[Clive Efford (Eltham) (Lab)]

The Minister claims that the current economic climate is down to the world economic situation, but in the next breath he claims that if, at some unspecified date in the future, things get better, that would be down to the Government. Over the recent period, mortgage borrowers have contributed an extra £1 billion in interest rates. Over the next couple of years, they are predicted to contribute £9 billion. The previous Prime Minister has apologised for her contribution to that, so why will he not do the same?

[Andrew Griffith]

In fairness, it is absolutely the case that these are largely international factors. The job of the Government is to control the variables within their control. The primary thing that they can do is not to come forward with greater unfunded spending promises as that would put more pressure on the public purse and would lead to interest rates and inflation being higher for longer. That is what is within our controllable domain and that is what we are focused on. I am not worried about where the credit accrues or otherwise; what I am worried about is trying to reduce interest rates for ordinary people at the earliest opportunity.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

The Minister talks about Government support and bandies about some big numbers, but does he understand that the effect of that for people is like taking a watering can to the economic bin fire that his Government set alight? Does the Minister have the humility to apologise right now to my constituents who are struggling? The mortgage rate rises might be the straw that breaks their backs—some are already broken—following as they do on the Government’s endeavours in terms of the mini-Budget and Brexit, which have fuelled this economic crisis.

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[Andrew Griffith]

I thank the hon. Member for his question. It must have been quite hard to get through all those points without once mentioning the fact that this has an international dimension. There is a war on European soil in Ukraine, and we have just come through an unprecedented global pandemic. He simply tries to reduce this to whatever is his party’s particular topic of the day. That is not worthy of him when we are trying to have a proper economic debate.

[Tonia Antoniazzi (Gower) (Lab)]

The Minister claims to be shielding families. He evidently is not going to say sorry. When everybody in this House is supporting their constituents, we need to know what assessment the Department has made of the number of people actually affected by recent increases in mortgage rates.

[Andrew Griffith]

I thank the hon. Lady for her question. Like others, the FCA has talked about the number of people in any one year whose mortgages are repriced. We do not know what the price of those will be. It seems that around 1 million to 1.5 million people are affected, so a significant number, as my hon. Friend the Member for Bracknell (James Sunderland) mentioned. There are also many savers in society. Rather than looking at what is happening, what we are doing to help is making those difficult decisions. We are not unleashing unfunded, uncosted spending plans on the public purse and we are trying to get through this to help people get to a world where inflation is falling, the cost of living pressures on them are reducing and we can get the economy growing again, which will provide good employment opportunities for her constituents.

[Claire Hanna (Belfast South) (SDLP)]

I wrote to the Minister earlier this week about the continuing problem of mortgage prisoners, following a comment from the Treasury that it is open to proportionate solutions for those frozen in that position after their mortgage lenders were sold from 2008. Recent reports state that the Government made a profit of £2.4 billion from selling on those mortgages. Will the Minister work with me, and with advocates for the tens of thousands of people trapped in those precarious financial circumstances, to find those proportionate solutions?

[Andrew Griffith]

The hon. Lady raises the plight of those who have been unable to access even the mortgages at elevated levels that we have been talking about here. I understand the problem; it is something I have given significant time to with my officials and I have read the recent work conducted by the London School of Economics. I hope that, in that spirit, she will also recognise that it is a complex issue and that within that overall collective there are many different individual fact patterns. While I am open to finding solutions, I hope she will recognise that it is not easy and there is no one-size-fits-all answer.

[Catherine West (Hornsey and Wood Green) (Lab)]

The Minister says there are 1,100,000 people affected by the mortgage market chaos inspired by the Truss-Kwarteng abracadabra magic last autumn. How many renters are affected? There is a renting crisis in my constituency and people simply cannot afford an overnight 20% increase in their rent.

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[Andrew Griffith]

I do not have any figures for rental, but the rental market is something we look at closely and we will keep an eye on what happens to those buy-to-let renters. My right hon. Friend the Secretary of State for Levelling Up, Housing and Communities has brought a significant set of reforms before this House to help renters. I come back to the point that, however popular or unpopular it may be with the Opposition, the best way to manage this situation is to be prudent with the nation’s finances, to get the debt burden falling and to give the markets confidence so that interest rates fall as quickly as possible. I ask all colleagues to work with us on that. The last thing we should be doing is putting out the Opposition’s £28 billion a year of unfunded promises, which will spook the markets and lead to the sorts of rates that none of us wishes to see.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

Shockingly, new data this morning reveals that the value of mortgage arrears has risen by 10% on the quarter—the highest and fastest increase in more than a decade. Many of my constituents are struggling to pay their mortgages. Unfortunately, they are paying the price for the Conservative Government’s economic failures, because a typical household’s mortgage payments are now three times greater than they were just two years ago. What conversations and what meetings have the Minister and the Chancellor had with lenders, and what action will they take to provide forbearance for my constituents?

[Andrew Griffith]

I should be grateful if the hon. Gentleman would write to me with those statistics. The statistics I quoted earlier are that the level of mortgage arrears reported by the Financial Conduct Authority for the period up to the end of 2022 was 0.81%. That is a record low in recent memory, significantly lower than before the pandemic and much lower than it was in 2009. I am very happy to engage with him about the level of mortgage arrears. I engage with mortgage lenders all the time, as does the Chancellor, and we want them to have the right degree of forbearance for families who are struggling.

[Marsha De Cordova (Battersea) (Lab)]

This Tory mortgage crisis is affecting my constituents. In London, mortgage costs are set to increase by more than £1.8 billion, people face the financial strain of high interest rates and incomes are not keeping up with those costs. When will the Minister finally get real, understand the impact of the crisis that his Government created and apologise to our constituents? What reassurances can he give to my constituents who will be facing remortgage costs?

[Andrew Griffith]

I can give a number of assurances to the hon. Lady’s constituents. I imagine that Battersea is a very cosmopolitan place, so as people travel around the world they will understand that western economies across the world are facing exactly the same impact on the cost of living and on interest rates. She talked about £1.8 billion as a very large number; indeed it is, and we share the concern of those with mortgages. However, I put it to her that £94 billion is also a very big number, and that is the amount of household support that we are providing during this cost of living crisis.

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

Earlier this year we saw the collapse of Silicon Valley Bank and Credit Suisse. What assessment has the Treasury undertaken of the general resilience of UK financial institutions, especially in a context where rising mortgage costs might lead to a rapid increase in household repossessions?

[Andrew Griffith]

My Treasury colleagues and I liaise closely with the Bank of England and the Prudential Regulation Authority, whose job it is to assure us of the soundness and resilience of banks. The Governor has talked about how the UK financial system is safe, secure and soundly capitalised, and that remains my belief.

[Rachael Maskell (York Central) (Lab/Co-op)]

York is a low-wage economy, yet we have extortionate house prices. Last year, housing costs went up by 23.1% in York—the highest rise in the country. My constituents are already mortgaged to the hilt and cannot afford more. What protections will the Minister put in place if mortgage rates rise further, as they are predicted to do? My constituents simply cannot afford their mortgages and they cannot afford this Government.

[Andrew Griffith]

If York is a low-wage economy, the hon. Lady’s constituents will be benefiting enormously from the unprecedented 9.7% increase in the national living wage. The measures we are putting—[Interruption.] Perhaps she does not like the 9.7% increase in the national living wage that this Government came forward with. We are putting measures in place with lenders, including forbearance, and working with the Department for Work and Pensions on mortgage interest support and to ensure that families have access to the support they need.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

The typical household’s mortgage payments have risen threefold in the last two years, yet in the north-east the typical wage packet is lower than when the Conservatives came to power 13 years ago. The Minister refuses to take any responsibility for the economic misery his Government are inflicting, despite having flagrantly and blatantly crashed the economy less than a year ago. Will he tell my constituents why they should carry on paying the price of Conservatism?

[Andrew Griffith]

Once again, we have a contribution from the hon. Lady that completely ignores the fact of the global pandemic, the £400 billion of support we have provided and, although I believe she is highly literate in these matters, the fact that interest rates are rising across the western world.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

In the first three months of this year, repossessions increased by 27% on the same period last year, and the latest estimates show that 2.5 million customers will need to renegotiate their mortgages over the next two years, with their payments increasing by £9 billion. Is the Minister really telling us that he is satisfied and that he has no reservations about the way that his Government have mismanaged the economy, with the consequent economic turbulence and soaring interest rates that are literally pricing people out of their homes?

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[Andrew Griffith]

This Government are focused—and this is what our constituents want to hear—on halving inflation, growing the economy and reducing the debt burden. From today forwards, that is the action we can take that will see interest rates falling sooner, reduce inflation and get us back to a position of economic growth. I am sure the hon. Lady wants that for her constituents as much as I do.

[Mr Toby Perkins (Chesterfield) (Lab)]

The Conservative party once prided itself on being the party of homeowners. The fact that we long ago ran out of Conservatives asking questions makes it clear that Tory MPs realise they have nothing to say to those people. Does the Minister realise that my constituents who are desperately worried about the cost of their mortgages will not have heard a single word from him to suggest that things are going to get better as a result of this Government’s actions?

[Andrew Griffith]

I can absolutely reassure the hon. Gentleman that the Government are focused on his constituents, even if his colleagues find it useful to ask the same question again and again. We are focused on not making the sort of unfunded spending commitments—such as the £28 billion that the right hon. Member for Leeds West (Rachel Reeves) herself described as “reckless”—that would really cause difficulties for mortgage holders in Chesterfield and across the United Kingdom.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

Given the jump in mortgage arrears, and to help everyone who is struggling to pay the Tory surcharge on their mortgages since the disastrous mini-Budget, is the Minister considering increasing access to mortgage interest relief?

[Andrew Griffith]

There are no plans to change that. Those are matters for fiscal events and for the Chancellor.

[Fleur Anderson (Putney) (Lab)]

The Tory mortgage crisis is affecting my constituents in Putney, including a group of young sharers I met this week whose landlord has had his mortgage increased and has passed the costs down to them. They have to leave their home and the area because they can no longer afford to live in south-west London. The Minister has blamed global factors again and again, but the cost of borrowing is higher here in the UK than in other developed economies. Does he agree that this is a Tory mortgage penalty—a Truss tax—and that the Government are to blame for the 13 disastrous years of housing policy that have brought us here?

[Andrew Griffith]

I do not agree with the hon. Lady, however fine her rhetoric may be. The reality is that, if we want the nation’s householders to pay less for their mortgages, we need responsible Conservative management of the economy. When it comes to her Putney constituency, the best thing that she can do, if she is on the side of those who wish to own their own home, is urge the Labour Mayor to build more homes.

[Hon. Members]

He is!

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

There is no danger of that when you are in the Chair, Madam Deputy Speaker.

I thank the Minister for his answers to some very difficult questions. It has been said that 1.5 million households, including some of my Strangford constituents, are set to come off fixed mortgage deals this year and face a sharp rise in their monthly repayments—up to 1.56 percentage points from Tuesday. Has the Minister made an assessment of the impact on those who are considering buying their first house in the next year or so, and will he assure the House that discussions are taking place with local banks on what we can do to support people through the process of buying their first homes amid shocking price increases?

[Andrew Griffith]

Let me be clear: the Government understand—I understand—the anxiety of those who have a mortgage, those who have invested in their home and those who wish to do so. That is why we will do everything we can—be it providing financial support to the tune of £94 billion, or making good decisions about our stewardship of the economy and not coming up with unfunded spending commitments—to ensure that we get back, as quickly as possible, to a world of falling interest rates and falling inflation, and support those who wish to buy a home above their head.

Draft Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) (No. 2) Order 2023

Andrew Griffith Excerpts

Wednesday 7th June 2023 General Committees

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

I beg to move,

That the Committee has considered the draft Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) (No. 2) Order 2023.

It is a pleasure to serve under your chairmanship, Ms McVey. As hon. Members will be aware, Siliconâ Valley Bank UK Ltd—or SVB UK—was sold to HSBC on Monday 13 March. The aim of the sale was to ensure that customers of SVB UK could access their deposits and banking services as normal, limit risks to our tech and life sciences sector, and safeguard some of the UK’s most promising companies. We achieved those outcomes without any public money or Government guarantees. There was no bail-out; SVB UK was sold to a private sector purchaser. The solution was a win for taxpayers, customers and the stability of the banking system. The International Monetary Fund has said that the UK’s response to SVB UK restored market confidence and contributed to the UK’s upgraded growth forecast. It now expects the UK to avoid a recession this year.

On Monday 13 March, using powers under the Banking Act 2009, I laid in both Houses a statutory instrument to facilitate the sale of SVB UK to HSBC. That instrument, which has now been approved by both Houses, granted HSBC’s ringfenced bank an exemption so that it could provide liquidity on non-arm’s-length terms to SVB UK on an ongoing basis. That was needed to facilitate the sale of SVB UK to HSBC, because it ensured that HSBC could provide the necessary funds—over £2 billion in the days immediately afterwards—to its new subsidiary. The exemption also ensures that HSBC UK can provide liquidity to SVB UK as needed going forward.

This second statutory instrument provides an ongoing exemption from ringfencing requirements for SVB UK beyond the existing four-year transition period. That exemption is subject to conditions relating to the size of SVB UK’s core deposits and the type of business that it can undertake. The first condition is intended to ensure that SVB UK or its subsidiaries cannot hold core deposits, which are typically retail and small business deposits, above the existing threshold in the ringfencing regime, which is currently £25 billion.

The second and third conditions are intended to ensure that SVB UK or its subsidiaries will be allowed to undertake new business activities only if they are similar to those conducted by SVB UK at the time of the acquisition by HSBC. Those conditions are intended to ensure that the exemptions from the wider regime are limited to what is needed to facilitate the sale of SVB UK. Together, they minimise risks to financial stability and limit any competitive distortion.

Hon. Members will note that Sam Woods, deputy governor for prudential regulation and chief executive of the Prudential Regulation Authority, has confirmed the PRA’s support for the provisions in the draft order, in a letter that I have laid in the Library. There are copies in the Committee Room for Members. He states that the statutory instrument, with its conditions, supports

“the PRA’s primary statutory objective of safety and soundness, and limits competitive distortion.”

He also confirms that the PRA feels that it

“has a range of tools…to ensure the effective supervision of HSBC UK and SVB UK”.

In conclusion, the draft order, along with the previous exemption, is crucial to the purchase of SVB UK by HSBC. It protects taxpayers, depositors and the financial system. The UK has a world-leading tech sector with a dynamic start-up and scale-up ecosystem, and the Government are pleased that a private sector purchaser was found. I hope that hon. Members will join me in supporting the draft order.

--- Later in debate ---

[Andrew Griffith]

It is always a pleasure to respond to the hon. Member for Hampstead and Kilburn. I thank her and the hon. Member for Glenrothes for their support.

I reassure both Opposition spokespeople that the exemption was a necessary move in the eyes of the Bank of England, which conducted the process to seek an alternative buyer, of which the exemption was a necessary precondition. In this case, the introduction of a long-term exemption, as opposed to the time-limited exemption of four years in the existing legislation, will ensure that the outcome that I think we all seek—the continued flow of funds on an affordable basis, particularly to small businesses and start-ups—can happen on a commercial basis. That is the reason for the long-term exemption from the ringfence.

I assure Members that the exemption is an exception, and not just to the process. The fact that we have introduced this statutory instrument, thereby giving Parliament the opportunity to scrutinise the change, demonstrates the proper nature of the exception process; this is not being done simply by the exercise of a discretion on the part of any of the participants.

I also assure Members that the intention behind the ringfencing regime—the desire to reconcile the protection of consumers and the importance of the financial stability system with the ongoing viability of a healthy financial sector—continues to this day. The objectives remain exactly the same. We have put out a call for evidence on the long-term review and will publish our response to it in due course. We are taking the appropriate amount of time and I am always happy to consult Members so that we get it right. This is not something that we seek to rush and we certainly do not seek to deregulate for deregulation’s sake. We wish to regulate the balance of harm.

It is also the case that the provisions of the original 2014 order might not always be the optimal point on the envelope. For example, we are trying to ensure the flow of funds to small and medium-sized enterprises, which is perhaps a shared objective. As we seek to move forward on ringfencing, that is not to repudiate the original intention laid down by this House but to revisit some matters, many years down the road from the 2008 banking crisis and in a different environment—for example, this sale happened very quickly—so that we can look at the most effective remedies in a situation in which things can move much quicker.

I think I have broadly addressed most questions. As the hon. Member for Glenrothes observed, the PRA’s powers are wide and are not fettered, other than in respect of the long-term continuation of this particular ringfence. A monitoring regime that many would characterise as intrusive will apply to the SVB UK subsidiary, just as it will to HSBC. We should be reassured—this is broadly what the PRA chief executive said in his letter to me that has been laid before the House—that the PRA feels it has the necessary powers.

On the slightly out-of-scope point from the hon. Member for Birmingham, Perry Barr about a national development bank—I understand that this was his opportunity to raise that important topic—we have made, as he will know, a number of interventions that support businesses at every point on the spectrum, from the good work done by the British Business Bank and its many different schemes to provide finance and liquidity, to the UK Infrastructure Bank, which has a specific remit in respect of net zero and levelling up. Rather than detain the Committee, let me say that I am always content to meet Members to explain the work we are doing and seek challenge if they would like us to look at additional work.

Question put and agreed to.

NatWest Group: Share Buyback Transaction

Andrew Griffith Excerpts

Tuesday 23rd May 2023 Written Statements

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

I can inform the House that on 22 May 2023 the Government sold c.469 million shares in NatWest Group (NWG, formerly Royal Bank of Scotland) to NWG by way of a directed buyback transaction. The transaction value amounts to approximately £1.26 billion, representing approximately 4.95% of the company.

This announcement demonstrates the continued progress being made towards the Government’s intention to return its shareholding in NWG to private ownership by 2025-26, subject to market conditions and achieving value for money for taxpayers. Following this transaction, the Government’s shareholding stands at approximately 38.6%.

Policy rationale

The Government are committed to returning NWG to full private ownership now that the original policy objective for the intervention in NWG—to preserve financial and economic stability at a time of crisis—has long been achieved.

The Government only conduct sales of NWG shares when it represents value for money to do so and market conditions allow.

Directed buyback detail

The Government, supported by advice from UK Government Investments, concluded that selling shares to NWG, in a single bilateral transaction, represented value for money.

Share buybacks are a common practice undertaken by companies looking to efficiently deploy their excess capital. NWG has shareholder approval to purchase up to 4.99% of its share capital from His Majesty’s Treasury on a rolling 12-month basis. This is the third sale of shares via an off-market share sale directly to the company and sixth large block sale of NWG shares undertaken by the Government.

The sale concluded on 22 May 2023, with NWG purchasing a limited number of its Government-owned shares. A total of approximately 469 million shares (approximately 4.95% of the bank) were sold at the 19 May market closing price of 268.4p per share. The Government’s shareholding now stands at approximately 38.6%. The reduction in the Government’s shareholding is less than the percentage sold as NWG will cancel most of the purchased shares.

Details of the sale are summarised below.

LIBOR Fixing: Conduct of Investigations

Andrew Griffith Excerpts

Tuesday 23rd May 2023 Commons Chamber

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

Let me first congratulate my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) on securing this debate. I recognise the work he has done to raise the profile of issues relating to the LIBOR scandal. I am also grateful to the right hon. Member for Hayes and Harlington (John McDonnell) for his intervention.

I would like to begin by saying a few words about LIBOR more generally. It is intended to reflect the rate at which banks lend to each other in wholesale markets. At its height, it was referenced by over £400 trillion-worth of financial contracts and was published for five major currencies. It has historically been important, not only for how our financial system operates but for everyday households and businesses. It featured in all sorts of contracts, including mortgages and loans in this country and internationally.

In the wake of the 2008 financial crisis and the decline in liquidity in inter-bank lending, the Financial Stability Board made it clear that continued use of major interest rate benchmarks such as LIBOR represented a potentially serious source of systemic risk. This was because the underlying market that these rates were intended to measure was no longer sufficiently active. To make LIBOR submissions, banks were instead increasingly reliant on expert judgment, which made LIBOR vulnerable to manipulation and a source of potential financial stability risk. This began the process now known as LIBOR wind-down, in which the UK Government, along with the regulators, have worked with the market to gradually phase out LIBOR. That process is almost complete. It has been complex but, to date, successful.

Turning to the scandal raised by my right hon. Friend, in 2012 it emerged that LIBOR was being manipulated for financial gain, and this became known as the LIBOR scandal. It was discovered that bankers were falsely inflating or deflating their rates to profit from trades. As a result, investigations into criminal activity began in a number of jurisdictions including the UK and the US. As well as fines to banks including Barclays, UBS and Deutsche Bank, the Serious Fraud Office secured five convictions for LIBOR rigging.

I agree with my right hon. Friend’s sentiment that this was a serious matter, and the response of the Government at the time reflected that. The Government set up the independent Wheatley review in 2012 and subsequently endorsed all of Mr Wheatley’s recommendations. They introduced legislation through the Financial Services Act 2012 to bring LIBOR under the regulatory jurisdiction of the Financial Conduct Authority, where it has remained. They also made manipulating benchmarks such as LIBOR a criminal offence. As I have mentioned, the investigations and subsequent prosecutions relating to the scandal were led by the independent Serious Fraud Office.

I note that my right hon. Friend says he will write to the Metropolitan police and has written to the Treasury Committee. He will understand that it would be inappropriate for me to comment from the Dispatch Box on any individual cases, or on the specifics of those cases. I can say that the Government’s position on financial market abuse is clear: it undermines the integrity of public markets, reduces public confidence and impairs their effectiveness.

During the financial crisis, state authorities were involved in the rigging of LIBOR—lowballing, as my right hon. Friend said—and the Treasury Committee was misled. He will be aware of the evidence provided to the original Treasury Committee inquiry by the former deputy governor of the Bank of England, Paul Tucker, and of the conclusions reached by the Committee in paragraph 107 of its report.

Select Committees of this House perform a vital role in holding Ministers and others to account, and it is important that, in fulfilling this role, they receive accurate evidence. It would, however, be a matter for the Treasury Committee and the relevant witnesses to respond as needed and, like my right hon. Friend, I look forward to hearing the response of the Committee’s Chair.

As a fellow parliamentarian, I thank my right hon. Friend for using his significant authority in this place to raise this important matter. I hope he will be content if I conclude my remarks with the hope that the UK will always uphold the integrity of our markets, as well as fair justice for those who work in them.

Question put and agreed to.

Council Tax and Stamp Duty Alternatives

Andrew Griffith Excerpts

Wednesday 17th May 2023 Westminster Hall

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

It is a pleasure to see you in the Chair, Mrs Harris, and to serve under you today. Let me join others in congratulating my hon. Friend the Member for Barrow and Furness (Simon Fell) on securing this well-attended debate. I note the largely cross-party nature of the contributions—with the exception of the speech by the hon. Member for Ealing North (James Murray)—and I will try to reflect that in my tone. We welcome this opportunity to discuss the important issue of property taxation, including the current status of council tax and stamp duty. I have heard the concerns that have been articulately put on behalf of Members’ constituents in many different parts of the country, and those concerns have been thoughtful and constructive.

For many people, council tax is the most fundamental tax: we pay it every month, it is highly visible, it has an impact on all sorts of important decisions and, when we pay it, we know what services we are getting for it. It has the strength unique in the taxation system of being local and personal. That is not to say that it is perfect, and we have heard today about some of the difficulties manifested in some communities.

Importantly, council tax is set, collected and retained by democratically elected local authorities, and I ask colleagues to think about that as we think about potential reforms. It ensures that households contribute to the cost of local services, whether that is fire and rescue, refuse collection, transport, libraries or—this is a particular passion for my constituents in Arundel and South Downs—dealing with potholes.

Council tax is a well-understood tax and has a high rate of collection and a stable base. It does not, for example, go up and down with property prices, as some potential alternatives might. Therefore, it gives local authorities a strong degree of certainty in their financial planning. On aggregate, it raises about £36 billion for local councils in England. That is about 57%—very importantly, the majority—of their core spending power. Council tax is the largest single source of revenue for local authorities. To ensure fairness, it is mitigated—we heard a little about this—through a range of reliefs, such as support for those on low incomes, a reduction for those with a disability and an exemption for students.

Stamp duty is an efficient tax to administer and collect. It raises a really substantial sum—£14 billion that the Government use to pay for essential services, such as the NHS, schools and police.

So these are not easy issues. For all of us thinking about the best way forward and about how to chart a course for reform, this issue does pose questions that are worth thinking about. Notwithstanding the advocacy of the proposal from many hon. and right hon. Members in the debate, neither the Opposition Front-Bench spokesman, the hon. Member for Ealing North, nor the distinguished hon. Member for Westmorland and Lonsdale (Tim Farron) actually went to the point of committing to make this change, so I would contend that there is a little more work to do.

[Peter Grant]

Will the Minister give way?

[Andrew Griffith]

Although the hon. Member does not represent England, perhaps he would like to make that commitment.

[Peter Grant]

At least we agree that we are no longer a United Kingdom—I am pleased to agree with the Minister on that.

Given the increasing complexity and scale of services that local government in Scotland and England has to provide, does the Minister see any benefit in giving councils the power to raise taxes based on something other than simply property values? Is it time to broaden the base so that they can raise their own incomes tax, VAT, sales tax or tourist taxes—or are the Government obsessed with the idea that their core tax will always be based on imaginary property values?

[Andrew Griffith]

In the interests of trying to reflect the views of hon. Members, I will not be distracted by that interesting idea. Again, the proposal that has been put forward does acknowledge the opportunity for local authorities to diversify their sources of revenue. One of the issues that, as a democrat, I find most problematic with this proposal is the impact it would have on local authorities. Their ability to raise revenue for themselves would be taken away, which would be one of the single biggest—and adverse, in my view—issues for local government. The system is often accused of being overly centralised, but this proposal would absolutely remove any ambiguity whatever, and that is something that the advocates of this proposal may want to think about.

[Helen Morgan]

Will the Minister give way?

[Andrew Griffith]

I will give way—sparingly.

[Helen Morgan]

I am grateful to the Minister for giving way. On the point about stability, surely a simple step to address some of the inequality in the current system would be to reassess the valuations and introduce higher bands of council tax.

[Andrew Griffith]

Higher bands have been introduced over time. It has been a long time—just as a point of fact—since there has been a revaluation. I note that both the Labour party and the Liberal Democrat party served in Government for significant periods during that time, so it is not just among Government Members that there is caution about some of the unintended consequences of doing something that affects so many people. The impact on those with low and fixed incomes of moving any sort of basis of property tax should be thought about carefully.

The hon. Member for Leeds East (Richard Burgon) was candid about his desire to soak the rich with wealth taxes. What we are talking about would effectively be an imperfect wealth tax, because it would be a tax on that proportion of wealth that relates only to residential property and it would not be comprehensive. For that reason, there would be people who were asset-rich but cash-poor, such as widows, who would have to think through the consequences.

Moving towards a more periodic review of values poses the question of how that revaluation would take place. Certainly, some of us are shy of algorithms, but in all likelihood, unless we were to recruit an army of estate agents-meet-inspectors, we would be using some algorithmic method. In fairness, colleagues on both sides have talked about the status quo, but there would also potentially be unfairness in a mechanistic approach.

[Tim Farron]

The Minister is being incredibly generous in giving way. In the short time available to him, he is providing a thoughtful critique of the proposal that has been put to him, and he is entitled to do that. He correctly says that none of the parties represented here is saying that this will definitely be in their manifesto, although I think we should all consider it. However, I would love him to consider the fact that the Fairer Share approach is cross-party. The people who have been advocating for the Government to think about this have made an extensive critique of council tax and how unfair and outdated it is. On the table is something that is potentially better. I would love the Minister to look again at council tax to see whether there are ways in which he could make it fairer.

[Andrew Griffith]

I hear the hon. Gentleman, and I look forward to reading his manifesto—whether it is for his party or for the coalition that his party and the Labour party both seem very keen on.

As we think about proposals, we must think about democracy and about the potentially disempowering impact on local government, of which I suspect that most colleagues are strong advocates. There is also the issue of accountability. My hon. Friend the Member for Hartlepool (Jill Mortimer) talked about the debate going on in Hartlepool, and I suspect that it is one of the livelier debates that local people are having. However, it would not be able to take place if these things were simply set in Whitehall and the money was distributed algorithmically.

My hon. Friend the Member for West Dorset (Chris Loder) talked a little about the compensating mechanisms of revenue support grant. The Government are levelling up in many ways, but that is another way in which we can seek a fairer outcome for our constituents.

[Chris Loder]

Will the Minister consider reviewing that for the Dorset Council area so we have fairness for our constituents?

[Andrew Griffith]

I am quite sure that my hon. Friend, who is an effective champion for his constituents, will continue to prosecute his case, but he will understand if I do not give that commitment here and now.

My hon. Friend the Member for Barrow and Furness and others talked about second home ownership. We understand that, and I have a proportion of second homes in my own constituency. As colleagues know, proposals on the table in the Levelling-up and Regeneration Bill would allow councils local and democratic discretion to attract a council tax premium that goes some way to address that issue. However, we should be cautious. Those homes already bring a disproportionate amount of net benefit to local councils, simply because they pay the full rate of council tax, but do not consume at the same intensity. The ability to have them pay double will increase that further.

Let us remember that this is not a simple issue. The work-from-home, hybrid economy blurs the line. Hon. Members—probably almost uniquely as a group—understand that people may work in one place and live in another, so the line between a first and a second home can be blurred. We should be cautious about discriminating on tax grounds against the person who chooses to work and rest in two different places, in two small homes, rather than in a single home of equivalent value. I offer that to hon. Members as a potential mitigant as we think about this issue.

Today, we have heard some thoughtful proposals, and a number of points have been made on both sides. In conclusion, these issues are important, and there are real consequences not only for our constituents, but for the housing market, in which, as one hon. Member said, there is already substantial intervention. We need to think through the unintended consequences at every point. Help to downsize would be one potential benefit for us all.

The Government will continue to act where appropriate to do so. I thank hon. Members for their thoughtful contributions. In securing the debate, my hon. Friend the Member for Barrow and Furness has allowed us to hear a variety of different contributions from all parts of the House. The Government will keep listening on this important topic.

Corporate Profit and Inflation

Andrew Griffith Excerpts

Tuesday 16th May 2023 Westminster Hall

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

It is a great pleasure to see you again in the Chair, Sir Mark. I congratulate the hon. Member for Leeds East (Richard Burgon) on securing this well-attended debate, and for his valiant attempt to leave his mark on the lexicon on this topic. I thank all Members for their contributions. Clearly, the issue of high prices and inflation is affecting everybody across the country—all our constituents, who send us here—and I welcome the opportunity to respond on the Government’s behalf.

The reality is that costs in the UK have primarily risen because of Putin’s illegal invasion of Ukraine and global supply pressures post covid. The right hon. Member for Hayes and Harlington (John McDonnell) was the only one of the eight contributors we heard from, including both Front-Bench spokesmen, to even go so far as to mention those two unprecedented facts.

[Richard Burgon]

That is not true.

[Zarah Sultana]

I mentioned that.

[Andrew Griffith]

I stand corrected. I was being diligent and attentive, but I was clearly so taken by the force of the arguments made by the hon. Members that I missed that.

[John McDonnell]

Will the Minister explain the role that Putin played in ensuring that Tesco, Sainsbury’s and Asda increased their prices to such an extent that they have increased their profits by 97%?

[Andrew Griffith]

If the right hon. Member lets me make some progress, I will address precisely his point. Domestic inflation pressures have risen. The UK labour market has remained very tight, reflecting a real cost headwind to employers. There have been real challenges, as we saw in the labour figures today, in getting people off welfare and into work. That has pushed up the cost to firms, including Tesco and others, of producing goods, which has resulted in inflation. The UK is not alone, and I hope Members will reflect on and understand that. We are seeing high inflation in all major global economies. Food inflation in Germany is above 20%.

[Margaret Greenwood]

Will the Minister come back to the question from my right hon. Friend for Hayes and Harlington? Why have profits increased so much?

[Andrew Griffith]

With respect, I have not heard an awful lot of analysis in the debate. I have heard many mentions of Unite the union, and I am familiar with its work, but I did not hear any analysis from Members. Let us talk about food prices for just a moment.

[Richard Burgon]

Will the Minister give way?

[Andrew Griffith]

I will give way because it is the hon. Member’s debate, but I will talk about food prices, if that is what I am being asked to do.

[Richard Burgon]

The Minister said he heard very little analysis from Opposition Members other than reference to research by Unite the union. Does he accept, however, that as well as Unite the union, officials at UBS, Goldman Sachs, the European Central Bank and the US Economic Policy Institute all suggest that more than half of the current price mark-up is to do with profiteering? If so, what are his Government going to do about it?

[Andrew Griffith]

I listened to the citations and I will go away and inform myself about them, but one can find a million citations in support of any argument, however spurious.

Let us get to the heart of food inflation. After reading the report from Unite the union earlier today, I went and did some research. I am keen to understand the level of alleged profiteering that we see, so I looked into costs at the Co-op, a mutual organisation that I believe supports many Opposition Members. I compared the alleged profiteering by our major supermarkets with what is happening in an organisation that I hope we can all agree—and join hands across the House—is not indulging in profiteering. The cost of four pints of milk at the Co-op is 20p more expensive than at Tesco. I have a wonderful chain of Co-operatives in my constituency and it serves our rural community magnificently, so I pay great tribute to the Co-op, but six eggs in the Co-op cost 35p more than at Tesco. The Co-op was retailing the same loaf of white bread for 56p more, and chicken breasts for £1.70 more, than Tesco. The Co-op is retailing butter, tea and Heinz baked beans for 40p more than Tesco—I would be very happy to give Hansard the details of this. I will stop at the emotive category of baby milk: an 800g pack of Cow & Gate baby powder retails for £10.50 at Tesco, but the same product retails for £11.50 at the Co-op.

I put it to you, Sir Mark, that we are seeing either a vibrant and competitive market in food retail—which includes the Co-operative mutual organisation, although its prices seem a little higher—or a level of anti-competitive practices. But if it is the latter—right hon. and hon. Members should be enormously careful about this—those anti-competitive practices and that profiteering extend to no less an organisation than the Co-operative mutual society, which supports Opposition Members. If any of them want to intervene on me, I would be very interested to hear their view of the Co-operative’s business practices.

[John McDonnell]

Let me explain this to the Minister. There is such a thing as the Co-op party, of which some people on this side of the House will be members, and there is such a thing as the Co-op store. The Co-op store is not related to the Labour party; it is a completely separate commercial entity. The Co-op party is separate completely, so there is no relationship between the Members here and the Co-op store, although some of them might shop at it.

[Sir Mark Hendrick (in the Chair)]

Order. John McDonnell has made a good point, but for clarification, as a Labour/Co-op MP—

[Andrew Griffith]

Declare your interest!

[Sir Mark Hendrick (in the Chair)]

I do declare an interest. What you call “profits” for the Co-op actually get reinvested in it; they are not given out to shareholders in dividends. That is the difference.

[Andrew Griffith]

As I said, the Co-operative, as a food retailer, is a marvellous organisation. My point is that we should be very cautious about simply making the assumption that an increase in the prices that consumers are paying, which is spread across very different parts of the producer sector, automatically leads to the sorts of outcomes that we heard from Opposition Members.

We have strayed quite a long way away from the topic of debate. I would dearly love to be a fly on the wall, or a passenger on the train as it returns to both Leeds East and Leeds West, because there is some dissonance in my mind about the position of the Opposition today. We have had a very refreshing debate that has been honest and open in its candour. We have heard about the need for the minimum wage to increase to £15 an hour, the need to scrap all anti-trade union laws and to give an above-inflation pay rise to workers, the need for an excess profits tax and for wealth taxes, the need for private rent controls, the need to impose price controls on food staples—there is lots of nodding, so please intervene on me—and the need to return to public ownership every water, rail and energy company. These points were all raised in the debate—

[Sir Mark Hendrick (in the Chair)]

Order. Because of the Divisions, we have run short of time.

Draft Insider Dealing (Securities and Regulated Markets) Order 2023

Andrew Griffith Excerpts

Tuesday 9th May 2023 General Committees

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

I beg to move,

That the Committee has considered the draft Insider Dealing (Securities and Regulated Markets) Order 2023.

It is a pleasure to serve under your chairmanship, Mrs Latham. I thank hon. and right hon. Members for attending this debate. The UK is one of the world’s leading financial centres, and the Government recognise that financial services are one of the core engines for boosting economic growth across all four nations of the UK.

I am sure that hon. Members are well aware of the extensive programme of financial services reform that the Government are pursuing, as set out by the Chancellor in the Edinburgh reforms package. However, it is important not to overlook the robust baseline regulation that ensures the integrity of our financial markets. The regulations amended by this draft statutory instrument are paramount to achieving that. They ensure that everyone can have confidence in the integrity of our financial markets.

The draft SI updates the UK’s criminal insider dealing regime to ensure that all market participants are held to high standards and that there are meaningful consequences for those who break the law. Insider dealing is a form of market abuse. In broad terms, it is where an individual trades in a financial instrument based on material, non-public information about a company. The Financial Conduct Authority is responsible for identifying and taking enforcement action against cases of insider dealing. It can impose a variety of criminal and regulatory sanctions under the criminal and civil market abuse regimes.

The intention of today’s amendments is to enable the FCA to take action against market abuse in a way that is commensurate with the seriousness and market impact of the abusive behaviour. The legislation that defines the current criminal offence for insider dealing was first introduced in 1993. The Criminal Justice Act 1993 lists the securities and regulated markets to which the insider dealing offence applies. However, financial markets have evolved since the lists of instruments and regulated markets were last updated. As a result, those lists are narrower than the more recently updated civil market abuse regime.

The Government believe that the gap between the civil and criminal insider dealing offences needs addressing. The draft SI does just that by aligning the list of securities in scope of the criminal insider dealing offence with the list in the civil insider dealing regime. The SI also replaces the named regulated markets in scope of the criminal insider dealing offence. The use of general definitions will future-proof the list going forward, avoiding relevant markets inadvertently falling out of scope.

Overall, the SI will reinforce the UK’s reputation as a fair and transparent place to invest, with robust regulatory standards and serious consequences for those who do not comply with our laws. I commend the draft order to the Committee.

--- Later in debate ---

[Andrew Griffith]

It is always a pleasure to follow the hon. Member for Hampstead and Kilburn; I thank her and her colleagues for their support. She makes a fair point about the period between publication of the FEMR in 2015 and the Committee’s consideration of the draft order today. I do not have the figures on—indeed, I do not even know—whether there has been a lack of prosecutions as a result. As the hon. Lady knows, there is both a civil and a criminal regime. It is only the civil regime that we are updating today; we are maintaining the criminal regime.

[Hannah Bardell (Livingston) (SNP)]

Like our Labour party colleagues, the Scottish National party supports the draft order. However, the reality is that the National Crime Agency has faced a 4.5% decrease in its budget in recent years. Is the Minister willing to say anything about the funding of the resources to pursue the criminals? What more will be done in line with updating the legislation?

[Andrew Griffith]

These are important matters. The funding of the police is out of scope, but I am sure I share the Committee’s desire to see any criminals in this space prosecuted and to see as many investigations as possible. The FCA has operational independence in dealing with those matters, and it is our job to provide it with the tools, which is what we are doing. I am grateful for the support of the hon. Lady and her party.

There have been a number of interludes since the original FEMR in 2015, including the unprecedented period during the pandemic and some of the other financial measures that we have had to pursue as part of Brexit. I hope we have consensus about how we move forward now. In all the important work that we are doing across the financial services sector, I have a zeal to proceed at the fastest possible pace. We do not have the ability to travel back in time, but we can put the draft order on the statute book now.

[Nigel Mills (Amber Valley) (Con)]

One of many changes since the FEMR is the rise of cryptoassets and cryptocurrencies. Do cryptoassets fall under the definition of transferable securities or money-market instruments included in the draft order, so that cryptocurrency insider trading will be caught by these rules?

[Andrew Griffith]

It is not in these rules per se. There were two things that I talked about; one is the fact that we are moving away from a prescriptive list and towards definitions of what constitutes a financial instrument. That allows a degree of future-proofing for precisely the purpose that my hon. Friend talks about.

My hon. Friend will also be aware that we are consulting right now on the broader regulation of cryptoassets. I humbly suggest that it is not in scope for this Committee, but I am happy to engage with him and other colleagues on it. The purpose of the consultation is precisely to involve the broadest possible range of hon. Members and stakeholders so that we get this important regulation right. It is a whole new part of the economy, and our desire is to get it right.

Question put and agreed to.

Oral Answers to Questions

Andrew Griffith Excerpts

Tuesday 9th May 2023 Commons Chamber

[Bob Blackman (Harrow East) (Con)]

3. What steps his Department is taking to improve the regulatory framework of the financial services sector.

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

The Edinburgh reforms take forward the Government’s ambition to maintain the UK’s position as a world-leading global financial centre, while ensuring that our financial sector remains robust in the face of market shocks. In particular, they introduce a new secondary duty of facilitating growth and international competitiveness, which is a first for UK regulators.

[Bob Blackman]

I thank my hon. Friend for that answer. Clearly, the culture and performance of regulators is one key consideration for firms when they choose to invest in the UK. What steps is he going to take to introduce key performance indicators for financial regulators to report on their delivery against the new growth and competitiveness objective in the Financial Services and Markets Bill? Is he considering adding any measures to the Bill that would strengthen the independent scrutiny of regulators?

[Andrew Griffith]

My hon. Friend does great service as chair of the all-party group on personal banking and fairer financial services, so he knows of what he speaks. Today, the Government published a call for proposals on the metrics that regulators should publish to support scrutiny of their work; as every business leader knows, what gets measured gets managed. That responds to the significant interest shown by industry and Parliament in ensuring that appropriate and transparent public measures are in place to support scrutiny of the regulators’ performance. The Government are clear that with great power must come greater accountability.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

One measure that would improve the regulatory framework for mutuals in the financial services sector, such as Royal London or Liverpool Victoria, would be the introduction of permanent mutual shares. Given that such a reform would allow a new safe route to access the capital that such financial mutuals need to expand—and without having to demutualise—will the Minister explain why the Treasury is still dragging its feet on the introduction of such a significant reform?

[Andrew Griffith]

The hon. Gentleman and I have talked a number of times about this. I do not think it is fair to say that the Treasury is dragging its feet. We have supported reform of the mutuals sector. We welcome a diversity of provision, which involves a greater expansion of and more commercial freedom for the mutuals sector. With the Law Commission, we are looking to take its work forward to see whether we can help, and I am always happy to sit down with him, or with any representatives from the sector, as part of my widespread programme of engagement.

[Christine Jardine (Edinburgh West) (LD)]

4. What fiscal steps he is taking to support businesses with energy costs.

--- Later in debate ---

[Mark Menzies (Fylde) (Con)]

11. What progress he has made on reducing the rate of inflation.

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

The Government’s three economic priorities this year are to halve inflation, grow the economy, and get debt falling. This will require patience and discipline. Countries around the world are facing rising prices and we will not be able to make that go away overnight, but by sticking to our plan, we will halve inflation this year and help to ease the pressures that people are facing.

[Mr Hollobone]

Food price inflation is increasing far faster than the overall average increase in prices. This is affecting the poorest the hardest in Kettering and across the country. Is there any good news at all from His Majesty’s Treasury about the prospects for food price inflation over the next 12 months?

[Andrew Griffith]

My hon. Friend is a doughty champion for his constituents. The Office for Budget Responsibility this year does expect food, tobacco and alcohol inflation to fall significantly, and that is not all. The Government recognise the challenges facing households due to the elevated cost of living in general, including food, so we took action at the spring statement to support struggling families. Taken together with previous action, support to households to help with bills is worth an average of £3,300 a year across this year and next.

[Mr French]

The Government are absolutely right to prioritise reducing inflation given the significant impact it is having on families and businesses across the country. I welcome the support that the Minister has just outlined for families in my constituency of Old Bexley and Sidcup. Can he confirm what assessment has been made by the Treasury of the impact of more than a decade of abnormal monetary policy following the global financial crisis?

[Andrew Griffith]

As my hon. Friend knows, monetary policy is the responsibility of the independent Monetary Policy Committee and the Bank of England. We will continue to work closely with them to ensure that monetary and fiscal policy are well co-ordinated. The Chancellor reconfirmed the inflation target of 2% at the autumn statement and confirmed that this Government will not change the target.

[Mark Menzies]

While inflation is now heading in the right direction, the effect of the price rises is still being felt by Fylde’s older people. What steps is my hon. Friend taking and what conversations has he had with the Department for Work and Pensions to ensure that Fylde’s retired residents are well protected?

[Andrew Griffith]

I and my colleagues work closely with colleagues in the DWP, as my hon. Friend knows, on behalf of pensioners in Fylde. More than 8 million pensioner households will receive a cost of living payment of £300 this winter, but more than 12 million pensioners have benefited from a 10.1% increase to their state pension. That is the biggest percentage rise in the state pension for more than 30 years and its biggest-ever cash increase.

[Alison McGovern (Wirral South) (Lab)]

As the Minister rightly said, monetary policy is made independently by the Monetary Policy Committee in this country. However, the Government are responsible for economic stability, and for that we need investment. What policies of the past couple of years does the Minister believe have got us into this position with inflation, and how are the Government going to make sure that we have better economic stability, given their recent record?

[Andrew Griffith]

The hon. Lady omits to mention both the headwinds from the global pandemic and Russia’s aggression in Ukraine. Any financially literate conversation on this subject has to acknowledge that we see very similar rates of increase in inflation and rising interest rates across the developed world. In that context, this Government are focusing on stability, ensuring that we continue to pay down debt over the cycle and do not do as the previous Labour Government did and leave a note behind for their successors saying that there is no money left.

[Alison Thewliss (Glasgow Central) (SNP)]

Food price inflation stood at 19.2% in March, up from February. That is causing severe problems for many in my constituency, particularly those who have no recourse to public funds status, meaning that they are not entitled to any support from the Government whatsoever. What will the Minister do to help those people, who are struggling and heading for the food banks because they cannot afford to make ends meet?

[Andrew Griffith]

In the interest of time, I will not repeat for the hon. Lady the support for households, which averages £3,500 across the United Kingdom. If she has constituents with particular needs, the Government have recently extended the £1 billion household support fund and I suggests she works with her local authority to try to meet their needs through that.

[Layla Moran (Oxford West and Abingdon) (LD)]

Inflation is hitting not just individuals and families, but councils and potentially infrastructure projects. Lodge Hill junction on the A34 in Abingdon is one such key piece of local infrastructure, and when completed, will support jobs and housing across Oxfordshire and Science Vale and the economy as a whole. Homes England and the Department for Levelling Up, Housing and Communities say that the final piece of that funding now sits with the Treasury in the brownfield, infrastructure and land fund. Will the Minister meet me so that I can explain why this is such an important piece of funding to be released, and please can the Government supply the last piece of this puzzle so that we can deliver Lodge Hill junction once and—

--- Later in debate ---

[Alex Cunningham (Stockton North) (Lab)]

10. What comparative assessment he has made of forecasts for the UK’s rates of (a) inflation and (b) economic growth with those for G7 countries in 2023.

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

Compared with the G7, the UK had the highest rate of growth in each of the past two years. The International Monetary Fund UK growth forecast for 2023 has been upgraded by more than that for any other G7 country, and the IMF has said that the UK is “on the right track” for economic growth.

[Alex Cunningham]

The Minister paints a pretty picture. The British people want hope for the future, but all they see is Britain continually lagging behind on the global stage and prospects for their families getting worse. The IMF says that Britain will have a smaller economy by the end of the year and the poorest growth of the G7 over this year and next. In March, UK inflation was the highest in western Europe, and projections show that it will be the highest in the G7 this year, while food prices are rising 50% faster than in the G7. Whose fault is it?

[Andrew Griffith]

It is certainly the hon. Gentleman’s fault if, having asked that we assess performance across the G7 and we do precisely that, he does not like the answer. The reality is that across the G7, growth has fallen and inflation has risen, but we know the sources of that—it is not this Government; it is the fault of Putin and the global covid pandemic, whether the Opposition like it or not.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

My hon. Friend is right to ignore the gloom and negativity coming from the Opposition Benches. They will always find a reason to talk down the British economy. Is it not the case that today, with more people in our country going out to work than ever before, our economy is demonstrating a dynamism and resilience that few other economies around the world can emulate and a dynamism that we do not get with a Labour Government?

[Andrew Griffith]

My right hon. Friend is absolutely right. Resilience is a strong word, and thanks to the actions that this Government have taken over the past six months, the Office for Budget Responsibility has confirmed that the UK is now expected to avoid a recession this year.

[Kirsten Oswald (East Renfrewshire) (SNP)]

12. What recent assessment his Department has made of the potential impact of the UK’s withdrawal from the EU on the economy.

--- Later in debate ---

[Sam Tarry (Ilford South) (Lab)]

We are clearly falling pretty short of where we need to be if we are to tackle net zero. Recent research by E3G and the World Wide Fund for Nature into clean investment showed that the gap is currently between £81 billion and £111 billion between now and 2030. That is equivalent to a quarter of the investment required in that crucial economic sector and every other sector of the economy. Public investment clearly needs to be a key driver in reaching net zero, so I wonder whether Ministers would consider increasing the capacity of the UK Infrastructure Bank on that.

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

The Government are leading the way with the recently published green finance strategy, but that stands as part of a broader piece of work, unleashing productive finance into all parts of the economy and in particular funding the transition, which is capital intensive.

[Dr Luke Evans (Bosworth) (Con)]

I thank the Chancellor for two weeks ago meeting Leicestershire MPs and the senior leadership of the county council to discuss funding there. Of particular concern is the core funding of special educational needs and disabilities, social care and transport such as buses. What more can the Minister do to address the problems with county council funding that we have in Leicestershire?

Cost of Living Increases

Andrew Griffith Excerpts

Tuesday 25th April 2023 Commons Chamber

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

This is a Government who will always support those who need it the most, a Government on the side of working families and a Government who are implementing generational, landmark policies to get the economy growing and ensure that everyone shares in its success. Just look at the impact of decisions made from the autumn statement 2022 onwards. It shows beyond doubt that Government support for households in 2023-24 provides low-income households with the largest benefit in cash terms and as a percentage of income. In fact, on average, households in the bottom half of income distribution will see twice the benefit of households in the top half, in cash terms. Because of the rises in tax thresholds introduced by successive Conservative Governments, for the first time ever, people in our country can earn £1,000 a month without paying a penny of tax or national insurance.

I thank my right hon. and hon. Friends for their contributions: my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom); and my hon. Friends the Members for Guildford (Angela Richardson); for Poole (Sir Robert Syms); for Clwyd South (Simon Baynes); for Runnymede and Weybridge (Dr Spencer); for Broadland (Jerome Mayhew); for Wantage (David Johnston), for Aylesbury (Rob Butler); for Mansfield (Ben Bradley) and for Peterborough (Paul Bristow). They all made salient comments about the support this Government are giving at this time when the cost of living has been rising.

As my right hon. Friend the Chief Secretary to the Treasury reminded us, the best way we can help people get through a period of rising prices is by bearing down on inflation. At the same time, we are cutting debt and growing the economy, which is the best way to lift living standards. But we also know at this time that some people need additional, targeted support. In the face of cost of living headwinds, we demonstrated our values by protecting struggling families with a £2,500 energy price guarantee, one-off payments and the uprating of benefits. Aside from the measures on energy, we made changes that mean the average driver has saved about £200 in total since the 5p fuel duty cut was introduced.

[David Linden (Glasgow East) (SNP)]

The Minister speaks about the support the Government have given in terms of the cost of living payment. Why is it then that, when someone has already been punished with a sanction, the Government punish them twice by not giving them the cost of living payment?

[Andrew Griffith]

I understand that the hon. Member and his party are not happy campers these days, but we are giving more money per head to households in Scotland than we are in the rest of the United Kingdom, which is why he should get behind the many benefits of being part of this Union. On this very day, more than 8 million families across the United Kingdom will receive in their accounts a £301 cost of living payment from the Government, and that is just the first of three payments that will be made, giving a total of £900 to low-income and vulnerable families.

One measure that touches almost everyone in this country is childcare. In the Budget, we on the Conservative Benches confirmed the biggest expansion of free childcare in living memory. Our new offer will close the gap between parental leave ending and the current childcare offer. It will reduce costs for parents who can get back to work and make sure that a career break does not become a career end. It will improve the lives of millions of people. It is the right thing to do, but we can only afford to do that because of the fiscal discipline that we have exercised.

I am delighted that, as people go to the polls next week, the Opposition have given them a reminder of where they stand, for which I am grateful. Conservative councils charge £80 a year less than Labour on a band E property. Under the last Labour Government, council tax doubled. Under Labour Wales, it has more than trebled. Not for the first time, Labour says one thing and does another. Its motion today calls for a council tax freeze, and yet, far from freezing, I looked at the increases in every one of the constituencies of those on the Opposition Front Bench: Leeds up 5%; Wolverhampton up 5%; Camden up 5%; Ealing up 5%; Greenwich up 5%. A full house of Labour councils charging the maximum that they are allowed in council tax.

Enough, Madam Deputy Speaker: enough of the Opposition giving us rhetoric not record; enough of the economic illiteracy from Opposition Front-Bench spokesmen; and enough of these ChatGPT-does-socialism-type speeches that we have heard this afternoon. We should never forget Labour’s record on the economy: working people and your children pay the price. Labour has ditched its rule not to borrow to fund day-to-day spending, so we know its plan to stick billions on the nation’s credit card. [Interruption.] Labour Members can intervene if I am incorrect. No Labour Government have ever left office with unemployment lower than when they came to power. Under the last Labour Government, unemployment rose from 2.1 million in 1997 to 2.5 million by the time they left office in 2010—more people denied the security and the chance in life of a good job.

Finally, let us never forget, when Labour left office in 2010, how the then Chief Secretary wrote—[Hon. Members: “Ah!”] What did he write? He wrote:

“Dear Chief Secretary, I’m afraid there’s no money left.”

We are a Government focused on delivering the British people’s priorities. We are making sure that we are helping those in financial strain. We are focused on the future and we are delivering not just for growth that comes when a country emerges from a downturn, but for long-term sustainable healthy growth.

Since the Conservative Government came into power in 2010, we have grown more than major economies such as France, Italy or Japan and around the same as Europe’s largest economy, Germany. We have halved unemployment. We have cut inequality and reduced the number of workless households left to us by 1 million. Output is now higher than pre-pandemic levels. There is still much to do, but we are on track to deliver—

[Sir Alan Campbell (Tynemouth) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Question put accordingly (Standing Order No. 31(2)), That the original words stand part of the Question.

Finance (No. 2) Bill

Andrew Griffith Excerpts

Committee of the whole House
Wednesday 19th April 2023 Commons Chamber

[Kirsty Blackman]

That is one reason why our amendment 23 would allow the Secretary of State to make those specifications, so that all the people considered to be working for NHS bodies—GPs are commissioned by NHS bodies—are included. The measure was intended to allow that level of flexibility. If I had not intended to allow that level of flexibility, we would not have tabled amendment 23 to allow the Secretary of State that flexibility. We referred to NHS bodies and specified a number of hours so that someone who works for the significant majority of their time in private practice and private systems, and perhaps works an hour or so every few months for the NHS, would not be caught by this measure. The intention is that those people who work for a significant amount of their time in contributing to the health of the population, making people better and well, ensuring that they stay healthy and live longer lives, are recognised and given the opportunity to benefit from this measure.

My understanding, from everything that the Government have said previously about this, is that one of the biggest concerns in this area relates to NHS doctors. If the Government feel that there are other significant areas of the public sector where people could and should benefit, I look forward very much to the Minister standing up and explaining all of those. I am sure I will be asking further questions about this in Committee.

The lifetime allowance was in place for a reason and it does not work in relation to senior NHS staff, but it does work in relation to those places where people are not contributing to the health and wellbeing of our population and where people have not been on the frontline during the past few years, working under immense pressure for the public good. SNP Members will therefore vote against clause 18 standing part of the Bill if we have a vote on that. That clause is about the abolition of that lifetime charge. We do not agree that that should apply to everyone. The Government need to bring in a bespoke scheme to solve this problem, rather than applying it to everybody, no matter how much money is involved and how little public service they provide for that income that they receive. I ask the House to support amendment 21, which stands in my name and those of my colleagues.

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

It is a pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman). We are covering clauses 18 to 25, which will remove the pension tax barriers to remaining in work that highly skilled and experienced individuals across the public and private sectors, including senior NHS clinicians, are facing. The clauses also ensure that the tax regime works appropriately for the winding up of collective money purchase schemes and legislates to provide taxpayer-funded top-up payments for up to 1.2 million of the lowest earners in net pay pension schemes.

--- Later in debate ---

[Anthony Browne]

Does the Minister agree that the 80% of employees who work for the private sector make a valuable contribution to the wellbeing of the country as well? Does he agree that they would have a right to feel annoyed at the idea that there should be an especially punitive regime just for private sector workers, which the public sector workers do not get punished by?

[Andrew Griffith]

My hon. Friend makes exactly the point that I was making, and does so extremely well. It is wrong for us in this House to seek to assign to ourselves the ability to judge the virtuous nature of people’s activity. I am sure that an accountant in the private sector works as diligently as an accountant seeking to drive value for money and the best medical outcomes in the NHS. With the greatest respect, I think that the hon. Member for Aberdeen North goes a little too far in seeking to “unbake” the wonderful cake of our mixed economy health system, which involves contributions from the private sector, private forensic laboratories and private diagnostic machines, and the wonderful work of our clinicians, and administrative, ancillary and domiciliary staff, who are mostly in the public sector. As I have said, her approach is the wrong basis on which this House should proceed.

Clauses 18 to 23 will reform pension tax thresholds to remove the current disincentives for highly experienced individuals to remain in the labour market or even to return to the workforce to build up their retirement savings. Currently, there are limits placed on the amount of tax-relieved pension savings individuals can make each year and an additional second restriction that applies to the total. That is an unusual feature of the tax system, where almost every other allowance is on an annual basis. The Government listened to stakeholders from across the public and private sectors, who have said that the annual and lifetime allowances can influence the timing of retirement and act as a barrier to remaining in the workforce.

The changes made by these clauses will increase the annual allowance from £40,000 to £60,000 and remove the lifetime allowance charge from 6 April 2023. The changes will ensure that pensions tax does not act as a barrier to staying in or returning to work, and will eliminate the chilling impact that the mere fear of triggering an extra tax charge has, even for those who are not immediately subject to falling foul of the cap. Much as the opposition parties may not wish to hear this, these changes command support across the economy. The Guild of Air Traffic Control Officers told us that pension taxation risks causing its members to reject tasks essential for the safe and efficient operation of air traffic control in the United Kingdom.

Dr Vishal Sharma of the British Medical Association has said that this is

“an incredibly important step forward”.

He said that the abolition of the lifetime allowance will mean that

“senior doctors will no longer be forced”—

his words—

“to retire early and can continue to work within the NHS, providing vital patient care.”

The Forces Pension Society said that this is a positive development and that it had been lobbying for it for several years. It said that these changes will help keep our streets safe. Marc Jones, chairman of the Association of Police and Crime Commissioners, confirmed that, as it relates to the police, they

“will be a game changer for thousands who love their jobs and do not want to retire.”

To support those who have left the labour market to return and build up their retirement savings, these clauses will also increase the money purchase annual allowance from £4,000 to £10,000 from April 2023. This will enable more individuals who have previously retired to return to the workforce and to continue to build their savings. In line with these headline reforms, there are also technical changes. They increase the minimum tapered annual allowance from £4,000 to £10,000 and the adjusted income level required for the annual tapered annual allowance to apply to an individual from £240,000 to £260,000.

[Kirsty Blackman]

While the Minister is talking about all the public sector individuals who will benefit as a result of these changes, he has not made the case for why this should apply to bankers. Why should bankers receive this exemption from the lifetime allowance? What benefit will the country get as a result?

[Andrew Griffith]

I am sure that the significant number of people—over half a million—who depend on jobs in the financial sector, including in places such as Edinburgh, one of our great financial centres, are listening with consternation to the politics of envy. The hon. Lady singles out individual professions and invites us to set separate tax policies on the basis of a particular profession. That would be entirely wrong. If she had been listening very carefully—I understand that she wanted to get in, because this is a debate and is the opportunity to do so—she would have heard that I was talking about the annual tapered allowance. That is a feature in pensions policy that is there entirely to ensure that it continues to have a progressive nature. A banker who is earning £260,000 a year can get only a reduced amount. They cannot avail themselves of the same annual allowance as the hon. Lady’s friends, colleagues and those she seeks to represent in our public services. I can assure the House that this is not a charter for bankers. In fact, the annual tapered allowance remains unchanged in its operation. We are updating the thresholds here today.

Unless the hon. Lady wishes to withdraw her amendment at this point having heard the strength of our arguments, I will now turn briefly to the remaining clauses that we are debating today, covering collective money purchase pension arrangements and relief relating to net pay arrangements. Collective money purchase is a new type of pension arrangement. Clause 24 will prevent any unintended tax consequences should a collective money purchase scheme wind up. It will ensure that members and their dependants can receive payments and transfer funds without incurring an unauthorised payments tax charge—I do not think that that should be controversial for the House.

Finally, clause 25 relates to the introduction of top-up payments for the lowest earners—another highly progressive measure—who sit within net pay pension schemes. There are two main methods of giving pensions tax relief. Although they provide the same outcomes for most individuals, lower earners can have different levels of take-home pay depending on how their pension scheme is administered for tax purposes, and the Government believe they are right to rectify that.

Clause 25 makes changes to ensure that eligible low-earning individuals whose income sits below their personal allowance receive a taxpayer-funded top-up payment so that they will have broadly similar take-home pay regardless of how their pension scheme is administered for tax purposes. The hon. Member for Ealing North (James Murray) has tabled some amendments in this respect, and I wrote to him yesterday to provide some of the comfort that I think he was looking for. They were well-intentioned amendments, and I hope that the letter I have sent him gives him some of the satisfaction that he seeks. Fundamentally, we do not disagree with what he is trying to achieve, and it has the support of those who have been agitating for low-income earners. That measure could benefit an estimated 1.2 million low earners who save into an occupational pension under net pay arrangements.

In conclusion, as I have set out, we know that there is a problem that needs to be tackled. It is a fact that individuals are choosing to retire early to prevent incurring pension taxes. The changes today, which have been widely welcomed by sectoral representatives across the economy, will ensure that we can retain our most skilled and experienced workers in all sectors while also simplifying and improving the pension arrangements for millions of households. I therefore urge Members to accept that clauses 18 to 25 should stand part of the Bill.

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Dame Rosie, for the opportunity to respond on behalf of the Opposition. I wish to speak in support of the new clauses in my name and the name of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).

In this debate, we get the chance to discuss something rare: a tax cut from this Government. It is rare to see a tax cut from this Government, because we are so used to seeing tax rises from them—24 tax rises in the past few years. We now face a tax burden in this country that has risen to its highest level in 70 years. This month, people across the country are being hit by a double whammy of Tory tax rises. Freezes to income tax thresholds mean stealth tax rises for working people, while, at the same time, families are being hit by the Tories’ council tax bombshell.

Let me be clear about what these tax rises mean: the Government’s six-year freeze in the personal allowance will take its real value in 2027-28 back down to its 2013-14 level, while this year, council tax for the typical band D property will breach £2,000 for the first time. In the middle of a cost of living crisis, made worse by the Conservatives’ tax rises, one permanent tax cut was announced by the Chancellor in his Budget last month. That tax cut, introduced by the clauses we are debating today, sees £l billion of public money spent to benefit only the 1% with the biggest pension pots. It is an extraordinary way to spend £l billion in the middle of a cost of living crisis, which is still hitting people across this country hard. Ministers may claim that their decision was driven by a desire to get doctors back in work, but it is clear that they could have found a fair, targeted fix for doctors’ pensions at a fraction of the cost. The British Medical Association has said that a targeted doctors’ scheme could cost as little as £32 million to implement. The Conservative Chair of the Treasury Committee has said that even she was surprised that the Government did a blanket cut, rather than a bespoke policy for doctors. That is why we oppose the Government’s plans to abolish the lifetime allowance charge in clause 18 as part of their package of changes covered by clauses 18 to 23.

I wish to spend a few moments addressing clause 25, which covers a separate pensions matter, unrelated to the package of measures that we have concerns about. Clause 25 introduces, as the Minister has said, a scheme of “top-up payments” for low earners contributing to net pay pension schemes who currently miss out on a Government pension savings incentive. We know that tax relief on pension contributions can be given to individual scheme members in two ways: relief at source and net pay arrangements. In the case of the former, even non-taxpayers are given basic rate tax relief, but in the case of the latter they are not. As the Minister said, this is particularly unfair as individual people have no control over which form of scheme their employer chooses. We commend the efforts of the Low Incomes Tax Reform Group, along with pension providers, Age UK, the TUC, and others, to campaign for a change to the law, which is culminating in clause 25 before us today.

There are, however, a number of points of detail that we would like to raise with the Minister. To help draw these out, we have tabled amendments, three of which— amendments 27, 28 and 29—have been selected for debate today. I wish to put on record my thanks to the Low Incomes Tax Reform Group for its help in drafting these amendments.



We recognise that, under the measures proposed in clause 25, there is an onus on His Majesty’s Revenue and Customs to make payments to eligible individuals. While we hope, of course, that HMRC would always do the right thing, we think individuals should be able to challenge the amount paid if they think it is incorrect. With that in mind, amendment 27 would require HMRC to provide recipients of the relief with a calculation of the payment so that it can be checked. I therefore welcome confirmation from the Economic Secretary to the Treasury in a letter sent to me this morning that

“HMRC are already planning to provide customers with details of the payment and how it was calculated.”

I would welcome any further detail on that commitment that the Economic Secretary is able to give in his closing remarks.

--- Later in debate ---

There is also the cost. The Treasury produces all these estimates, and we can have a big debate about its methodology and how it calculates things, but I fundamentally do not believe that a tax that is so punitive that it simply stops people from working at the peak of their skills and experience is somehow good for the overall economy. Clearly it means people work less and pay less tax. The overall cost of this measure will be far less than expected. I do not speak for the Treasury, but my understanding is that that was part of its rationale. When it looked at the costs for doing it for doctors and then at the costs for doing it for the economy overall, it realised there was not that big a difference, so it might as well go for the whole thing. The arguments against abolishing the lifetime allowance simply do not stack up. They are fundamentally unfair and economically illiterate, and the Government should push ahead with getting rid of the lifetime allowance.

[Andrew Griffith]

I thank my hon. Friends for their contributions to this debate. It has been brief, and I will try to keep my remarks brief, too. The Government do not want any doctor to retire early because of the way that pension taxes work, but as my hon. Friends have said, the issues that these changes address go much wider than doctors and affect workers across the economy. Nobody should find themselves having to reduce their work commitments due to interaction between their pay, their pension and the tax system. It is detrimental not just to those individuals who feel compelled to retire earlier than they would like, but also to the economy, and with them goes their often irreplaceable knowledge and experience.

My hon. Friend the Member for Poole (Sir Robert Syms) reminded us that today is a bad day for the purveyors of golf equipment, because this measure will allow people to come back into work. More than anything, we should be talking about the patients and others who will benefit, as well as the benefit to the economy from doctors, consultants and workers across sectors continuing to pay tax at their normal rate for those extra years.

My hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell) conjured up the image of how it would oh so wonderful to be a fly on the wall for the recent conversations between the hon. Members for Ilford North (Wes Streeting) and for Ealing North (James Murray) in respect of this policy. We took our cue from the hon. Member for Ilford North, who called the cap “crazy” and said that removing it would “inevitably save lives”. I find it remarkable that that is no longer the position of the official Opposition.

My hon. Friend the Member for Amber Valley (Nigel Mills) talked about the fiendishly difficult position of trying to create a special scheme. Though we take the amendment of the hon. Member for Aberdeen North (Kirsty Blackman) in good faith, she nevertheless conjures up an “Animal Farm” tax policy, where we hit GP practices, people who work in hospices and adult and social care, mental health consultants, those who work in air ambulances and medical charities, and give preference to NHS finance directors over long-standing public servants elsewhere in the sector. I could not make those unequal choices, and I am surprised that she and her party feel able to do so.

Finally, my hon. Friend the Member for South Cambridgeshire (Anthony Browne), who speaks with such great knowledge on matters financial, reminded us of the fundamental principle. We could call it the Starmer principle: what is good for the Leader of the Opposition should be good for everyone.

Since this is part of the fundamental economic debate, I will conclude by reminding my hon. Friends what happened the last time Labour had its chance to put its hand on the economy: the then Chief Secretary to the Treasury left a note saying that there was no money left. [Interruption.] I have answered the questions from the hon. Member for Ealing North, and I was kind enough to write to him about the matters that he raised with me.

[Kirsty Blackman]

The Government have been battling manfully to attempt to retrofit a justification to a policy that was unveiled like a rabbit out of a hat on Budget day. We have been speaking about doctors’ pensions in this Chamber for years, and suddenly it turns out it is actually about air traffic controllers, senior police officers and others who were not being mentioned, because the Chancellor has made the decision to abolish the lifetime allowance. The Minister was continuing to try to pull at the heartstrings by mentioning NHS doctors and consultants in every second sentence as if they are the only ones who will benefit from the £1 billion tax cut that is being made, and as if we should all support this change because it is for our NHS heroes, but actually it is not just for our NHS heroes.

The Government have chosen to implement this in the widest, most ham-fisted way. If the current policy of the lifetime allowance was so bad, why did it take the Conservative Government 10 years to change it? Why did it take them so long to decide this was so horrific that they had to get rid of it? Why, if they cannot possibly have a scheme that allows for one profession or one public service to be treated differently, did they allow the scheme for judges to continue for such a long period of time? If that was so discriminatory and cannot possibly be replicated for NHS doctors, why have they only realised this in the last few months? Their arguments do not stack up. Therefore, we will do what we intended to do, which is to press amendment 21 to a vote.

Question put, That the amendment be made.