(1 year, 9 months ago)
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It is a pleasure to serve under your chairmanship, Mrs Murray, and it is always a pleasure to follow the hon. Member for Erith and Thamesmead (Abena Oppong-Asare).
I congratulate my right hon. Friend the Member for Tatton (Esther McVey) on securing this debate and on her ongoing work in this domain. We have had a wide-ranging debate. I will not respond to every point as many of them are for the inquiry chairman, Baroness Hallett, to answer. Members should be reassured that, within scope, she will look at the points they raised about the scientific and public health advice and the impact on health outcomes, education and civil liberties.
My right hon. Friend was quite right to lament the fact that we in Parliament did not have the opportunity to ask questions at the time. It is to her credit that she continues to bring back this issue so we can learn the lessons of lockdown, which she rightly referred to as a blunt instrument. I am sure that no Member would wish it to be repeated. She was also right to remind us that under Labour lockdowns would have been longer and more costly.
I will not, because I would like to respond to as many points as possible. We have had a long debate about a wide-ranging set of consequences. We heard the hon. Lady’s perspective and, indeed, to the extent that it had a critique and a narrative it was that we did not lock down deeper, harder and for longer.
No, I have made it clear that I will not be giving way.
My hon. Friend the Member for North Wiltshire (James Gray) mentioned the impact on the hospitality sector. I represent a constituency with a significant hospitality sector, and we know that the sector was affected disproportionately during the lockdown. He and other Members understandably raised the ongoing impact of covid. One or two Members, although perhaps not enough, also mentioned the impact of the war in Ukraine, and I thank those who did for putting it in the right context. My hon. Friend raised the issue of one hospitality business in his constituency the energy bills of which have gone from £16,000 to £60,000 per month. Clearly, he is looking at the issues that people are facing, and we hear that.
The economic priority during the pandemic was to stave off an economic depression, mass unemployment and the potential for rapidly deteriorating living standards. My right hon. Friend the Member for Tatton talked about GDP falling to its lowest level since 1709. We are fortunate that the economy is now growing, thanks not only to the productive and entrepreneurial nature of the British people but to the unprecedented level of support provided. Ours was one of the fastest growing economies in recent years and that continues to be the case, and we came out of lockdown earlier than many other countries.
As all Members recognise, the attempt to limit the spread of the virus did mean the implementation of restrictions. Alongside those restrictions, the Government provided support for individuals, families and businesses throughout the country that were impacted by the virus. The two things went hand in hand. The Government could not manage that unprecedented situation. It is easy with hindsight—we have talked a lot about hindsight —and many Members have empathised with that.
I am grateful for the support from the hon. Member for North Ayrshire and Arran (Patricia Gibson), who made some fair points about the uncertainty that was faced and the difficultly of the decisions. It is my belief that they were made in good faith and tried to do the best to protect people and the economy. We cannot know, but there is at least the possibility, which the hon. Lady raised, that the impacts could have been worse if it was not for the financial support in particular that was provided, along with the other measures.
For all too short a time I served alongside the hon. Member for Blackley and Broughton (Graham Stringer) on the Science and Technology Committee. He was a ferocious interrogator and—if I may say so—very wise in the early, almost contemporaneous analysis of the scientific advice. His contribution was largely about the scientific advice, so I hope he will forgive me if I do not respond more fully to him.
My hon. Friend the Member for Bolton West (Chris Green) reiterated how vital it is that we do not lock down Parliament again, and I support him in that. Lessons will be learned and must have been learned. We here all have a voice. The reason why we are here today is because we have a voice to protect our constituents and to protect the economy from the ravages of things such as the pandemic.
My hon. Friend the Member for Bolton West also talked about the compounding effect, not just of the pandemic. I am the first to acknowledge that the pandemic has an ongoing impact on the economy. The right hon. Member for East Antrim (Sammy Wilson) talked about “economic long covid”, which is certainly part of the context in which we sit today.
My hon. Friend the Member for Bolton West reminded us that at that time nobody anticipated—as I think he put it—Europe’s biggest oil producer invading Europe’s biggest food producer. That is one reason why the Government have once again come forward with an unprecedented level of support to get people through the winter and the energy crisis that we now face, with the same objectives as the generous support that was provided during the pandemic.
Along with other major economies, the UK is in the midst of a cost of living challenge that has been caused by global inflation as a result of the disruption of supply chains, as well as the increase in energy prices. This is a global challenge and we still see higher inflation in Germany, the Netherlands and Italy. We are acutely aware of the pressures that households and businesses face. Several Members said that having been so successful in protecting the economy, jobs and businesses, it is clearly vital—this is a shared objective of Government—that we continue to do so again this winter.
Going forward, we will continue to place our people and our businesses at the heart of our policies. We are happy to make interventions, and as we debate the economic consequences of covid that is something we can all take forward.
I call Esther McVey, with one minute to wind up.
(1 year, 9 months ago)
Commons ChamberIt is a pleasure to speak in this debate. I congratulate my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard), who has a distinguished record in advocating for this subject that is matched only by his distinguished record in speaking up for his constituents.
As my hon. Friend so persuasively explained, loan sharks—he prefers to call them illegal money lenders, so I will do so going forward—can at best use unfair, hidden fees and sky-high interest rates and, at worst, some of the much more aggressive practices that he talked about. The Government recognise many of the concerns that he outlined, and I recognise them from stories that I have heard.
Illegal money lenders prey on the most vulnerable people, which is one of the saddest things about this particular form of crime. As we heard in the case of Michelle, it causes the victims great harm and distress, as well as inflicting damage on the wider communities—sometimes, those communities already face adversity—in which they operate. It is a devastating crime.
This is not a novel issue affecting only some. Only recently, I too met the Centre for Social Justice, including Matthew Greenwood, who has produced an excellent report, to listen to the findings about the prevalence of illegal money lending in England. I want to be absolutely clear with the House that lending money without Financial Conduct Authority authorisation is a crime. We want to clamp down on this immoral and damaging practice, and that is why, as my hon. Friend mentioned, the Treasury funds the illegal money lending teams across the UK. Those teams include specialist local trading standards officers who operate nationally and work alongside the FCA in maintaining standards in the consumer credit market. They can draw on geographically dispersed community intelligence officers, who are crucial in identifying local illegal money lenders, who disproportionately operate in low-income communities, and clearly, by the nature of the crime—my hon. Friend mentioned that there is often a family and friends link—can be hard to detect.
Since the teams were established in 2004, they have prosecuted over 400 cases of illegal money lending and the associated criminality that accompanies it, and have caused nearly £90 million of illegal debt to be written off. That is a huge number, but there is more we can do.
I thank the Minister for the comprehensive and detailed response he is giving, which I think is what the hon. Member for Blackpool North and Cleveleys (Paul Maynard) is looking for. I mentioned the issue in Northern Ireland in my previous intervention. I know that the Minister may not have had an opportunity to speak to anyone in Northern Ireland, whether in policing and justice or in the Police Service of Northern Ireland, but if he has, can he give any indication of what discussions he has had with those in Northern Ireland, where paramilitaries seem to be the moneylenders, about how we can take those bloodsuckers—which is what they are—out of society and off the backs of the local people?
I thank the hon. Member for his intervention. I have not had that opportunity: I am a relatively new Minister, but one who has already had impressed upon him the gravity and prevalence of this situation. I will undertake to understand the situation not just in England, but in all parts of our Union, including with the Police Service of Northern Ireland. Of course, if we are going to tackle this problem, it is right to tackle it in every corner of the Union and make sure there is no hiding place.
The Government have increased funding since the Treasury took over responsibility in 2017. That funding has gone up by 37%, and this year, the Government will provide around £7 million to the teams. I understand the desire of my hon. Friend the Member for Blackpool North and Cleveleys for more resources to be put into this area. I will take that away, meet with the teams and those responsible, and see what more we can do, whether that is simply a question of resources and priorities or whether some legislative changes could be examined. I cannot make any promises at the Dispatch Box today, but I will do that for my hon. Friend as we seek to bear down on this issue.
Those teams also provide support to victims and education to those who are most at risk, and they tell me that they have helped over 30,000 people through that process. They undertake community work, warning people like Michelle, my hon. Friend’s constituent, of the risks of loan sharks—perhaps that term is okay in this colloquial context—or illegal moneylenders. They also support people through the provision of legal and affordable credit, which is something I am very keen to increase. As my hon. Friend impressed on me, we have to work upstream, providing safe, legal and low-cost alternatives to cut off the demand for this product at source. I want consumers to build resilience through having a savings buffer, as well as getting young children into the savings habit at a very early age, as I did. That is a great life gift to give to somebody, and we are well placed to do so through the provision of things like credit unions—safe, legal and affordable credit when people need it.
The Minister is incredibly gracious in giving way, and I am not going to hold up the debate for much longer. I just want to say that I was very fortunate to have a mother who, when I was 16, gave me my first £10. I went down to the Northern bank, as it was then—it is now Danske bank—and that was the first stage in my savings. That instilled a habit in me, and probably in all my brothers and sisters, of saving and being able to pay our debts.
I commend the hon. Gentleman and his mother—he probably would not be where he is today if not for that brilliant savings habit established at an early age. I had a National Savings and Investments blue book; I used to go along to the post office, put in my pound and get a little entry into that book.
I do not mean to digress—not every part of the United Kingdom has an important fixture, a date with destiny, shortly—but I share the passion of my hon. Friend the Member for Blackpool North and Cleveleys about getting people into the savings habit. I will be meeting soon to understand more about the opportunity presented by community development finance institutions, which provide a local, place-based alternative source of credit to people. Also, as my hon. Friend mentioned, there is the brilliant Help to Save scheme, and it would be a delight to work with him to see how we can upscale that—I am sure that he has great insights into it. The scheme is very creditable. It does a good job, and I am delighted to learn that it has helped more than 350,000 individuals. However, as we learned on the prevalence of illegal lending, there is a great deal more to do, and I am keen to understand that scheme more. I recently met the management team of National Savings and Investments at its new offices just around the corner from here. It operates that scheme on behalf of the Department for Work and Pensions, and that could provide a great opportunity.
I know that people across the United Kingdom are worried at this time about the cost of living. Some of them are seeing their disposable incomes decrease or be squeezed. We are fully alive to the fact that that may induce people to turn to illegal lenders. To help the most vulnerable, we have announced £37 billion of support for the cost of living this financial year. We have taken decisive action to support millions of households and businesses with rising energy costs this winter through the energy price guarantee and the energy bill relief scheme. I know that my hon. Friend would say that there is always more to be done, and that the Prime Minister would say that, however generous the Government wish to be, there is a limit to how much we can do. We seek to get the balance right.
In addition to the energy price guarantee, millions of the most vulnerable will receive £1,200 of support through the £400 from the energy bills support scheme, the £150 from the council tax rebate and a one-off £650 cost of living payment. I hope that that gives my hon. Friend some reassurance about how seriously we take this issue and how we are putting the taxpayers’ money where our mouth is, in terms of helping the most vulnerable and trying to keep them out of the clutches of illegal money lenders. I undertake to him to continue to work hard to introduce safe, legal and affordable alternatives, as well as to be relentless in our pursuit of those who would try to exploit this opportunity.
Question put and agreed to.
(1 year, 9 months ago)
Public Bill CommitteesIt is a pleasure, Mr Bone, to serve under your chairship. It is an honour to follow the hon. Member for North East Bedfordshire. As he has highlighted, we have come to a substantial and key clause.
As the hon. Gentleman briefly stated, the clause sets out requirements for reviews of the bank’s effectiveness and impact. In particular, it states:
“The Chancellor must appoint an independent person to carry out reviews of…the effectiveness of the Bank in delivering its objectives, and…its impact in relation to climate change and regional and local economic growth (including the extent to which its investments in particular projects or types of projects have encouraged additional investment in those projects or types of project by the private sector).”
The independent person must share those reports with the Treasury, which must then publish the reports and lay a copy before Parliament. I welcome that there will be performance reviews of the bank. Given the importance of its objectives, it is right that its ability to meet its aims is evaluated. We will get to the frequency of the reports later. I am sure I do not need to reveal to Committee members that we think the current proposed frequencies are inadequate.
Amendment 14, tabled by the hon. Member for North East Bedfordshire, would add a third element to the reports: the independent person would have to consider the effectiveness and scale of private and other third-party capital attracted to investments by the bank. We have already discussed the concept of additionality—the idea that the bank should be adding value and crowding in private sector investment. Clause 9(1)(b) already makes reference to additional investment, so I am confident that that is already covered by the Bill.
It is a pleasure to serve under your chairmanship, Mr Bone. I thank my hon. Friend the Member for North East Bedfordshire for his diligence in endeavouring to ensure that the Bill properly protects taxpayers’ interests and properly mobilises the private sector investment that the country depends on. I also thank him for trying his hardest to keep Ministers and this institution to account. I would never seek to do anything to discourage him.
However, in this case, I would like to join hands with the hon. Member for Erith and Thamesmead and, regrettably, confirm that it is my view that clause 9(1)(b), which already talks about the degree to which investments in particular projects or types of projects have encouraged additional investment in those projects or types of projects by the private sector, will go a long way to accomplishing what my hon. Friend wants. I am happy to write to him on what I consider to be the effectiveness of the clause and explore whether there is some value to be added in changing it, but it is my position, as it is that of the hon. Member for Erith and Thamesmead, that clause 9(1)(b) already does that.
My hon. Friend the Member for North East Bedfordshire should be reassured that the Government are setting up this institution with great foresight as to how we keep it accountable. The mere fact that we are legislating at its inception for an independent review to be carried out is a very progressive thing. We are trying to ensure that all our arm’s length bodies are as effective as possible. Speaking personally, I think it would be an innovation for every other arm’s length body to have to have independent reviews at frequent intervals.
I hope that my hon. Friend will agree that the wording of the Bill is already sufficiently broad to cover what he is seeking and accept my assurances to explore whether it should be changed, and that he will not press his amendment to a vote.
I appreciate the comments by the Opposition spokesperson and, of course, my hon. Friend the Minister. My concern about subsection (1)(b) is that the focus on the extent to which investments have attracted additional private sector investment is subordinate to the effectiveness, in terms of the impact on climate change and regional and local growth. That essentially means that if there is a project that is very strong on achieving climate change goals, the bank will be perfectly happy to pursue that, even at an extended cost to the taxpayer. I hope I have not got the Minister wrong.
To clarify, I do not read it as being subordinate; it is merely clarificatory that that is within scope. I thought it might be useful to put that on the record.
That is very helpful. With that assurance from the Minister, I am happy to withdraw my amendment.
Amendment, by leave, withdrawn.
The hon. Member asks an important question. I am sure that we agree that it is important to look at the geographical element of investments. This is not just a concern of Labour’s; the report I mentioned is by Open Democracy. Brilliant projects are taking place; I do not want to take anything away from them, but I want us to ensure that we are supporting businesses in the UK. That is really important. We all know from talking to our constituents that great investment could be used. That needs to be acknowledged, and that is why we tabled the amendment, which would ensure that reviews of the bank consider the geographic spread of the businesses that the bank invests in and their ownership.
The Government do not support the amendment. The hon. Lady is quite right to raise the importance of the regional split, and we all aspire to higher standards of transparency in business investment. These investments will, of course, be highly transparent. We have talked before about the reporting to Parliament; we will talk later about the annual report and the frequency of reporting. I can assure the hon. Lady that it will not be possible to hide a physical investment in infrastructure. That is the very nature of the provisions. Where the bank has deployed its capital, and the nature of the investments, will be very transparent. Indeed, the report that she cites from Open Democracy rather proves that point. There is no deficiency of transparency if Open Democracy has been able fully to ascertain the ownership.
Open Democracy has done the research that the Government have not done to get that data. It spent significant time getting that data. It should not be left to organisations such as Open Democracy to get that information. That information should be easily accessible to us. This is taxpayers’ money, and I do not see how the amendment is unreasonable.
I make the same point again. The fact is that the information is readily accessible in the public domain through Companies House. It will be accessible through the different mechanisms for holding the UK Infrastructure Bank to account. There is no desire to do anything other than ensure that Parliament and other public interest stakeholders can see precisely where the bank is deploying its capital. That is the very purpose of it. We can talk later about the annual report mechanism, which will include the disclosure of material information.
In respect of—
I was going to say something helpful, but of course I will give way. Hopefully it will re-occur to me in a moment.
I thank the Minister for giving way. I wonder whether he could talk a little more about why the report on the geographic spread of businesses would not be of value to our country. There was a very good National Audit Office report on the creation of the UK Infrastructure Bank published in June this year. One of its recommendations was that the bank should
“further develop its understanding of where infrastructure needs are greatest so that it routinely informs investment decisions and prioritises them.”
Surely such geographical reporting would help the bank with its work.
The hon. Member sort of took the words out of my mouth. We will expect the UK Infrastructure Bank to make the regional nature of its investments clear. It has done so to date, and clearly it should do so going forward. Things that should happen do not necessarily need to be put into statute at every turn. There are lots of other ways of ensuring that the information is readily available.
I have no further comments, other than to urge Members to support our sensible amendment, which I think would benefit all our constituents across the country.
Question put, That the amendment be made.
I thank the hon. Member for North East Bedfordshire for his comments. I will speak briefly to amendments 21 and 22.
I share the hon. Member’s concerns, because the initial review of the bank will be published within seven years of the Bill coming into force, and subsequent reviews will be published at intervals of no more than seven years. Those timeframes are shocking, particularly given that the Government’s original intention was for the initial report to be published in 10 years’ time.
I point out to the Minister that the levelling up missions are due to be met by 2030 and the net zero target by 2050, so a review in seven years’ time would miss the first of those targets. I would be interested to hear from the Minister how, without that review, those targets will be met.
Amendment 21 would provide that the initial review would be published within four years of the Bill coming into force, while amendment 22 would see subsequent reviews published every five years. That would enable the bank to grow, improve and ensure that it is meeting its objectives. I noted that the hon. Member for North East Bedfordshire may not press his amendments, so hopefully he finds ours to be more appropriate.
I thank both the well-meaning Members—my hon. Friend the Member for North East Bedfordshire and the hon. Member for Erith and Thamesmead—who seek to get the right interval of reviews, both in respect of the first and subsequent periods. The fact that both colleagues have ended up with different intervals suggests that this is not something that need be of doctrine or dogma.
I thank the Minister for pointing out that we have come up with different intervals, but I remind him that, obviously, the Government did that as well. Initially, they were looking to do the review every 10 years, but they have changed it to seven years, so there is scope to adapt and change, as under our amendments.
There is indeed scope, but there is also interplay with other expected reviews to which the UK Investment Bank will be subject. While I oppose, fairly, all the amendments put forward, I undertake to come back on these points at subsequent stages.
I understand that the Minister considers that hon. Members are being well meaning but, if I may say so—I do not know if this is parliamentary language, Mr Bone—that is a tad patronising. We are talking about transparency and ensuring that the bank, which is using public money, is going in the right direction. It should not be too difficult for the bank to come back and have a review in a much shorter time than seven years. Given that we have had three Prime Ministers in a year, we might see many Ministers in those seven years. This Minister may give us his undertaking, but he might not be in place throughout that period.
I am not sure quite how to react to the right hon. Lady’s predictions about my expected tenure, but I dare say she is probably right in many respects. Let us try to get through the remainder of the afternoon before making any amendments. I certainly did not intend to patronise any colleagues.
We have to get this right. The most important thing is that the bank is equipped to deliver the outcomes that we seek by deploying its capital in pursuit of its statutory objectives. I do not want us to trip over a particular interval when, inevitably, a number of reviews will be ongoing. Whether the right hon. Lady likes it or not, the undertaking that I am going to give is to come back on this. The Government have already moved in respect of clause 9(5)—from 10 years to seven. I hear from Members on both sides of the Committee that there is concern that seven years is still too long, and I undertake to come back on that.
The Minister is being generous with his time. I appreciate that he will take this matter away, but I remind him of the bank’s core function: to help us to meet our climate change targets by 2050. Several Back Benchers have already mentioned that. I urge the Minister to review the situation, because if we are going to meet the targets, particularly the 2030 targets, seven years will be far too long. Our proposal seems reasonable, so it would be helpful if the Minister would consider it and write to me about it.
That is effectively what I am doing. The key point is that this is a novel institution. It has a great deal of runway, and it also has an awful lot of operationalising and scaling to do over the immediate period. I hope that no one wants to subject the bank to an excess of reviews during that initial period, as that would inevitably detract from its resources. None of that takes us away from any of the accountability measures we have talked about. I will write to the hon. Lady with a determination, or an explanation, regarding whether we can substitute a different interval in clause 9(5).
As this is the first time I have spoken this afternoon, may I say that it is a pleasure to serve under your chairmanship, Mr Bone?
I want to pin the Minister down a little on what he means when he talks about coming back. Would that be coming back in the form of writing to the hon. Member for Erith and Thamesmead, or coming back during the Bill’s remaining stages? I want to clarify exactly what he means, because some of us have fallen foul of such behaviour by Ministers before.
I am not sure what is the nefarious behaviour of which the hon. Member speaks. I have spoken about our wanting to get the review intervals right. I am talking about potentially proposing a different number as an amendment at a later stage of the Bill.
Order. It might help if, when the Minister sends a reply to the shadow Minister, he sends it to the whole Committee.
It is a pleasure to serve under your chairmanship, Mr Bone—for the first time, I believe.
Recently, I was briefly the incumbent of the roads portfolio, which is obviously an important part of infrastructure. The average time from scheme idea to spades in the ground actually exceeds the seven years that is provided for in the Bill. While I am extremely sympathetic to the points made by my hon. Friend the Member for North East Bedfordshire about ensuring that we do not go too long without checking, I am also sympathetic to the idea that we need to be able to operationalise the schemes. Does the Minister agree that the key to getting the seven years down is the reform of planning legislation? We cannot guarantee an investment until the development consent orders are cleared.
The Minister absolutely agrees that the key point is to make the institution effective in delivering its goals. The hon. Member for Erith and Thamesmead talked about net zero and the imperative to get on, decarbonise our economy and ensure that we have the infrastructure in place. All hon. Members are supporters of scrutiny and accountability, which is why we all trip over this period of seven years as potentially being a long period—it is longer than the tenure that any of us enjoy. That is precisely because there is a trade-off with operationalising and delivering objectives.
I welcome the Minister’s undertaking to come back with a different date for the laying of a report before Parliament. It is the reporting to and scrutiny of Parliament that is important in this instance, not least because, these days, recent Parliaments have rarely run to four years, although that used to be the average for a Parliament. I hope that the Government will look at a date that will allow each Parliament in the realm to consider the work of the bank. In the very good NAO report that was published in June, as one of its key findings, it said that
“At the end of May 2022, the Bank had made five deals”.
Can the Minister update us on how many deals had been made by the bank up until, say, October this year?
We are moving slightly away from the amendments, but I will write to all hon. Members with an update. The annual report is due to be published imminently; the hon. Member was not here this morning when I confirmed that I have signed off what I needed to do. I expect the report to be laid in the House of Commons Library in the coming days. Some 10 deals have been made so far but, because this is a subject of interest, we will ensure that everybody is aware of the deals and that we lay the annual report before the House as quickly as possible.
If it is a choice, I will do it one final time. We will then move to the vote.
The Minister referred to coming back another time about clause 9(5). As my hon. Friend the Member for South Ribble said, when we are reviewing investments, a seven-year period, and perhaps longer, might be a reasonable period for consideration. As the hon. Member for Glasgow East said, there is logic to having a review every five years during a Parliament. To my mind, subsection (4) refers to the more essential period. Essentially, it says that we will not have our first report for seven years. My thought is that we need one more frequently than that. Will the Minister clarify whether he intends to come back to the Committee on not just subsection (5), as he said he would, but subsection (4)?
With respect, these are quite different points. I do not intend to come back on subsection (4). There are many reviews. We should not confuse the additional process of bringing in an outside party and conducting an independent review. That is quite different from the normal regular accountability of publishing an annual report, disclosure, complying with the combined code, having good governance practices, the oversight of the Treasury Committee and any of the other ongoing reviews that the Government spawn all the time. This is a separate statutory independent review. It is an unusual but positive feature, and I do not propose to reopen the point, because that is the Government’s position. We thought about it, and it will take time for this entity to be operating at scale, when it is actually capable of providing a useful determination for the review.
I am looking expectantly across the room, but as I do not see any encouragement from Opposition Members, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 21, in clause 9, page 4, line 21, leave out “7” and insert “4”.—(Abena Oppong-Asare.)
This amendment requires an initial report of the Bank’s effectiveness to take place within 4 years after the Act comes into force, rather than the current 7.
Question put, That the amendment be made.
Given the lively exchange of views about frequency, I think that members of the Committee are broadly familiar with the clause. The provision for regular independent and statutory reviews of the bank’s effectiveness in meeting its core objectives is important to ensure that it meets its objectives and delivers good value for the taxpayer. It is important that this is an independent review, independent of the bank itself and of HM Treasury. The review will look at the extent to which the bank has met its climate change and levelling-up objectives. In response to the points made by colleagues in the other place, it will also look at whether the bank has been suitably additional in the market. All of that is fundamental to the bank’s success.
We have talked about the review period. The statutory independent review will be in addition to the UKIB framework document, which will be reviewed after the Bill receives Royal Assent and at regular intervals thereafter, in addition to effectiveness reviews from the Cabinet Office, to which all public bodies are subject. The strategic review in 2024 will cover the general progress to date of the UKIB and its capital position, the implementation of the financial framework, the UKIB’s delegation limits and the return on equity. It will be additional to the financial framework, which will be reviewed from time to time after the strategic review. Given all of that and the debate about the period and my undertaking to come back on clause 9(5) and revisit what is the appropriate time, given colleagues’ concerns that seven years is too long, I recommend that the clause stand part of the Bill.
I am disappointed that the measures to strengthen clause 9 were not adopted. However, I welcome the fact that there will be reviews of the bank. Here and in the other place, concerns have been raised about the projects that the bank is financing, from their location to the level of additionality they provide. Reviews of the bank will certainly clear up the issues that need to resolved.
I hope that there will be opportunity for parliamentary scrutiny and discussion following report publications. I have noted—and I am sure the Minister is aware—that the Public Accounts Committee is currently conducting a review of the establishment of the UK Infrastructure Bank. It is a shame that the recommendations may not come early enough to influence the Bill, but its work demonstrates that the importance of evaluation. We have spoken about this topic at length today, so we will not oppose clause 9.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Amendments made: 6, in clause 10, page 4, line 32, at end insert—
““appropriate national authority” means—
(a) the Scottish Ministers,
(b) the Welsh Ministers, or
(c) the Department for Infrastructure in Northern Ireland.”
This amendment would define “appropriate national authority”.
Amendment 9, in clause 10, page 5, line 4, leave out the definition of “relevant public authorities” and insert—
““public authorities” means local authorities, Northern Ireland departments and any other person exercising functions of a public nature.”—(Andrew Griffith.)
See the explanatory statement for Amendment 8.
Clause 10
Interpretation
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
Government amendment 7.
Clause 11 stand part.
I hope that this discussion is largely technical and not subject to controversy. Clause 10 sets out the definitions for various terms that are used in the Bill, such as financial assistance, local authority and relevant public authorities. Financial assistance is defined in a broadly similar way to the definition in other legislation, such as the Infrastructure (Financial Assistance) Act 2012, but also reflects the specific priorities of the bank. It is intended to be a broad and inclusive definition in line with the potential diversity of the bank’s investment activities.
The Bill contains provisions stating that the bank is able to provide loans to relevant public authorities, and the clause defines public authorities to include Northern Ireland Departments, as well as local authorities in England, Scotland and Wales, and district councils in Northern Ireland. That is indicative of our commitment that the bank should work to deliver collaboratively and UK-wide, taking into account different infrastructure financing landscapes.
Government amendment 7 is a privilege amendment, as is standard for a Bill that begins its passage in the Lords and concerns matters of public finance. A privilege amendment was passed; given the Bill is now in the Commons, I have tabled an amendment to remove it that is purely technical. Clause 11 confirms that the Bill extends to England, Wales, Scotland and Northern Ireland, and the point at which it will come into force, which will be two months after Royal Assent.
New clause 1 would oblige the bank to publish an annual report addressing the geographical spread and ownership of the bodies the bank invests in, as well as a good jobs plan for all businesses and bodies it invests in, which requires the business or body to improve productivity, pay, jobs and living standards. It is similar to amendment 23, which has fallen, although it would require reporting after the event rather than a review. Many of my earlier points about amendment 23 remain pertinent. The bank already reports on its investments and will publish a summary in its annual report and accounts. The bank is capturing data on location in its deal assessments and will consider how best to report publicly on location for future investments.
As discussed earlier, the nature of an infrastructure investment means that it is difficult to hide. They tend to be fairly visible and tangible and we would all be able to work out exactly where those millions of pounds of capital had been deployed. I reassure hon. Members that the bank is subject to freedom of information requests in the usual way, which I understand is a painless process by which one can readily find out information. [Interruption.] The legislation was not brought in by this Government, so if it is deficient, it is not on our watch.
The Minister says that it is open to individuals to put in freedom of information requests. I do not understand why the Minister would encourage that when our new clause would make things a lot easier and more transparent. It takes a lot of time to do the paperwork associated with FOI requests, so the new clause would save staff from having to do that extra admin work. In setting up the bank, why does the Minister want it to take on those extra responsibilities? It makes no sense.
It remains my contention that it is simply not necessary for this barnacle to be adhered to this particular ship as it steams out on its levelling-up mission across the UK, taking us on the path to net zero.
If I understand it correctly, the Minister’s objection to new clause 1 is that the bank would already be doing quite a lot of reporting anyway—by a nod of the head, he is acceding to that. If the Government oppose further reporting, I presume that they object to new clause 1 because they have undertaken an impact analysis of it. Could he place that impact assessment in the Library so that Members can see it, and perhaps the new clause could be brought back on Report?
I remind the hon. Gentleman that this is not a Government new clause. If anyone wishes to conduct an impact assessment of it, they are very welcome to do so, but it was not tabled by the Government.
Does that mean that the Minister is objecting to the new clause purely because it was tabled by the Opposition, rather than based on evidence?
Our position has been very consistent. I understand that it may not be the position of the Opposition, and it is no worse for that. Our position is that statute is not the be-all and end-all. The most important thing is that we get this bank up and running, delivering on its outcomes, and that we do so in good fashion, with the minimum, not maximum, amount of extra statute.
The new clause contains two elements, so I will turn briefly to the other point nested in it, which is the good jobs plan. The bank is already committed to pursuing good environmental, social, resilience and governance policy. We do not feel that adding extra statutory requirements in this particular case is the right decision. The bank will be reporting on the number of jobs created as one of its key performance indicators and will be working up measures on productivity as well as setting out the impact of its assessments, on which we will all hold it to account. With that, I ask the Opposition to withdraw their new clause.
I am afraid that I will not be withdrawing the new clause. It is a sensible new clause and I urge all members of the Committee to support it, so I wish to push it to a vote.
Question put, That the clause be read a Second time.
Further to that point of order, Mr Bone. Following the remarks of the hon. Member for Erith and Thamesmead, I thank all hon. Members for their contributions, and you as Chair, Mr Bone, and the Clerks and the officials. I thank in particular the hon. Member for North East Bedfordshire. I think we knew it was unlikely that he would sacrifice his position in the governing party by voting against the Government, but his amendments were helpful in provoking discussion. I know that a number of my colleagues on Bill Committees this afternoon will not have the luxury of finishing at 3 o’clock. On that basis, I thank everybody present for the speedy way in which the Bill has passed through the House and look forward to the further stages and to any remaining t’s being crossed and i’s dotted.
Further to that point of order, Mr Bone. I echo the comments of the hon. Member for Glasgow East and commend the hon. Member for Erith and Thamesmead for her graciousness and diligence. It is fully understood on this side of the Committee that Opposition Members do not have the same support as that provided to Ministers by officials. A great deal of diligence goes into preparing amendments and advocating them. The hon. Member for Ealing North is always a strong advocate for his party’s position. I thank my officials for their work in preparing and presenting the Bill. I thank you, Mr Bone, and your officers. I hope my colleagues will not mind me singling out my hon. Friend the Member for North East Bedfordshire for bringing a certain je ne sais quoi to proceedings, and for advancing his own cause.
Bill, as amended, to be reported.
(1 year, 9 months ago)
Public Bill CommitteesCopies of written evidence that the Committee receives will be made available in the Committee Room, and circulated to Members by email.
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room. It shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or a similar issue. Please note that decisions on amendments take place not in the order they are debated, but in the order they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause to which it relates.
A Member who has put their name to the lead amendment in a group is called first. Other Members are then free to catch my eye to speak on all or any of the amendments within that group. A Member may speak more than once in a single debate. At the end of a debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, they will need to indicate if they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendment in a group to a vote, they need to let me know.
Clause 1
The UK Infrastructure Bank
Question proposed, That the clause stand part of the Bill.
It is a pleasure to serve under your chairmanship, Mr Davies. I thank Members for their work on the Committee this morning. Clause 1 is a technical clause that outlines that the company incorporated as the UK Infrastructure Bank will be referred to as “the Bank” for the purposes of the Bill, and links it in legislation to its company registration number. The clause is essential to ensure that the Bill refers to the correct legal entity. I recommend that it stand part.
Clause 1 ordered to stand part of the Bill.
Clause 2
Objectives and activities
I beg to move amendment 10, in clause 2, page 1, line 14, at end insert
“, and
‘(c) to create long term financial returns to its shareholder(s).”
It is a pleasure to serve under your chairmanship, Mr Davies, and to be the first Member, other than the Minister, to speak. As hon. Members look down the amendment paper, they will see that I have tabled a number of amendments. It is such a pity that so few Labour Members have bothered to show up to the Committee on such an important issue. I always thought that the Labour party thought that it was important to invest in green technologies and to level up. Clearly, the absence of Labour Members shows that that is just a paper commitment, not a real one.
This is an important Bill. Of course, in a certain regard it formalises what is already extant; however, it is important that we, as Members of Parliament, ensure that we provide the right objectives and activities to which the board and directors of the UK Infrastructure Bank should subsequently pay attention. In that regard, I have tabled two amendments to clause 2: amendments 10 and 11. If it is convenient with you, Mr Davies, I shall also speak to amendment 11.
Yes. I am just going to wrap up, Mr Davies; thank you. We would not want to encourage a similar short-lived path for the UK Infrastructure Bank. To achieve its objectives, it needs to be a long-lasting institution that supports businesses and improves investor confidence. We have a different third objective in mind for the bank, and I will explain that in Committee later today.
I thank all those who have contributed to this grouping. If I may, I will speak to clause 2, the Government amendments, and then the amendments in the name of—
Order. You cannot do that. You must speak to amendment 10, and we will come to clause 2.
Perfect, Mr Davies. My hon. Friend the Member for North East Bedfordshire is not only a distinguished predecessor of mine, but is a doughty champion for the interests of the taxpayer, and we commend him for that.
We have set out in the framework that the bank must already generate a financial return as part of the company’s operating principles. As set out in the UK Infrastructure Bank’s strategic plan, that has been set at an admirable 2.5% to 4% by the end of 2025-26. The bank, as my hon. Friend said, has a triple bottom line, including a positive financial return as a requirement across its investments.
Putting that target into law—I cannot believe that my hon. Friend is an advocate of writing everything into statute; the statute is often large enough as it is without embellishing it with additional Christmas trees of prescription—could create legal problems for the bank and undermine its core purpose, given that there might from time to time be reasons outside of its control why it cannot meet the target in relation to every investment.
My hon. Friend is right: not everything should be written into statute, but there ought to be more clarity. Can he provide a couple of points of clarity so that I may withdraw my amendment? On the bank’s target of 2.5% to 4% return, is that a real rate of return, and above what cost of capital? And if the chief executive and the directors do not achieve that rate of return, what will be the consequences for them?
I will write to my hon. Friend on the calculation of that return. The UK Infrastructure Bank is subject to the full panoply of disclosures, sanctions and accountability, not just to this place, as is appropriate, but under the Companies Act 2006 under which it is constituted. I do not believe, therefore, that there is a deficiency in that. For that reason, notwithstanding the very understandable spirit with which my hon. Friend advocates his amendment, I hope he will consider withdrawing it.
The hon. Member for Erith and Thamesmead and the Opposition are as sincere in pursuing this amendment as they are wrong. They are adventurous in terms of scope, because they are trying to crowbar an entire—
On a point of order, Mr Davies. I am sure the Minister is not at all suggesting that you have selected amendments that are out of scope for the Committee to vote on.
My reference to “scope” related to the broad set of industrial policies laid out by the hon. Member for Erith and Thamesmead, not to the wording of the amendments.
My comments were about the previous discussion. The shadow Minister was in scope on her amendments. I call the shadow Minister.
Order. The hon. Lady will have the final word, but the issue is whether these amendments are in order. Obviously, they were selected for debate, and the Minister was speaking to them. I know his comments were about whether comments made were in order, but if he could make his speech, I will then call the hon. Lady to respond, and she can make similar points. I call the Minister.
Thank you, Mr Davies. The Government think that the aim of reducing regional inequality is already implicit in the bank’s current objective. As my right hon. Friend the Member for Elmet and Rothwell reminded me, the bank was constituted in Leeds, rightly outside of the overheated south-east. A number of its early investments have already seen their capital deployed to some of the most left-behind parts of the United Kingdom. Our belief is that the objective of supporting regional and local growth provides a clear direction for the bank without being overly prescriptive, which I am sure nobody would want. The strategic steer by the Chancellor in March makes clear that the bank must focus on geographical inequality, with reference to the levelling-up White Paper, which the House will debate tomorrow. That is the right place to set out the Government’s strategic approach to levelling up, but that is best done on a portfolio basis rather than investment by investment, which is what the amendment implies.
Turning to the second part of the amendment, the bank’s framework document already includes, under its regional and local economy growth objective, achieving higher levels of productivity and providing opportunities for new jobs—something the hon. Member for Erith and Thamesmead talked about as an important output. We think it is more appropriate to have this requirement in the framework document rather than in legislation to minimise the legal risk across investments. I am sure that we can all agree that no one wants to create more work for lawyers.
The right hon. Lady will have to talk to her Front Bench if that is the official policy, but I assure the Committee that it is not the policy of the Government.
The point is that this is public money. The bank has to be accountable for it. Lawyers are the guardians of justice. It is not about making more money for lawyers. It is about interpreting legislation that is put through very quickly and not thought through. That is the basis of it.
The hon. Lady makes a very fair point on the valiant role of lawyers in keeping us all to account. The alternative, of course, is legislation that is clear and allows the appropriate degree of discretion. The Government contend that that is what this is.
The amendments by the hon. Member for Erith and Thamesmead would include in the bank’s objectives the improvement of pay and living standards. Economic growth in the long run is closely linked to supporting productivity, income and employment and living standards. It is implicit in the bank’s objectives. Including the amendments would make the objectives too wide-ranging for an infrastructure bank, as it could focus on anything relating to pay or standards, for example training programmes or household appliances, which do not come under economic infrastructure. For these reasons, we consider it preferable to keep the statutory objectives as they are—a balance between clarity and flexibility—while instead providing further recommendations as to the bank’s targets and areas of focus via more flexible mechanisms such as the strategic steer, which can be updated from time to time.
I thank the Minister for his comments. We agree that the legislation needs to be clear, but I think our approach is very different. I do not want to repeat what I have already said, but I want to highlight that addressing economic inequalities, particularly between regions, is really important,. We think the amendments would help the bank retain its freedom while reaching targets at any level. For this reason, we will push the amendments to a vote.
Question put, That the amendment be made.
I beg to move amendment 8, in clause 2, page 1, line 18, leave out “relevant”.
This amendment, and Amendment 9, would clarify that the Bank can provide loans to public authorities other than local authorities and Northern Ireland Departments (as well as to persons other than public authorities).
The amendments broaden the definition of “public authority” used in relation to the bank’s capacity to lend. The drafting as is broadly meets the policy aims and would allow the bank to lend to local authorities and to the Northern Ireland Executive. However, given that primary legislation can be a blunt instrument, we do not want inadvertently and by implication to preclude the bank from investing in other public authorities. I hope that all members of Committee can agree on that.
Other public authorities could include existing public bodies, as well as new public bodies created in the future by local authorities or Government Departments.
I thank the Minister for his explanation of the amendments.
Clause 2(4) describes the activities of the bank, as the Minister explained, and sets out that in addition to funding private infrastructure projects, it can provide financial support to local government. Government amendment 8 seeks to clarify that the bank can provide loans to public authorities other than local authorities and Northern Ireland Departments. Amendment 9 to clause 10 would achieve the same purpose. It would clarify that the Bill considers public authorities to be local authorities, Northern Ireland Departments and any other person exercising functions of a public nature.
I am grateful to the Minister for his letter of yesterday that set out the reasons for the Government amendments, which we will not oppose.
Amendment 8 agreed to.
I beg to move amendment 1, in clause 2, page 1, line 23, leave out from “includes” to “technologies” on line 24.
This amendment would remove the reference to “structures underpinning the circular economy, and nature-based solutions,” from the definition of “infrastructure”.
The amendments would remove both the Lords amendments. Government amendment 1 would remove the addition of “nature-based solutions” and
“structures underpinning the circular economy”
from the definition of infrastructure. The bank has a broad mandate with flexibility to support a wide range of projects to help to tackle climate change and to support regional and local economic growth.
On nature-based solutions, earlier this year the Government conducted a review to consider the potential of broadening the bank’s objectives to include other areas such as improving UK natural capital. The review recognised the significant potential for increased use of nature-based and hybrid infrastructure solutions, including for the water sector, greenhouse gas removal and opportunities for the growth of ecosystems services markets. Those opportunities will be important to meet our objective to leverage private finance for nature recovery.
The outcome of the review was formally made clear to the bank and to the market through the Chancellor’s non-statutory strategic steer. As we discussed earlier, that is an alternative to writing everything in statute and is more flexible. That steer clearly laid out that nature-based solutions are in scope and are something that the bank should pursue. However, given that they are already part of the remit and are clearly covered within the non-exhaustive definition of infrastructure, we do not believe this language should be retained in the Bill.
Moving on to amendment 2, clause 2(6) focuses on improving
“productivity, pay, jobs and living standards”
and reducing geographic inequality. The effect of this subsection is to put a statutory duty on the bank to have regard to these two areas in relation to every potential investment that it considers, which would have significant impacts on the bank. On improving jobs specifically, we understand the intention of the provision and do not disagree with it as a general principle, but that is quite different from the individual investment evaluation.
Those objectives are not set out in the Bill. Are they going to be in secondary legislation?
As I have laid out, the Government’s position is that the steer to the bank, which is flexible and can be updated from time to time, rather than requiring primary legislation—it may be something the Labour party wishes to take advantage of in future—is a more agile and flexible way of guiding the bank as it seeks to achieve its objectives.
Is the Minister therefore suggesting that that would only be within a policy framework rather than in the issuing of secondary legislation?
The steer provided from time to time in the context of the wider oversight of the investment bank, under its statutory objectives—effectively, the interpretation layer—is the right place. We do not disagree with the principle, but we could sit here all day and think of various admirable principles that we would like to put into statute. It is the Government’s contention that the provision would over-fetter the discretion of the bank and that it is not the appropriate vehicle. I understand that we will debate this point a number of times as we go through the Bill. The Government want the bank to get on with its job. We want to give it the statutory clarity it needs and to allow Parliament and Government, from time to time, if they wish, to give the steer required.
It is a pleasure to serve on the Committee with you as Chair today, Mr Davies. As we know, clause 2 concerns the objectives and activities of the UK Infrastructure Bank. Subsection (5) seeks to define the infrastructure and makes reference to the
“structures underpinning the circular economy, and nature-based solutions”,
which reflects an amendment made in the Lords that Government amendment 1 seeks to remove. The Government’s opposition to this measure seems to run counter to subsection (3)(a), which defines tackling climate change as an objective of the bank. I note that the Government do not oppose this objective of the bank, but they do seem to reject its delivery. We naturally oppose the amendment, which highlights how the Government seem to be all talk but unwilling to follow through on solutions to the climate emergency.
The truth is that the Government and the newly appointed Prime Minister have a record of failure on investing in green infrastructure for our country and our economy. While we welcome the bank’s focus on tackling climate change, no matter how well it plays its part, the British people need a Government with an effective plan to make the investments in the jobs, homes and energy supplies of the future a reality.
I beg to move amendment 3, in clause 2, page 2, line 16, at end insert—
“(7A) The Treasury must consult the appropriate national authority before making provision in regulations under subsection (7) that would be within the legislative competence of—
(a) the Scottish Parliament, if contained in an Act of that Parliament,
(b) Senedd Cymru, if contained in an Act of the Senedd, or
(c) the Northern Ireland Assembly, if contained in an Act of that Assembly made without the Secretary of State’s consent,
apart from provision that is merely incidental to, or consequential on, provision which would be outside that competence.”
This amendment would require the Treasury to consult the relevant devolved authority before making regulations under clause 2(7) that would contain provision within the legislative competence of the authority in question.
This group concerns provisions that will, I hope, gladden the heart of the hon. Member for Glasgow East, because they add a duty to consult the devolved Administrations on the use of delegated legislative powers in the Bill, including the power to amend the bank’s activities or the definition of infrastructure, and to issue the strategic steer. The amendments come as a direct result of the positive engagement we have had with the DAs to date. They specifically address a concern raised that the Government would be legislating or acting in areas of devolved competence without an appropriate mechanism to engage with the DAs.
I do not think we have any concerns about the UK Government consulting the Scottish Government in respect of their intended actions, but I think the key question is will they listen, and if the Scottish Government have any concerns, will they have a veto?
These amendments are a proof positive of the Government having listened. If the hon. Member is so crushingly sceptical, perhaps he will oppose the amendments, which have been proffered following consultation with the DAs. It was never our intention to pursue these measures without an appropriate mechanism to engage with the DAs. That is why we are happy to bring forward these amendments today.
I would like to put on the record my gratitude to officials in Scotland, Northern Ireland and Wales for engaging so positively to date on the Bill. I think we all support the Bill’s ultimate objectives, and I am hopeful that it will secure a legislative consent motion from each of the devolved legislatures. I hope that hon. Members will support the amendments.
Government amendment 3 concerns the consultation of appropriate national authorities when using statutory instruments to change regulations pertaining to the definition of infrastructure and the bank’s activities, as outlined in clause 2(7). If changing regulations under subsection (7) fell within the legislative competence of the Scottish Parliament, Senedd Cymru or the Northern Irish Assembly, the amendment would require the Treasury to consult the relevant devolved authority.
Similarly, Government amendment 4 would require the Treasury to consult the relevant devolved authority before including in a statement of strategic priorities for the bank matters within the legislative competence of the devolved authority.
Government amendment 6 simply defines “appropriate national authority” to mean the Scottish Ministers, the Welsh Ministers, or the Department for Infrastructure in Northern Ireland.
We are supportive of these amendments, as we are supportive of the Union. Labour recognises the very real importance of working closely with devolved Administrations, and we recognise the great work of Welsh Labour. Indeed, the Government could learn a thing or two from Welsh Labour, given its record for infrastructure investment. The Welsh infrastructure investment plan has already allocated more than £12 billion for key capital projects to transform and maintain the NHS estate, deliver 20,000 affordable homes and deliver rail infrastructure improvements.
Amendment 3 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Clause 2 is of central importance to the policy remit in which the bank will operate. I think that is why we have heard so many different—sometimes contrasting—views about how prescriptive that remit should be. The clause sets out the bank’s objectives and activities, as well as an inclusive definition of infrastructure, which is central to its scope—it is the UK infrastructure bank, after all. The clause also creates delegated powers to enable the Treasury to change the bank’s activities or the definition of infrastructure using secondary legislation under the affirmative procedure, so Parliament will have its say. The bank’s objectives to help the Government meet their climate change ambitions and to support levelling up across the UK are currently set out in the framework document. Clause 2(3) puts those on a statutory footing, which we hope sends a signal to the market about the Government’s commitment to these policy aims and the bank’s central role in helping deliver them.
Studying Parliament as he does, the Minister will have paid attention to my campaign to be Transport Committee Chair, which was unfortunately unsuccessful last week. One point that I made repeatedly as part of that campaign was about the projects that are slightly too big for local authorities and slightly too small for the Department for Transport. The objectives, while hotly debated here, must be so prescriptive as to not allow the UK Infrastructure Bank to lend to local authorities for smaller but none the less important projects in local communities. Is that fair?
My hon. Friend makes a very fair point. I will be happy to facilitate meetings between her— expert in transport as she is—and the infrastructure bank to get into some of those potential projects in more detail. She made a significant contribution as roads Minister.
Clause 2(5) sets out the definition of infrastructure. We have taken a power to amend the bank’s activities and the definition of infrastructure, using the affirmative procedure in both Houses. Across these different areas, clause 2 is the bedrock on which the bank will operate, and I commend it to the Committee.
We know that after 12 years of low growth from the Conservatives there is a vital need to invest in the infrastructure of the future. Across the country, we need to invest in new transport, new digital infrastructure, new sources of energy that are sustainable and secure, and new high-quality jobs with decent pay. That is why we support the establishment of the UK Infrastructure Bank, and the Bill’s aim of putting it on a statutory footing.
We wanted the bank to address the deep economic inequalities across the country, which is why we sought to amend clause 2(3). My hon. Friend the Member for Erith and Thamesmead emphasised that, in supporting regional and local economic growth, the bank should reduce economic inequalities within and between regions of the United Kingdom to improve productivity, pay, jobs and living standards. In the same subsection, we wanted to add a third objective: for the bank to support supply chain resilience and the UK’s industrial strategy.
We wanted to retain two Lords amendments that strengthened the Bill: one that included the circular economy and nature-based solutions in the Bill’s definition of infrastructure, and one that Labour introduced to ensure that the Bill would focus on creating jobs and reducing economic inequalities. It is deeply disappointing that the Government have blocked those measures to make the UK Infrastructure Bank succeed and be fit for a modern, prosperous Britain. A Labour Government would deliver investment and loans in a way that supports the entire country, to meet the challenge of regional inequality and the commitments of our climate ambitions.
Question put and agreed to.
Clause 2, as amended, accordingly ordered to stand part of the Bill.
Clause 3
Strategic priorities and plans
Amendment made: 4, in clause 3, page 2, line 26, at end insert—
“(4A) The Treasury must consult the appropriate national authority about any provision which the Treasury proposes to include in a statement under this section and which concerns a subject matter provision about which would be within the legislative competence of—
(a) the Scottish Parliament, if contained in an Act of that Parliament,
(b) Senedd Cymru, if contained in an Act of the Senedd, or
(c) the Northern Ireland Assembly, if contained in an Act of that Assembly made without the Secretary of State’s consent.
(4B) The duty to consult imposed by subsection (4A) may be satisfied by consultation carried out before the passing of this Act.”—(Andrew Griffith.)
This amendment would require the Treasury to consult the relevant devolved authority before including in a statement of strategic priorities for the Bank any provision which the Treasury proposes to include in the statement and which concerns a subject matter within the legislative competence of the authority in question.
Question proposed, That the clause, as amended, stand part of the Bill.
Clause 3 gives His Majesty’s Treasury the power to issue the bank with a strategic steer. We talked about that earlier as a mechanism by which the Government of the day can flexibly, and in an agile fashion, give the bank some direction. That steer will set out what, in the Government’s view, the bank should prioritise and focus its activities on. The strategic steer, and any revisions of it, will be required to be laid before Parliament.
The Chancellor issued the bank with its first strategic steer in March in order to inform the development of the bank’s inaugural strategic plan, which was published in June. That gave the opportunity to share an update on the Treasury’s interpretation of the bank’s strategic objectives and to clarify the definition of infrastructure that the bank should be working with. It highlighted the role that the bank can play in improving energy resilience, as well as setting out the outcome of the Treasury’s review of environmental objectives, confirming that there is significant scope in the bank’s existing objectives for it to invest in nature-based solutions.
We do not expect a steer to be issued more than once a Parliament, which will ensure that the bank has certainty in the long term to plan its investment strategy while keeping pace with Government priorities and ensuring policy alignment across infrastructure investment.
Can the Minister tell me whether the steer will include giving a bit more specificity to the UK Infrastructure Bank about where on the investment spectrum—emerging businesses, high-growth businesses, mature businesses—it should place the preponderance of its resources? Will the steer provide clarification from the Government to help the bank?
The strategic steer is precisely an attempt to find the right balance between prescription—I understand that my hon. Friend does not seek that directly but wants to be able to command the bank to invest at particular points of the curve from time to time—and the bank’s being able to use its expertise and motivate its leadership by having a relatively broad set of parameters. We all understand that that is a careful balance, and we do not want to move it in either direction, but I agree with my hon. Friend that the strategic steer is a vehicle to achieve the purpose he seeks.
I do not mean to dwell too much on this issue, and I certainly do not want to irritate the Minister through my questioning, but I want to make the point that the skillsets required for the bank to be effective as an emerging-stage investor are different from those required for it to be an investor in a mature business or a high-growth business. My concern is that the bank will try to spread itself too thinly, particularly in the early stages.
My hon. Friend makes a very wise and informed point. The UK Infrastructure Bank is not the only intervention that the Government make; the British Business Bank has a broad portfolio of ways to support the sector. I hope that between the two of them, with the strategic steer perhaps being used as a vehicle to align them, every outcome that my hon. Friend seeks can be properly covered. Again, he makes a strong point about confidence and capability, and about how we resource against different types of investment.
The bank is required under the clause to update its strategic plan to ensure that it reflects the changes when a strategic steer is issued, once per Parliament. That will ensure that the will of Parliament is satisfied within a reasonable timeframe. Given that the bank is ultimately owned by the Government and the taxpayer, it is right that we retain a power to issue the bank with a strategic steer to set out its priorities, which is why I support the clause.
I thank the Minister for his explanation of the clause, which lays out the bank’s strategic priorities and plans. It is largely administrative and requires the Treasury to prepare a statement of strategic priorities for the bank, which must be laid before Parliament and can be revised or replaced.
As the Minister said, the Chancellor—the now Prime Minister—put the strategic steer in place on 18 March. As I have already highlighted, the strategic steer included some plans that Labour do not oppose; indeed, we want to see some of them in the Bill, rather than in policy documents with ambiguous legal status. The Government must recognise that point, which is evidenced by the energy efficiency amendment that they introduced in the Lords. The Chancellor stated in the March strategic steer that
“I’d encourage you to prioritise opportunities that align with the government’s renewed focus on energy security. Examples of relevant opportunities may include helping to bring forward low carbon energy projects that accelerate the UK’s transition to clean energy and improve the energy efficiency of buildings and homes.”
It was rightly pointed out in the other place that the Bill did not include energy efficiency measures. In recognition of that, the Government introduced an amendment on energy efficiency, which Labour welcomed.
I anticipate that in much of the Committee’s proceedings, the Government will assure us that many of our asks are covered by the strategic steer or the framework document. However, if that is the case, will they put them in the Bill, as they did with energy efficiency? If they are firm commitments then they should be in the legislation itself. We are here to scrutinise the Bill, but so many key elements of it seem to be relegated to documents that are not amendable and are legally ambiguous. Labour does not oppose clause 3, but it would be useful if the Minister could clarify the legal status of the various documents that interact with the Bill.
I want to echo some of the comments made by the hon. Member for North East Bedfordshire. In terms of the skills required, I too am worried about the bank being spread thin. I appreciate that the Minister has made comments about competency and capability with respect to particular investments, but it is important that at this stage—while we can—we look at how we can clarify the legal status of the various documents that interact with the Bill.
I thank the hon. Lady and I reiterate that, in general, our differences are to do not with outcome, but with process and how prescriptive one should be when putting things into legislation. Philosophically, the Conservative party does not think it is always right to be over-prescriptive; the objective is to provide a flexible and agile tool that can be responsive and deliver the outcomes that we seek. Passing laws in itself does not change the outcome.
That is the whole reason we are here as legislators. I gently remind the Minister that it is important to put things in the Bill; otherwise, there is confusion and there are too many grey areas. The Minister does not want lawyers to get involved, but it is important to have clarity. That is the purpose of legislation. Does he agree?
The hon. Member for Erith and Thamesmead asked me to clarify. Of course we do not put everything in legislation; that is just not the way that we work. As we have committed to doing on the strategic steer, we bring things to Parliament to provide the opportunity to debate and discuss them. How this will work will be laid down in the Bill itself. As I have explained, the strategic steer can be issued from time to time—once per Parliament. Its legal status is that the body itself must have regard to it and then respond by setting its own strategic plans.
I appreciate the time that the Minister has given me to intervene on this point. He said that we do not always put things down in legislation, but that has been done already with the energy efficiency measures. All I am saying is that if these are firm commitments, then I do not understand why they cannot be laid down in the Bill. That would avoid confusion at a later stage, and it is important that we get this right.
I feel I have addressed this point a number of times. There is just a difference between us as to the degree to which we should embellish primary legislation, which is hard to change and inflexible to respond to circumstances. That remains the position in the House. If the hon. Member for Erith and Thamesmead and her party are successful in obtaining a majority in a future election, she will have the opportunity to provide the strategic steer, which I assure her the UK Infrastructure Bank will have regard to under this framework. Perhaps we can then reassemble, and she will have the opportunity to hang whichever baubles she would like to on this particular Christmas tree.
Question put and agreed to.
Clause 3, as amended, accordingly ordered to stand part of the Bill.
Clause 4
Directions
I beg to move amendment 19, in clause 4, page 2, line 38, at end insert
“and any subsequent, consequential, or relevant correspondence between the Treasury and the Bank.”
This amendment increases transparency surrounding directions issued by the Treasury to the Bank.
I will briefly set out what the clause will do, because that context is necessary to understand what our amendment would do in turn. Clause 4 would grant the Treasury the power to give directions to the UK Infrastructure Bank about how to deliver on its objectives. Subsection (2) would require the bank to comply with those directions, but the Treasury would be unable to give those directions until it had consulted with the bank’s board of directors. The Treasury would be required to publish the directions as soon as practicable, and under an upcoming framework document the bank would have the right to publish a reservation notice in respect of the direction.
The bank has been described by the Government as operationally independent, but we know that the Treasury is the sole stakeholder in the bank. It is therefore possible for the Treasury to exert influence on the bank’s activities as a result of its ownership stake under the normal principles of company law. The Bill’s explanatory notes set out the Government’s position, stating:
“The Government’s policy is that such influence should be used sparingly in practice, and that the default position should be that the Bank is independent as regards its operations and investment decisions.”
Given that the Treasury is the sole stakeholder in the bank, however, we have concerns about the procedural transparency of the clause. We are conscious that the clause provides the procedural framework for the Government to direct the bank. As we have heard several times this morning, the Prime Minister’s infamous Tunbridge Wells speech indicates the need for an extra degree of caution.
The explanatory notes state that the Government’s use of influence will be constrained by the need
“to act rationally and proportionately”,
but the record of the Government causes us to have doubts. We therefore wish to enhance the safeguards in the Bill and ensure that the Government do not exert undue influence over the activity of the bank. Conservative Governments have recently rejected Treasury orthodoxy, and the bank may in future raise concerns about the direction of Government policy. As the bank is compelled to abide by directions given by the Treasury, it is important that we have a transparent process to allow for scrutiny in those circumstances. That is why we tabled amendment 19, which seeks to insert a requirement that
“any subsequent, consequential, or relevant correspondence between the Treasury and the Bank”
be made public. The purpose of the amendment is to increase transparency surrounding directions issued by the Treasury to the bank. It will simply require the Treasury to publish additional relevant correspondence between the Treasury and the bank, providing fuller context to any directions issued and enabling the proper scrutiny of investments made with public money.
The hon. Member’s amendment is a solution in search of a problem. The bank is constituted with taxpayers’ money, for which Ministers are accountable to Parliament and to Select Committees, which have the power to compel information and witnesses. There is a strong degree of accountability, and it is entirely appropriate that Ministers, from whichever side of the House they may one day hail, have the ability to direct the bank as necessary, as part of the matrix of ministerial accountability. I therefore reject the amendment. The Government will not support it, simply because we consider it to be wholly unnecessary.
I take no reassurance whatever from the Minister’s comments, so I will push this amendment to a vote.
Question put, That the amendment be made.
Clause 4 contains a provision for His Majesty’s Treasury to issue the bank with a direction of a general or specific nature about how the bank is to deliver its statutory objectives. To address the concerns raised by the hon. Member for Ealing North, the bank must be consulted before any direction is given, and any direction given must then be published by the Treasury. Ministers are rightly accountable to Parliament for this bank, and for any element of risk to the Exchequer or taxpayer that its activities create. That is right, even though the bank will be operationally independent for its day-to-day operations and its own investment decisions.
It is therefore considered necessary and entirely appropriate that the Government have a reserved power to direct the bank about how it is to deliver its objectives. Without a power of direction in statute, His Majesty’s Treasury could still direct the bank; however, there would be situations where the board would refuse a direction if the power were not in statute, given directors’ obligations under the Companies Act 2006. The two things could conflict. The purpose of the clause is to clarify where that conflict could arise, and the power of direction in statute removes that potential.
I assure right hon. and hon. Members from both sides of the House that the Government expect to use the power infrequently. Constrained powers of direction are a relatively common feature of similar institutions, such as the British Business Bank and HMRC. I commend the clause to the Committee.
I rise to speak briefly, as I set out our views on clause 4 more widely in the context of amendment 19, which I am disappointed that the Government chose to oppose. We were simply aiming to improve procedural transparency; it makes me wonder why the Government are so keen to avoid that being part of the Bill. Having lost that amendment, we will not be opposing the clause as it now stands.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Financial Assistance
Question proposed, That the clause stand part of the Bill.
Clause 5 gives the Treasury the power to provide the bank with financial assistance to enable it to deliver on its objectives. Financial assistance is defined in clause 10 to include
“assistance provided by way of loan, guarantee, indemnity, participation in equity financing and any other kind of financial assistance”,
whether given on an actual or contingent basis. The bank has been operating on an interim basis so far, with £22 billion of capitalisation from the Treasury, using existing powers derived from the Infrastructure (Financial Assistance) Act 2012 and sections 50 and 51 of the United Kingdom Internal Market Act 2020. However, we believe that a specific spending power is important in ensuring that the bank is an enduring institution.
Normally, the bank borrows from the Debt Management Office through voted loans via the Treasury’s supply funding. However, subsection (2) will make it possible for the bank to receive money paid directly out of the National Loans Fund, with the terms and conditions and interest rates of any such loans being determined by the Treasury. This removes the need for the Treasury to act as an intermediary in lending money from the National Loans Fund, while still maintaining control over the terms and conditions of direct loans. That is consistent with the approach taken by the Green Investment Bank when that was established.
Clause 6 provides for the bank, each year, to provide to the Treasury a copy of its annual report and accounts, and for the Treasury to lay these before Parliament. This will ensure the direct accessibility of the accounts by Parliament. This is a common clause for arm’s length bodies; it was in the legislation for the Advance Research and Invention Agency, the Green Investment Bank and the Bank of England. We expect the bank to publish its annual report and accounts for 2021-22 before the end of this calendar year—I believe they will be laid in the immediate future. The annual report and accounts will cover, as is standard, the bank’s progress on its success criteria, which I am sure will be of interest to my hon. Friend the Member for North East Bedfordshire, including its key performance indicators, its compliance with financial services regulation and its financial accounts.
As the Minister highlighted, clause 5 concerns financial assistance to the bank and clause 6 concerns the bank’s annual accounts and reports. The Minister has already provided a detailed summary, so I am not going to repeat what he has said. As he mentioned, clause 5 allows for the Treasury to provide financial assistance to the bank for the purpose of helping the bank deliver its objectives. Clause 6 requires the bank’s directors to comply with section 441 of the Companies Act 2006, delivering the Treasury a copy of its accounts and reports each financial year. As the Minister has outlined already, such clauses are commonly used. These are clearly technical and administrative requirements, and we will not object to them.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6 ordered to stand part of the Bill.
Clause 7
Directors: appointment and tenure
Amendment 12 seeks to limit the maximum number of directors on the board of the bank, moving it down from 14 to eight. Amendment 13 stipulates that at least four of the board members must be non-executive directors. We will be opposing amendment 12, as we believe that it is important for a range of views and expertise to be represented on the board of the bank. We believe that narrowing the board simply narrows the potential for diverse insight and ideas. As we will push for in amendment 20, which I will speak to shortly, we believe it is vital that there be a workers’ representative on the board. Narrowing the maximum figure reduces the board’s capacity to gain workers’ insight. On amendment 13, we will abstain.
I thank my hon. Friend the Member for North East Bedfordshire for rightly raising the important subject of governance, which relates to the arms length body in scope today. It is a very important point when considering how we manage efficiency and the will of Parliament through arms-length bodies. While not disagreeing in principle, the Government will not be supporting amendments 12 or 13, but I would be very happy to engage with my hon. Friend to see if there is something practical we can do.
My concern is with reducing the maximum board size to eight in the UK governance structure under the combined code, which my hon. Friend may have views on as well. Unlike in the US, in the UK we have a large number of committees of boards—rather more than is the case in the US. The limit of eight may present the challenge of not being able to successfully staff and structure those committees. That would be a concern to me.
The amendment requiring non-executive directors to hold a majority on the board is sensible, but I believe that would be the objective of the organisation anyway, and it complies with the corporate governance code to have a majority of non-executive directors. I do not think we need a requirement in legislation, but it is something I am happy to explore with my hon. Friend to give him the comfort he seeks without us moving out of potential compliance. I would ask him to withdraw his amendment.
Well, Mr Davies, I am sorely tempted to push this to a vote, notwithstanding the comments from my hon. Friend the Minister. I understand his point and would ask that in his direction he would issues around governance. I am disappointed that Labour is not prepared to support my amendment. Therefore, rather than my valiant quest end in ignominious defeat, I beg to ask to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment 5, clause 7, page 3, line 23, at end insert—
“(ba) the Board is to appoint one or more directors to be responsible for ensuring that the Board considers the interests of the appropriate national authorities when making decisions;”
This amendment would require the Bank’s Board to include one or more directors with responsibility for ensuring that the Board considers the interests of the appropriate national authorities when making decisions.
The amendment sets out the requirement for UKIB’s board to appoint one or more directors to be responsible for ensuring that the interests of the devolved Administrations are considered in the board’s decision making. The work of the bank is UK-wide and it has already supported projects in each of the devolved Administrations. Given that Scotland, Wales and Northern Ireland have strong interests in infrastructure investment in their respective nations, we, the Government, are keen to ensure that UKIB considers their views throughout its strategy and decision-making, including board discussions.
I would not necessarily oppose that argument, but I look forward to the day when the legislation can be updated to remove any representatives of the Scottish Parliament’s view, when Scotland takes its place as a rightful independent nation.
I rise to indicate my support for amendment 20—[Interruption]—which I gather is also being given by Comrade Fuller on the other side of the Committee. It is very welcome that the Labour party, having recently departed from its relationship with trade unions and workers, is finally seeing the light and coming back to the idea that it ought to have a strong association with trade unions. The amendment probably could have been tidied up slightly, perhaps to include somebody from the Trades Union Congress, but on the broad thrust of the argument I very much support the idea that the Labour party is once again deciding to go back to its roots, rather than flirt too much with the policy of the right hon. and learned Member for Holborn and St Pancras (Keir Starmer).
I shall strongly resist the temptation to debate the fundamental merits of workers on boards, overturning the existing system of UK corporate governance, or indeed the nationality of any particular worker. Why stop at one English worker when one could have representatives of workers from all the DAs?
In thoroughly opposing the amendment, I confirm that the bank will comply with the corporate governance code, which provides, as the hon. Member for Ealing North outlined, a number of options through which a company can achieve the desired representation. The bank has already designated Marianne Økland to take on the role of facilitating engagement with the workforce. That will be set out in the annual report when published. I ask, perhaps fruitlessly, the hon. Member not to waste the Committee’s time by pressing the amendment to a vote, given that the bank is complying with the existing UK corporate governance code.
While I welcome the Minister’s assurance about the bank’s compliance with the UK corporate governance code, I am disappointed that he feels that a vote on worker representation on the board would be a waste of time. It is an issue of great importance to the Opposition, so we will press the amendment to a vote.
Question put, That the amendment be made.
The clause sets out the core provisions on the make-up of, and appointment to, the bank’s board of directors. The clause requires that the board has a number of directors that is broadly consistent with comparable boards. It allows for the appointment of directors to have a spread of expertise across banking, infrastructure finance and climate change mitigation, as well as the appropriate balance between executive and non-executive directors. The clause sets out that the chair, chief executive officer and non-execs will be appointed by the Chancellor of the Exchequer.
All non-exec directors are recruited with reference to guidelines set out by the Office of the Commissioner for Public Appointments, and are being appointed based on the skills that they could bring to the board around the UKIB’s mandate. Throughout the process we have been conscious of the need to ensure a broad spread of expertise, as well as cognitive diversity. Finally, the clause contains provisions on the circumstances that would prohibit a person from continuing as a non-exec director, such as bankruptcy, or mental or physical incapacitation. I recommend that the clause stand part of the Bill.
As the Minister outlined, clause 7 concerns the appointment and tenure of directors to the board of the bank. We note that it requires at least five but no more than 14 directors; that the board’s chair, chief executive officer and non-executive directors be appointed by the Chancellor of the Exchequer; that the tenure of non-executive directors not exceed four years; and that a person may not be appointed as non-executive director more than twice.
The clause also requires that a person ceases to be a non-executive director as soon as they cease to be a director by virtue of any provision of the Companies Act 2006, or are otherwise prohibited by law; they become bankrupt or their estate is sequestrated; a registered medical professional treating them provides the written opinion that that person is incapable of serving as a director due to physical or mental incapacity for more than three months; or the person has resigned from the position in accordance with the notification procedures of the bank. We recognise that the number of directors is broadly consistent with comparable boards, such as the Bank of England board. We also understand that the intention behind that is to provide flexibility and a wide spread of expertise.
(1 year, 9 months ago)
Commons ChamberIn these challenging times, this was an autumn statement that responds directly to the needs of our country. It is serious and sensible, it delivers on stability, growth and public services, and it does so at a time of great geopolitical uncertainty. Inflation is on the march around the world, with higher rates in Germany, the Netherlands and Italy than in the United Kingdom. Interest rates are up from historic lows across the Atlantic and in the euro area. Growth forecasts around the world have been downgraded.
We are not immune from these global challenges, and so many colleagues on the Government Benches were right to provide that context. My hon. Friends the Members for South Cambridgeshire (Anthony Browne), for Poole (Sir Robert Syms), for Ipswich (Tom Hunt) and for Delyn (Rob Roberts) talked about how anybody who denies that economic context is taking the British people for fools. Those of us on this side of the House will never take the British people for fools. We will tell them the truths.
In designing our response, we have focused on the need to be compassionate, honest and fair, just as we did during the covid pandemic, spending £400 billion to protect the people and businesses of this country. We have put our values front and centre, and that means, despite a downturn, delivering a stronger NHS and protecting pensioners. It means spending £55 billion this winter to protect households on energy bills, and it means, as my right hon. Friend the Member for Gainsborough (Sir Edward Leigh) talked about, giving us the time to deliver the public service reform that will make sure that we spend every pound of taxpayers’ money in the right way. It means that, even with underlying debt as a percentage of GDP falling, we are investing in an education system that gives people the skills they need to take advantage of the job market of the future that we are going to create. And it means that, even with public sector borrowing kept below 3%, we will be building the infrastructure we need to compete in the world.
As my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, talked about, inflation is the most invidious thing, and that is why this autumn statement goes with the grain of the action that we need to take now. These are immensely difficult decisions. Increasing taxes is not something that any Government want to do, but right now it is what a responsible Government, facing these challenges, must do. My right hon. Friends the Members for Gainsborough and for Middlesbrough South and East Cleveland (Mr Clarke), and my hon. Friends the Members for South Dorset (Richard Drax) and for Don Valley (Nick Fletcher) talked passionately about that. None of us on this side of the House came here to do that. Conservatives believe in people keeping more of what they earn. We are on the side of strivers, and the quicker we can get back to that, the better, but now is not that time.
We are going to grow public spending, but we are going to grow it slower than the economy. As my right hon. Friend the Chief Secretary to the Treasury said in his opening speech, for the remaining two years of this spending review, we will protect the increases in departmental budgets that we have already set out in cash terms. We will then grow resource spending at 1% a year in real terms for the three years that follow. Although Departments will have to make efficiencies to deal with inflationary pressures in the next two years, that means that overall spending on public services will continue to rise in real terms for the next five years.
This was not just a statement about stability and our public services. Central to it was growth. As my right hon. Friend the Chancellor said to the House last week:
“Sound money is the rock upon which long-term prosperity rests; but it is not enough on its own. Our plan is designed to build a high-wage, high-skill economy that leads to long-term prosperity.”—[Official Report, 17 November 2022; Vol. 722, c. 851.]
This autumn statement delivers on that: more money for education; working with the Department for Work and Pensions and seeking to tackle the crisis of inactivity, at a time when employers are crying out for workers, with more than 600,000 people off welfare and into work; and increasing public funding for research and development to £20 billion by 2024-25, as part of our mission to make the United Kingdom a science superpower, with the highest level of research and development that the country has ever seen. We are investing in high-risk, high-reward research, and we seek for the constituency of every Member, the vision that my hon. Friend the Member for Don Valley seeks for his constituents.
We will grow by using our Brexit freedoms to take the next step in our supply-side transformation, targeting five growth industries of outsize opportunity. [Interruption.] Opposition Members may disagree that these are outsize opportunities, but do they disagree with digital technology, life sciences, new low carbon industries, our wonderful financial services, and advanced manufacturing? We need to be better at turning world-class innovation into world-class companies, but the capital to invest in opportunities cannot come solely from the taxpayer, whatever the hon. Member for Coventry South (Zarah Sultana) may wish. That is why our decision last week on the reform of Solvency II is so important for growth. Without compromising policyholder protection, the changes will better mobilise the UK’s £3.4 trillion of pension wealth. As the Association of British Insurers estimates, that will unlock £100 billion of new investment here in our economy over the next 10 years. That is investment in sustainable assets, clean energy, house building and local communities, and it is just the start of a series of measures that will combine with the Financial Services and Markets Bill—the first ab initio review of financial services regulation for over 20 years, and the first since we left the European Union—and will make the UK the world’s most innovative and competitive global financial centre.
That is why, unlike those on the Opposition Benches who yearn wistfully for powers to be returned to their Brussels overlords, the Prime Minister and the Chancellor were right to reaffirm today that we must never go back, and never pursue a relationship with Europe that relies on alignment with EU laws. Brexit can deliver and is already delivering enormous benefit and opportunities—something my hon. Friend the Member for South Dorset reminded us.
I will happily give way. Perhaps the hon. Member will tell the House how dividing this great Union will grow our economy.
As I think everyone on these Benches will agree, the Budget we have just had presented to us means that the Union is anything but great. Will the Minister tell my constituents one thing from Brexit that is a definite benefit even to 20% of people in my constituency—something about which they will notice a difference?
I am afraid we do not have enough time left to share all the benefits that we are delivering for the hon. Gentleman’s constituents, but as SNP Members sit here tonight, and the nights are dark and the evenings growing colder, his constituents, like all our constituents, will be enormously grateful for the £55 billion that we are putting in to protect people and households from the cost of energy this winter.
We face a global energy crisis. We face high and global inflation. We face a global economic crisis. We do not live in isolation away from those economic realities. As much as the Opposition twist those facts, those are the realities after covid and Russia’s invasion of Ukraine. But with our resourcefulness and resilience, we will overcome those challenges. This autumn statement was for doctors, nurses and those working in the NHS. It was for teachers and schools. It was for pensioners and those on benefits. It was, above all else, for those on the lowest wages, those who are vulnerable, those who need help with their energy bills and everybody who relies on public services.
Ordered, That the debate be now adjourned.—(Andrew Stephenson.)
Debate to be resumed tomorrow.
(1 year, 9 months ago)
Commons ChamberThe Government are rightly reducing the burden of regulation for tens of thousands of small and medium-sized enterprises. Just a month ago, the presumption of exemption when Departments make regulations was extended from businesses with fewer than 50 employees to those with fewer than 500, and we expect 40,000 SMEs to benefit from that.
People in the Stroud district are looking for ways to improve the energy efficiency of their homes, but a constituent has raised with me the difficulty of securing finance for products such as solar photovoltaic and batteries. Will my hon. Friend agree to ensure that the Government work with me in looking into whether the Consumer Credit Act 1974 constitutes a barrier to banks providing finance for renewable energy solutions, and whether changes could be made to the Act to assist consumers and businesses without a cost to the taxpayer?
My hon. Friend regularly champions the cause of her constituents with Ministers. The Government are committed to reforming the Consumer Credit Act, recognising the need for modernisation of this regulation. I hope that such reform can support the vital investment needed to improve the sustainability of homes in her constituency and across the UK.
As a former small business owner in the financial services sector, I know all too well how red tape and disproportionate regulation hamper competitors in the industry, often to the detriment of consumers, particularly those who are vulnerable. The Financial Services and Markets Bill presents a great opportunity to ensure that our world-leading insurance and financial services industry remains globally competitive. Can the Minister confirm that he will take all possible steps to ensure that the Bill delivers to its full potential, with regulators being held more accountable for their decisions?
I can give my hon. Friend that assurance. As he knows, the Government are committed to effective, efficient and proportionate regulation. He has advocated a number of amendments to that Bill, and I am giving them due consideration.
A common concern for small business people I speak to, in Watford and beyond, is cash flow, which has a heavy impact on organisations, for instance when Governments make late payments. May I ask the Government to ensure that the announcement to be made this week sends the clear message that all Departments and local government bodies follow the prompt payment policy robustly and, whenever possible, encourage businesses to follow the prompt payment code, so that SMEs can be paid quickly and fully and do not suffer in the efforts to make efficiencies and savings?
I know that my colleagues will join me in paying tribute to my hon. Friend for the time that he spends helping small businesses. As he says, the Government must lead by example on prompt payment. They are committed to paying 90% of valid invoices within five days and 100% within 30 days, which is absolutely right, and the Cabinet Office’s Procurement Bill will ensure that that happens throughout the public sector.
I recently attended a meeting with business leaders in Clacton who worry about being hamstrung on the global stage. We are going to be one of the highest payers of corporation tax anywhere. Does my hon. Friend agree that, despite recent financial upheavals, we must maintain our focus on growth and support our businesses, both large and small, by keeping a firm lid on corporation tax?
I can assure my hon. Friend that the Government are on the side of small businesses and fiscal responsibly, and the introduction of the small profits rate will help the businesses that he talks about.
When the Government cut the red tape and open the box, they will find 2,400 pieces of retained EU law, so what are they going to do to help small businesses navigate all the legislation that is going to drop on them at the end of next year?
I welcome the hon. Lady’s conversion to the cause of easing the red tape that is buried within EU law. It is this Government’s objective to use our new-found freedoms to create regulations that are appropriate for the businesses of this country and that will help us to grow and deliver the prosperity we need for public services.
Some of our best SMEs are farmers and my constituency is blessed with many farms. Farmers regularly tell me that the duplication of forms is driving up prices and that pressures around energy are increasing food prices, so can the Minister set out what more meaningful support he will be giving to farmers in my constituency and across the United Kingdom? At the minute, the Government are found wanting.
Representing a rural constituency myself, I am familiar with the challenges to our food producers that the hon. Member talks about. I will ensure that the Secretary of State for Environment, Food and Rural Affairs writes to him setting out what we are doing to ensure that we continue to have security of food supply in this country.
High street SMEs keep telling me how unfair the current business rate system is, and of course Labour agrees, so as we enter a Conservative recession, will the Chancellor follow Labour’s lead by lifting the small business rate relief for 300,000 businesses to give our high street businesses the boost they need?
The Government have committed to review business rates, but it would be wrong for me to pre-empt the outcome of that review here today.
Following the mini-Budget, the former Chancellor promised to write to me about energy bill support for a small business in my constituency. That response has yet to materialise. Will the Chancellor please look into this and provide a response that I can share with my business, Equi’s Ice Cream?
I will ensure that the case the hon. Lady raises is responded to.
The Government are committed to helping as many first-time buyers on to the housing ladder as possible. We are investing £11.5 billion in building more of the affordable homes that the country needs. First-time buyers can access first-time buyer’s relief for stamp duty land tax, which means that 90% of first-time buyers need pay no stamp duty at all.
For so many younger people, even those on really good wages, the idea of owning their own house is now a pipe dream. We have 1 million more people in private rented accommodation and, since 2010, 800,000 fewer under-45 households own their own home. What is it about 12 years of Conservative government that has been so brutal for young people with ambitions to own their own home?
The Government are very conscious and very supportive of people’s desire to own their own home, which is why we have made so many interventions on affordability. Underlying that is the strength of the economy, which offers great employment prospects for those who seek to work hard, to save and, ultimately, to purchase their own home. We are on their side.
The consequences of September’s disastrous mini-Budget continue to be felt, as we will see in the autumn statement on Thursday—the third Budget statement in two months from the fourth Chancellor since the summer, presided over by the fifth Prime Minister in six years. Whatever they represent, it is certainly not stability.
Mortgage rates are still well above what they were before the mini-Budget. I have a constituent who is a first-time buyer, and he is facing a £200-a-month increase on his mortgage quote compared with before the mini-Budget. Why should my constituent, and thousands like him, pay the price in their mortgage payments for the economic damage caused by the Government’s recklessness?
The right hon. Gentleman does this House and his constituents a great disservice with that characterisation, which did not mention once the tragedy of the events caused by Russia’s invasion of Ukraine and the fact that we are coming off the back of an extraordinary intervention to protect this country, jobs and businesses from covid. In the future, when he characterises the economy, he owes it to all of us to be more proportionate.
I know that, after 12 years, the Government quite like stealing our ideas, such as the windfall tax and the energy price freeze, so let me offer a suggestion. High deposit demands, increased unaffordability due to price rises and, now, rising mortgage rates all mean it is increasingly difficult for first-time buyers to get on the property ladder, so will the Government consider Labour’s proposal for a mortgage guarantee scheme, as operates in countries such as Canada, to help first-time buyers get on the property ladder and to protect them from negative equity in times of market turbulence? Would that not be a practical idea to stop people being trapped in the private rented sector and to help them buy a home of their own?
Not only is that a good idea, it is a Conservative idea that we have already introduced. I am glad the right hon. Gentleman has belatedly latched on to it.
With interest rates rising around the world, many others countries are considering more imaginative ways of enabling those with mortgages to continue to pay. Will my hon. Friend look at the schemes operating in the United States that allow lenders to extend the duration of a mortgage to allow payments to remain on an even keel and, therefore, to remain more affordable for hard-pressed households?
Yes, I will do that. My right hon. Friend is right to point to the fact that mortgage rates have been rising throughout the world. This Government will always be on the side of trying to protect people with mortgages. Lenders are responsible and are willing to extend. The advice is that people should always speak to their lender if they have difficulties. I will certainly look at the case he mentions.
As chairman of the all-party parliamentary group on personal banking and fairer financial services, I have been in protracted correspondence with the Financial Conduct Authority about the Blackmore Bond scandal. Despite receiving more than 30 complaints and a whistleblower producing evidence, the FCA refused to investigate. I realise that it predates my hon. Friend’s appointment, but will he investigate this and force the FCA to take action?
I thank my hon. Friend for raising this case. It was, sadly, outside the FCA perimeter, but I would be happy to meet him, because I understand that it raises important issues for him and his constituents.
I will happily meet the hon. Member to understand more details of the case. It is important that the FCA provides protection for consumers. That is one of the objectives of the Financial Services and Markets Bill, which is currently going through Parliament.
(1 year, 9 months ago)
General CommitteesI beg to move,
That the Committee has considered the draft Financial Services (Miscellaneous Amendments) Regulations 2022.
It is a pleasure to serve under your chairmanship, Mr Robertson.
The statutory instrument comprises two sets of provisions relating to Gibraltarian firms operating in the UK market, and to securitisation. The proposed legislation will remedy technical deficiencies identified in financial services legislation that was put in place to help manage our withdrawal from the EU. In relation to Gibraltar, the instrument will fix temporary market access arrangements that were put in place to ensure Gibraltarian firms did not face a cliff edge loss of market access into the UK when we left the EU. In particular, the amendments will complete the intended transfer of powers to the Treasury and the Financial Conduct Authority in three specific areas. That transfer will give the UK authorities powers in relation to Gibraltarian firms where operating in the UK market, consistent with their powers over domestic firms.
It is worth remembering that financial services legislation was amended on withdrawal from the EU to adjust the treatment of "European economic area firms", in particular to remove passporting rights that were a function of the EU single market. At that time, because Gibraltarian firms benefited from equivalent rights, separate provisions were necessary to preserve the existing arrangements supporting market access for financial services between the UK and Gibraltar. Those arrangements were always intended to be temporary. Through the Financial Services Act 2021, we are working to replace them with a new, permanent regime designed specifically for Gibraltar that reflects our unique history and relationship.
The temporary regime that the Government put in place for Gibraltarian firms unintentionally prevented the transfer of powers to the Treasury and the Financial Conduct Authority - or the FCA - from being completed in certain areas, leaving gaps in UK law. This SI will exclude provisions from that temporary regime to remove those gaps in the powers available to the Treasury and FCA. That is equitable and proportionate as it will enable the treatment of Gibraltarian firms to be brought in line with UK firms. To close those gaps would provide for a more consistent legal and regulatory environment, as had been intended.
The SI will have an impact on three regulations that affect Gibraltarian firms operating in our market, namely, the Short Selling Regulation; the Markets in Financial Instruments Regulation; and the Packaged Retail and Insurance-based Investment Products Regulation. I shall highlight the key impacts of the SI on those regulations.
Under the Short Selling Regulation, the Treasury's power to modify the reporting threshold relating to net short positions will extend to Gibraltarian firms trading shares on a UK trading venue. Under Markets in Financial Instruments Regulation, the FCA will be able to apply technical standards relating to post-trade disclosure obligations to Gibraltarian investment firms in the UK. Similarly, under the Packaged Retail and Insurance-based Investment Products Regulation, the FCA will be able to apply technical standards to Gibraltar firms selling, advising on or manufacturing PRIlPs to retail investors in the UK.
I note that the instrument confers new powers on UK authorities, in effect the same powers that the Treasury and FCA already have in relation to UK firms. The Treasury and the FCA would need to take steps to apply those powers as appropriate to Gibraltarian firms in the UK market.
The next set of provisions delivered through the SI relates to securitisation. Securitisation is the packaging up of assets or loans and selling them on to investors. This allows lenders, such as banks, to transfer the risks of assets to other banks and investors to free up their balance sheets and allow for further lending to the real economy. In relation to securitisation, the instrument will amend the end-date for two specific requirements. That will preserve a consistent approach to certain securitisations which are subject to temporary transitional arrangements, following the UK's withdrawal from the EU.
The UK supports the implementation of international standards to promote simple, transparent and standardised securitisations, known as "STS" securitisations. STS securitisations are easier for investors to understand and assess the risks of. As a result, some STS investors will benefit from lower capital requirements. Generally, only firms established in the UK can designate their securitisations as STS. However, transitional arrangements were put in place to allow for certain EU STS securitisations issued prior to the end of 2022 to be recognised in the UK. Those arrangements were extended to the end of 2024 by another set of EU exit regulations earlier this year.
The SI before the Committee will simply extend the end-date of two requirements for EU STS securitisations to the end of 2024, rather than 2022. That will ensure UK investors do the appropriate due diligence checks when investing in EU STS securitisations, and that those securitisations remain exempt from clearing requirements to prevent unnecessary administrative burden. The amendments thus maintain the current requirements as long as the transitional arrangements last.
I hope colleagues will join me in supporting the regulations, which I commend to the Committee.
It is a pleasure to follow my colleague, the hon. Member for Ealing North, and I thank him for this support for the measure, which, as he confirmed, is technical in nature.
I note the comments of the hon. Member for Dunfermline and West Fife about Brexit. I can assure colleagues that anything to do with Brexit is a wee stroll compared with the epic marathon that would be disentangling Scotland from the rest of the United Kingdom.
It is the Government’s view that the amendments, which relate to securitisation and the Gibraltar financial services regime, are necessary, appropriate and proportionate. I hope that hon. Members have found today’s Committee sitting informative and that they will join me in supporting the regulations, which I commend to the Committee.
Question put and agreed to.
(1 year, 9 months ago)
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It is a pleasure to serve under your chairmanship, Mrs Cummins, and I congratulate the hon. Member for Hemsworth (Jon Trickett) on securing the debate. I accept that he is sincere in bringing forward his concern and that of his constituents, but we on this side of the House believe that he is sadly wrong.
In responding for the Government, I am grateful for the opportunity to lift the lid on what is an important but often misrepresented issue. Let me be unequivocal from the outset that the Government are unapologetic about our commitment to the financial services industry, which stretches across the whole of this great nation. If the hon. Gentleman cares to talk to his Front-Bench colleagues, he will find that the policy of both Front-Bench teams is to support the sector in order to help grow our economy and create the prosperity from which we all benefit.
I will happily do so. Perhaps we will hear more about the policy of those on the Opposition Front Bench.
Does the Minister accept that I am not speaking on behalf of my Front-Bench colleagues? I am speaking about the views of my constituents and others across the country, and in the interests of what I believe the country should be doing. The Government are clearly wrong, whatever those on the two Front Benches are proposing.
It is always a pleasure to hear a Member of this House speak on behalf of their constituents, which is indeed what we are here to do. I stand corrected by the hon. Gentleman: this debate is not about the policy of Opposition Front Benchers. I just thought it was worth setting that in context, because where there is consensus, we should build on it. I understand his views, but the scale of the sector’s contribution to the United Kingdom is truly massive.
Financial and related professional services, and all those that are engaged in the support functions, make up 12% of the UK’s gross value added—12% of the economy. That is millions of jobs, and not just in the City. Indeed, I actively push back against the idea that I am the City Minister, because that is not the case. The financial sector has to build bridges and reach into every household across the country. To that point, the hon. Gentleman is probably aware from talking to his constituents that there are 145,000 jobs in the financial sector and related industries in Yorkshire and the Humber, and long may that continue. Those are the sorts of high-quality, high-skilled jobs that I am sure he seeks for his constituents, for our generation and for generations to come.
The sector produces prodigious amounts of tax revenues—billions of pounds—without which our public services would be in peril. Because of the financial services sector, I can look our hospitals, schools, police, fire services and all of our brilliant, fabulous public servants in the eye. The hon. Gentleman might tell us that they do not get enough revenues, but one of the ways in which we can continue to make sure that they are sustainably well financed is on the back of the very bankers he decries, and my mission is to continue to grow this wonderful sector.
I return to the subject of the debate: the bonus cap. Although many people are confused about what the bonus cap is, I know that the hon. Gentleman has followed this topic and is not confused. It is not a cap on bonus pay. If he would like to introduce such a measure, Parliament offers many wonderful opportunities for him to do so, including ten-minute rule Bills and Backbench Business debates. If he would like to propose a cap on bonuses, I am sure that the House would be keen to hear more about how such a cap would work.
I think the hon. Gentleman knows that what we are talking about is not a cap on bonuses whereby fixed pay is inflated and bankers are paid the egregious amounts that he talks about. This did no such thing. It was simply about the composition of pay and how much of it is geared to performance versus a mere entitlement or fact of contractual law. It has never been a cap. The EU directive that the hon. Gentleman talked about relates to the ratio of fixed pay to bonuses. At no point has there been a cap. To be in favour of the status quo is actually to be in favour of higher basic salaries for bankers. Perhaps we should have renamed this debate, “The debate about higher basic salaries for bankers.” We may have got more bankers to come and watch, but I am not sure how many hon. Members would have clamoured to support a debate about higher basic pay for bankers. This is a really important point. The hon. Gentleman himself raised the fact that since this so-called cap was introduced, we have actually seen an increase in pay. If it was a cap, by its own definition it has failed.
The consequence of all this is that by removing restrictions, more of bankers’ pay can be performance-based. If they do not perform, perhaps their salaries will go down and perhaps the hon. Member’s objectives would be achieved by the very measure the Government have advocated. We would be removing the insistence on higher fixed pay, and more of it would be based on performance. If they do not perform or grow the economy, and if they do not contribute the near 50% share that the bankers will typically be paying in tax to our nation, then their salaries will go down. I would offer that to the hon. Gentleman as a reframing of how he thinks about this.
This is a common remuneration structure, not just in this sector but elsewhere in the economy. It is how many industries align performance and incentives in a sensible way. I have heard the argument that removing what we have now established as a so-called bonus cap will see a return to the bad behaviour and perverse incentives that led to the global financial crisis. The hon. Gentleman was there at the heart of that in No. 10, and I can understand that experience, but things have moved on—not just in respect of this cap, but the fourth European directive.
At that point there was no broader remuneration framework for bankers. They could get their entire variable pay on the day it was awarded. There was no element of deferral or additional regulatory requirements, such as those imposed by the Prudential Regulation Authority and the Financial Conduct Authority, to require a significant proportion of variable remuneration to be deferred for a number of years. In those years, firms are able to revisit performance and material events or misconduct and then take account of those within the remuneration framework. Since the hon. Gentleman’s service in No. 10, we have seen the introduction of the senior managers regime, which has even greater accountability.
The point is that the regulatory structures have evolved. They were right to evolve in the aftermath of the global financial crisis, but the reforms that work do not include this arbitrary and variable remuneration ratio.
The Minister will have heard me talking about a person in the City being remunerated £68 million in a single year. Of that, £200,000 was the basic pay, and the rest was bonus. I think the Minister is resting his case on the expansion of basic salaries, but that is not the case for that person. It would take the average person in my constituency 2,260 years on an average salary to achieve what that person achieved in a year. Is that possibly morally justifiable?
The hon. Gentleman needs to make peace with the benefits of a capitalist, free-enterprise, private, risk-taking economy. I understand that that is a certain distance for the hon. Gentleman to travel. Perhaps we do not have enough time this afternoon for the hon. Gentleman to travel all that distance. By his own admission, he chose the most extreme of the most extreme cases. I celebrate, because in that example, his, mine and your constituents, Mrs Cummins, would be better off to the tune of £34 million, from that single, most productive of financial services employees in that year putting that money back into the Exchequer. I sincerely hope that is absolutely the case, because the Government have made a great endeavour to collect all the tax revenues owed.
I will shortly conclude, but earlier the hon. Gentleman seemed to decry the fact that seven out of 10 of the most highly paid bankers in Europe were based in London in the United Kingdom. I think the very opposite. The Government’s view is that, if not seven, it should be eight, and that we should seek to obtain those revenues and grow our economy, reinvesting in the productive and public services.
At the beginning, the hon. Gentleman made great play that this was one of the few surviving measures of the mini-Budget, the then growth plan. I cannot leave that lying on file, because the biggest single measure, which all our constituents benefit from right now, as the nights grow colder and the temperatures plummet, was the £60 million—
Sixty billion pounds—a little more than bankers’ pay. That is now flowing into individuals’ heating, fuel and energy bills, protecting every one of our constituents, up and down the United Kingdom. This was not the sole surviving measure that the hon. Gentleman talked about. This was a sensible measure, part of taking an inherited European rulebook that never fitted the fact pattern of the United Kingdom. That is why the Bank of England and the Liberal Democrat part of the coalition all made great protestations at the time that the fourth European capital requirements directive was introduced, because it did not fit the unique fact pattern of the United Kingdom.
Let me conclude. I pay tribute to the hon. Gentleman for bringing these matters to the House. It is absolutely right that we talk about this and understand how we are going to drive our economy forward in the fairest possible way. The City, I hasten to remind him, has a significant duty to society, and must be connected to every part of the United Kingdom, even our wonderful Administration north of the border. The Government’s position is that the measure is the right one. The hon. Gentleman asked whether the Government stood by that. It is the case, because we want a productive economy and people to be paid what they earn, but no more than is warranted. That is why we continue to stand by the measure.
Question put and agreed to.
(1 year, 10 months ago)
Public Bill CommitteesIt is a pleasure to serve under your chairmanship again, Mr Sharma. I start by paying tribute to my hon. Friend the Member for Walthamstow, as others have done, for tabling the new clause and for her relentless work in the House to highlight the risks that unsecured credit poses to the most vulnerable in society, including many of my constituents in Kilburn. I also pay tribute to her successful campaign for better regulation of payday loans and companies. I am sure everyone has heard her speak on that campaign in the Chamber at some point.
As my hon. Friend the Member for Kingston upon Hull and Hessle said, we are disappointed that the Bill has failed to address buy now, pay later regulation. For years, the Government have promised to regulate the sector, but have not done so, which has left millions of consumers without protection. I recognise that many of my constituents, particularly the young, value buy now, pay later products, because they allow people to pay for expensive products over time. However, the products can also result in debt building up quickly and easily. That is why it is so important that the sector is properly regulated, as my hon. Friend the Member for Mitcham and Morden outlined.
An investigation by the FCA, the Woolard review, which reported in February last year, found that many consumers simply do not know that buy now, pay later products are a form of credit, which means that some people do not consider the risks associated with taking out such products and may not look at the products as carefully as they might have done otherwise. That should be deeply concerning to all of us here, and it has left the most vulnerable, financially excluded people at risk of getting trapped in a cycle of debt. The review made it clear that there is an urgent need to regulate all buy now, pay later products.
We are almost two years on from the review and nothing has been done—no action has been taken. The Government’s consultation concluded in June, and this Bill was the perfect opportunity to bring forward provisions to regulate the sector. Will the Minister explain why the Government have chosen not to do so? It is not just consumers who are in desperate need of regulation. As shadow City Minister, I have engaged with the main players in the buy now, pay later sector in recent months. They too have called on the Government for proper regulation to provide certainty for businesses and to keep bad actors out of the market. I hope the Minister will explain why his Government have chosen to leave consumers unprotected and have ignored calls from the sector by failing to include this regulation in the Bill today.
It is a pleasure to serve under your chairmanship, Mr Sharma. It is always a pleasure to follow the hon. Member for Hampstead and Kilburn. I would like to add my recognition for what the hon. Member for Walthamstow has achieved, particularly when it comes to payday loans.
The debate on this clause is not about the ends. Rather, it is about the means and the best way of proceeding from here to an end that, as we heard from my hon. Friend the Member for West Worcestershire, is common to both sides of the Committee. However, there is a difference. The Government will not be supporting this amendment. I want to make it clear that we are trying to find the best path on which to proceed, and we are trying to get this important area right.
The amendment would require the Treasury to make regulations to bring buy now, pay later products into regulation within 28 days of the Bill’s passage. I contend that that would be breakneck speed. I hear and understand the frustration of colleagues that the legislation has taken a certain amount of time to mature, but it is also an innovative product and something that provides real utility to millions of people. It is important that we get this right.
The challenge for us in bringing forward appropriate regulations in this domain is that we must ensure we give no succour to the greater evil of informal or illegal credit. As we look to regulate the credit market, we have to acknowledge that what we do not regulate creates a floor, beneath which nefarious providers operate—for example, those whom the hon. Member for Walthamstow has been vigilant in cracking down on.
I understand the desire to move at pace, but I do not accept that nothing has happened. The FCA has significantly moved the dial on this, although there is more to do. It is our contention that we should do it in a thoughtful way and by consulting with the sector, which is supportive of endeavours to bring forward the right amount of legislation.
We also acknowledge that to many people credit can be a valued lifeline. Like the hon. Member for West Dunbartonshire, I remember being sent to do the weekly grocery shop, and that shop provided credit of a buy now, pay later form. As a growing family, and particularly at certain moments of the year, we had a more-than-average amount of groceries. It was a real lifeline. It was a way to spread the cost in a measured way. We should recognise that we must be very careful of the unintended consequences.
I am glad to hear that the Minister was helpful to his mother when growing up by doing the grocery shop. He has just made a subtle point about unintended consequences of unregulated lenders—nefarious was the word he used. We would all associate ourselves with that. I wonder if the Minister would talk about speed, given that he does not agree with a month. When does he expect this process to bring forward the wherewithal to incorporate this kind of lending into regulation? Is it his view that the price and consequences of the interest rates that are attached to lending like this should be presented far more upfront when it comes to the button being clicked?
I will address both of those points. In terms of timing, the Government published, as the hon. Member knows, a consultation on the proposed approach to regulation in October 2021; I acknowledge that was some time ago. The response to that consultation was published in June 2022. The Government are now developing the necessary legislation and intend to consult on that draft legislation soon. The Government aim to lay secondary legislation in mid-2023.
The hon. Member talks about price, and I will defer to her expertise if this is the case, but my understanding is that the category that is defined as “buy now, pay later” is required to be credit-provided for no more than 12 months, in no more than 12 instalments, and interest free. So although I am an addict for data, and I believe that transparency is—in most markets—the best oxygen, in this case it is clear and established that this product category is not allowed to charge interest. That does not mean that it does not have charges; there is hidden small print, and I understand and support the need for that.
I accept what the Minister has said, but the price here is not an interest rate, it is actually what happens if one does not make the payments. It is the consequences of falling behind that are the issue rather than an interest rate.
I think that the hon. Member and I are at common cause in terms of what we are talking about. To make a wider point, I think we would all understand and aspire to a culture that was “save first, and buy later”. What we are talking about are societal changes. We live in a society where too many people have early recourse to debt and where we perhaps do not have the level of financial education that we would like. That is something that I discussed yesterday with the Money and Pensions Service.
There is a great deal more work to do. I would like to champion that in my relatively new ministerial role. Although it is important that we regulate, and although we have to recognise that, however much we try to work upstream, there will be people who are exploited or simply vulnerable, or who are not operating on the sort of level of financial resilience that they should be. I know the Treasury Committee spends a great deal of time on that; it is a concern to me and the ministerial team in the Treasury. That is an area that we can collaborate and work on; it need not be something that we divide over. That is particularly pertinent to younger people.
As well as committing to move forward with regulation, we commit to do so in a measured way, in the right way and at the right time. That also brings into consideration wider initiatives about financial education in general.
I want to press the new clause to a vote.
Question put, That the clause be read a Second time.
That is extremely helpful in setting out the thought processes behind the new clause. One of the issues that the hon. Member for Hampstead and Kilburn might wish to clarify is that, if the hon. Member for Mitcham and Morden is correct, the new clause has to contain the stipulation that to get a banking licence in the United Kingdom, one needs to pay a certain amount of social levy so that banking hubs can be established. For me, that is the issue with the clause. I therefore suggest that the hon. Member for Hampstead and Kilburn might want to take it away and bring it back on Report, or have a discussion with the Minister about exactly how the levy that the hon. Member for Mitcham and Morden is effectively talking about is to be established. This new clause does not make that clear, and therefore, frankly, the practicality of the new clause—notwithstanding that we all agree with its intent—is clearly flawed.
I once again note the strength of feeling on both sides of the Committee. The hon. Member for Mitcham and Morden has spoken in a number of debates on clauses of the Bill about the importance of bank branches to our constituencies and local communities. When I visit her constituency to see the opening of the new cash machine, perhaps I will be able to review the provision for myself.
The Government do not support the new clause, but if I may make eyes at the Opposition, I would be very open to accepting an amendment about appalling hold music, as suggested by the hon. Member for Wallasey. That is something to look forward to—I am not sure I should say that in front of my Whip, but one has immense sympathy with the point made.
There are very real issues here, which no one disputes. I am familiar with the sobering challenges that the hon. Member for Wallasey talked about. I know from my meetings with charities that one in three of us will end up with dementia. The RNIB has done fantastic work for those with impaired sight or sight loss, and Age UK does lots of great work in our constituencies—very practical work, as well as raising these issues. I am very open to meeting representatives of all three organisations, so I am happy to give that commitment: they are on my long list of people to meet in this role.
Notwithstanding the wider debate about the role of statute in protecting bank branches from closure, I am keen that we harness the positive uses of technology to try to solve problems. We know that voice recognition can help people who are partially sighted, and the internet now has a great deal more regulation—every website now has accessibility options for people with sight issues—so there are things we can do to close that delta. The point about the importance of the consumer voice is also very well made and understood. It is very important that we make sure there is the right level of consumer representation and consumer voice across our entire financial regulatory system, rather than its representatives solely being producers or practitioners.
This might not be strictly within the scope of the new clause, but will the Minister take away the point about the problems with touchpads when people pay for things in shops? With flat surfaces, it is incredibly difficult for visually impaired and partially sighted people to know which buttons they are pressing when entering their PIN number. It is one of those cases where, as the Minister has said, technology advances and does not mean to discriminate against people, but it is causing difficulties.
I do understand that point, and I will take it away. We are all challenged by the wonderful two-factor authentication that even the parliamentary authorities require of us as we log in, and I understand that as we move from analogue to digital, some really important protections are sometimes lost.
The availability of alternative channels by which customers can access their banking means that this issue is quite distinct from access to cash. We have talked about access to cash, and we understand the significant steps forward presented in the Bill and the new duty on the FCA. That is very positive. Where a branch is the only source of cash access services, the closure of that branch will be within the scope of the powers, which starts to address the issue of branch closure. We are giving the FCA powers to do its job. As we know, the purpose of the Bill is to give the FCA powers, not for Parliament to be overly prescriptive. In that circumstance, the FCA could delay the closure until some other reasonable provision for access to cash applied.
The Minister mentions the FCA, and I also want to take the chance to respond to the earlier comments by the hon. Member for Wimbledon. I am not endorsing a specific model—this is something to consider—but the proposed banking hub could work in exactly the same way as the current banking hub model, which is funded by the sector and regulated by the FCA, which also ensures that sites provide in-person services as well. If the Minister is willing to talk further on the provisions in the new clause—the hon. Member for Wimbledon was generous in suggesting that he would do so—I would be happy to explore banking hub models with him.
There is a great deal of good evolution. I suspect that members on both sides of the Committee would say that it has come quite late in the process, but nevertheless there has been evolution in the banking hub solution—that dynamic, sector-led initiative—as well as the work of the Post Office, which offers in-person facilities for a wide range of, if not all, transactions. There may be a gradient of availability, but post offices that offer a certain range of services to deal with the most common and frequently made transactions are almost ubiquitous. The need to travel for more complex needs would not be an unsurprising feature in this market.
I welcome the initiatives developed by the Cash Action Group, Natalie Ceeney and UK Finance, and implemented by LINK, which are making the local assessments to determine where shared solutions are most appropriate. The industry has committed to shared bank hubs in 29 locations across the UK. Yesterday, it committed to a further four, in Luton, Surrey, Prestatyn, and Welling in south-east London. There is a good rate of change coming now, albeit from a low base.
The Government’s perspective is that while many people need and prefer to use in-person banking services, at this time it would not be proportionate to legislate to intervene in the market. Instead, we want to see the impact of closures understood, considered and mitigated wherever possible by the array of initiatives that have been put forward. I will continue to work with the sector, the FCA and other stakeholders from both sides—I mentioned some earlier—on this important issue.
The Minister says that it is not enough of a problem at the moment to legislate. Why might that be the case? This is not going to become less of an issue. As more people get to the stage where they cannot access services, I suspect it will get worse rather than better. Could he give the Committee an idea of his thinking about how bad the situation would have to get before regulation would be appropriate? We must make certain that we do not leave millions of people behind and shut them out of access to necessary banking services.
While taking nothing away from the hon. Member’s view, and indeed her experience in this space, I do not entirely share her pessimism that it is a one-way street and that the problem will only get worse. Solutions will be deployed. The rate at which banking hubs can be deployed, the sorts of services that people use, and technology will all evolve. I talked earlier, as she did, about some of the challenges of an ageing society in which loneliness is prevalent, both in urban and rural areas. There are initiatives, both community-led and technological, to help with some of that. We do not decry in any way the statement that there is a problem. I do not think that Members have heard that from me, or from any Government Members. The aim is to proceed in a proportionate manner.
The Minister talks about how he wants the impact of closures to be understood in the decision-making process. Understood by whom? The banks are telling us why they want to close their branches: they are saving money. The FCA is saying, “The banks are closing their branches to save money.” Our constituents know what it means to lose a bank branch. There is nothing new here. We understand why banks are closing their branches: they want to save cash. They do not want to continue a local service for our constituents, so what does the Minister mean by “understood”? Understood by whom—the banks, the FCA or our constituents?
Ultimately, the banks are downstream of the widespread issue that is the change in consumer behaviour. We have heard both in evidence and in comments made in Committee that 86% of transactions are now digital. The use case of going to a bank branch has evolved rapidly in my lifetime and the lifetime of all Committee members. That is the ultimate macro issue that we are dealing with. Is that issue understood? I think it is.
Solutions could be brought to the table, in terms of both a greater toolkit for the FCA and greater prominence and scrutiny of the FCA as it uses the existing toolkit and the new powers in the Bill. There are also industry-led solutions, which having perhaps started slowly are increasing at greater pace. Proportionality is about giving those developing trends time to mature to see what models can be developed, while accepting the underlying need for action.
I therefore ask the hon. Member for Hampstead and Kilburn to withdraw the motion.
After listening to contributions from Members on both sides of the Committee, I would like to have a conversation with the Minister about the new clause. I will bring it back at a later stage, but for now I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 6
National strategy on financial fraud
“(1) The Treasury must lay before the House of Commons a national strategy for the purpose of detecting, preventing and investigating fraud and associated financial crime within six months of the passing of this Act.
(2) In preparing the strategy, the Treasury must consult—
(a) the Secretary of State for the Home Office,
(b) the National Economic Crime Centre,
(c) law enforcement bodies which the Treasury considers relevant to the strategy,
(d) relevant regulators,
(e) financial services stakeholders,
(f) digital platforms, telecommunications companies, financial technology companies, and social media companies.
(3) The strategy must include arrangements for a data-sharing agreement involving—
(a) relevant law enforcement agencies,
(b) relevant regulators,
(c) financial services stakeholders,
(d) telecommunications stakeholders, and
(e) technology-based communication platforms,
for the purposes of detecting, preventing and investigating fraud and associated financial crime and, in particular, tracking stolen money which may pass through mule bank accounts or platforms operated by other financial services stakeholders.
(4) In this section ‘fraud and associated financial crime’ includes, but is not limited to authorised push payment fraud, unauthorised facility takeover fraud, and online and offline identity fraud.
(5) In this section, ‘financial services stakeholders’ includes banks, building societies, credit unions, investment firms, Electric Money Institutions, virtual asset providers and exchanges, and payment system operators.”—(Tulip Siddiq.)
This new clause would require the Treasury to publish a national strategy for the detection, prevention and investigation of fraud and associated financial crime, after having consulted relevant stakeholders. The strategy must include arrangements for a data sharing agreement between law enforcement agencies, regulators and others to track stolen money.
Brought up, and read the First time.
I support the new clause. I refer the Minister to the evidence given by Mike Haley, the chief executive of CIFAS. In respect of fraud, he said:
“Absolutely, there should be a national strategy, and prevention should be at its core.”
He said that the Home Office was looking at
“publishing a national strategy; it has been much delayed and it is very much anticipated.”
One reason for including a national strategy in the Bill is the need for that strategy to be introduced as quickly as possible.
Mike Haley also said that he would like that strategy to be
“more ambitious, and to cover the public and private sectors, as well as law enforcement.”
He made the very good point that
“fraudsters do not decide one day, ‘We only go after bounce back loans because that is a public sector fraud.’ They will go after a loan from the NatWest bank, or a mortgage.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 68, Q130.]
He highlighted the inability to share information and said that some people might say that GDPR was preventing them from sharing information. He went on to say:
“It is a crime that is at scale and at speed in the online environment. To be able to share the mobile numbers that are being used, the devices and the IP addresses at speed across the whole of the environment—payment providers, fintechs and telecos—would be enormously powerful. This is a volume crime, and we need to have prevention at the core of any national strategy. That would have a massive positive impact. ”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 38, Q129.]
Our witnesses called for a national strategy that looks at crime seriously and that is more ambitious than that suggested by the Home Office and broader in scope. Although many of the frauds relate to small amounts, they are numerous and they cause people significant harm. When the Minister responds, I would like him to recall that oral evidence and the reason why our new clause calls for a national strategy.
I will be brief. The Government are committed to tackling fraud, and we recognise that it goes far wider than financial services. There absolutely should be a national strategy, and there will be.
The Government recognise that tackling fraud requires a unified and co-ordinated response from Government, law enforcement and the private sector better to protect the public and businesses from fraud, reduce the impact on victims, and increase the disruption and prosecution of fraudsters. That is why the Government, led by the Home Office, which is the right body to be the lead, but with full Treasury input, will publish a new broad-based strategy to address the threat of fraud. I hope the Opposition will welcome that. The Government intend to publish it later this year.
Indeed.
The Government will work with industry to remove the vulnerabilities that fraudsters exploit, we will work with intelligence agencies to shut down fraudulent infrastructure, and we will work with law enforcement to identify the most harmful offenders and bring them to justice. We will also ensure, with all partners, that the public have the advice and support they need. That should reassure the Committee that a clear strategy to tackle fraud will be forthcoming and that the new clause is unnecessary.
I note the Opposition’s concerns about data sharing, which are specifically referenced in the new clause. I reassure them that the Payment Systems Regulator has work under way with industry participants to enhance data sharing to prevent fraud. The PSR’s managing director, Chris Hemsley, did not raise any legislative barriers to data sharing for that purpose when he gave evidence to the Committee recently.
I will rise to the challenge put down by the hon. Member for Wallasey to turn the tide on fraud, because we all must acknowledge that it is a critical policing issue in this day and age. In that spirit, I hope that she will join us to ensure that her colleagues reverse their opposition to the Public Order Bill, which is tying up hundreds of thousands of police hours that could usefully be spent prosecuting the challenge of fraud. I also hope that she supports our initiative to cut red tape in policing and to end woke policing, so that we no longer arrest people for Twitter posts, we do not send the police off to dance the Macarena at carnivals or Pride events, and they no longer take the knee. If the hon. Lady is as serious as we are about tackling fraud, she has to acknowledge that there is a need to think about how we allocate our resources.
After what I thought was quite a consensual debate, it is slightly unworthy of the Minister to resort to those comments in the week when there has been an inspectorate report about the misogyny, behaviour and culture of a lot of the police force. That needs to be reformed so that all members of our communities, whatever their age, gender or ethnicity, can trust the police; we all want to see that.
Will the Minister admit that so-called woke policing is not an issue in fraud? The issue is fragmentation. Woke policing was not raised during the great number of Treasury Committee evidence sessions about the fraud, so it was unworthy of him to make those points at the end of his speech. We need a system that is not fragmentated and that is focused relentlessly on output, and where there is cross-departmental working and proper funding, as well as data sharing, so that we can crack down on something that all of us want to see driven out of our system.
I would never want to be unworthy in the hon. Lady’s eyes, so I am distressed that my offer to build consensus about how the police could best deploy their resources has, at this first stage, been rebuffed.
I ask the hon. Member for Hampstead and Kilburn to withdraw the motion.
The Minister was doing so well and I was hoping we could go through this sitting without hearing the Conservatives say the word “woke” once, but unluckily that has now been crossed off my bingo sheet.
I will press the new clause to a vote, because I want to hold the Minister to account and ensure he does not push this commitment too far down the road, and because every person in the sector I have spoken to has stressed the importance of legislative change when it comes to data sharing.
Question put, That the clause be read a Second time.
(1 year, 10 months ago)
Public Bill CommitteesIt is a pleasure to serve under your chairmanship, Mr Sharma.
Clauses 60 and 61 deliver on the Government’s commitment to replace the Bank of England’s cash ratio deposit scheme with a new Bank of England levy. Under the cash ratio deposit scheme, banks and building societies with over £600 million in eligible liabilities must place a portion of their deposits with the Bank on a non-interest-bearing basis. The Bank then invests the deposits, and the income generated is used to fund the costs of the Bank’s monetary policy and financial stability functions.
However, the Bank of England’s policy remit and policy responsibilities have grown in recent years, and the cash ratio deposit scheme has not generated the income required to fully fund those functions. As a result, the shortfall has been funded by the Bank’s capital and reserves. Clause 60 replaces the scheme with a new Bank of England levy, repeals the provisions governing the cash ratio deposit scheme in the Bank of England Act 1998, and inserts new section 6A and new schedule 2ZA into the Act.
As with the cash ratio deposit scheme, the new levy will fund the Bank’s financial stability and monetary policy activities. The same eligible financial institutions participating in the cash ratio deposit scheme will pay the levy, with contributions proportionate to their size. Each year, the Bank will be required to publish information setting out the policy functions that it intends to fund through the levy, and the amount that it intends to levy.
The Bank will remain subject to National Audit Office value-for-money reviews to ensure that it remains cost-effective. The levy will deliver a more reliable and stable funding stream to the Bank, and banks and building societies will benefit from greater certainty about the size of their annual contributions towards those functions. Secondary legislation will be introduced in due course to set out further details of the operationalisation of the levy, including how institutions’ contributions will be determined. The Treasury will consult on the draft legislation and has committed to review it every five years.
Clause 61 simply makes a number of consequential amendments to the Bank of England Act 1998 that are required to reflect the new levy. The levy will provide greater certainty to the Bank, as well as to financial institutions. I therefore recommend that clauses 60 and 61 stand part of the Bill.
The operation of the cash ratio deposit scheme referred to in clauses 60 and 61 is subject to changes in two variables—the gilt rate and the size of deposits eligible for the scheme—so I have two quick questions for the Minister. How did the recent crisis in the gilt market affect the Bank of England’s income under the scheme, and how has the recent crisis in the gilt market, and the subsequent actions taken by the Bank, informed Government thinking on clauses 60 and 61?
There is not a direct relationship between the recent turbulence in the gilt market and the Bank. The clauses will deliver a more reliable income stream to the Bank to fund its activities, because it will receive a levy rather than the income on the difference between interest-free deposits—the money that it gets from levy payers—and the returns that the Bank is able to harness from them.
The current scheme was set up in an environment of higher rates, when higher yields were obtainable. The recent experience over many years of much lower levels of return is the reason why the Bank has not been able to fully finance its activities simply from those interest-free deposits. I hope that answers the hon. Lady’s question.
Question put and agreed to.
Clause 60 accordingly ordered to stand part of the Bill.
Clause 61 ordered to stand part of the Bill.
Clause 62
Liability of payment service providers for fraudulent transactions
Question proposed, That the clause stand part of the Bill.
Clause 62 enables and requires the Payment Systems Regulator to take action to improve the reimbursement of victims of authorised push payment scams, or APP scams as they are commonly known. APP scams occur when someone is tricked into sending their money to a fraudster. Almost 200,000 cases of these scams were recorded in 2021, with known losses to victims totalling £583 million. Sadly, fraudsters often target the most vulnerable people in our society.
Under the European regulatory system that we have inherited, there is no statutory or regulatory requirement for payment service providers to reimburse victims of these scams. We need to do better and we can do better for victims of fraud in the UK.
Although the creation of a voluntary industry reimbursement code has improved matters, reimbursement outcomes for victims have been inconsistent and only around half the money stolen is being reimbursed. As a result, many victims are left facing significant losses; in the worst cases, victims lose their life savings.
We recognise these issues and so clause 62 does two things. First, it removes legal barriers in retained EU law that currently prevent regulatory action by the PSR. That will finally enable the PSR to mandate reimbursement in any payment system under its supervision.
The PSR has the relevant expertise, powers and objectives to tackle this crucial issue. However, regulation 90 of the Payment Service Regulations 2017, which form part of retained EU law, prevents the PSR from using its powers to require reimbursement. Therefore, clause 62(11) amends regulation 90 of the 2017 regulations to remove the existing legislative barrier to regulatory action. That will enable the PSR to use its relevant powers in relation to APP scam reimbursement across any payment system designated for regulation by the PSR.
Secondly, clause 62 places a specific duty on the PSR to take action in relation to the faster payments service. This service is the main UK instant payment system and is currently the payment system within which the highest volume of APP fraud is committed. Therefore, action is needed in this regard as a priority.
Clause 62 places a duty on the PSR to consult on a draft of the regulatory requirement in relation to the faster payments service within two months of this legislation coming into force, and the PSR must impose the requirement within six months of the clause coming into force. In 2021, 97% of APP scams occurred across the faster payments service, because it is the UK’s main payment system for instant consumer-bank transfers. Therefore, by requiring the PSR to take action in relation to the faster payments service, the legislation will improve outcomes in the vast majority of APP scam cases.
As a result of the clause and subsequent regulatory action, consumers will be more consistently and comprehensively protected when they fall victim to an APP scam. This is a vital measure to ensure that customers are protected amid the growing threat posed by APP fraud.
I therefore recommend that the clause stand part of the Bill.
Labour fully supports clause 62, which enhances protection for victims of authorised push payment schemes, but we are deeply disappointed that the Bill does nothing to strengthen fraud prevention.
When asked about fraud in February, the former Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), claimed that fraud and scams are not something that
“people experience in their daily lives”,
which is tone-deaf. Essentially, he dismissed crime as inconsequential. In the real world, countless lives have been destroyed by fraud and scams, and I am sure the Minister will have examples from constituents in his inbox. There is a new Chancellor now, but the lack of ambition in this Bill on fraud shows that the Government’s approach to fraud remains the same. We will debate my new clause 6 on broader strategies for tackling fraud later, but I want to focus on the inadequacies of the provisions in clause 62.
UK Finance has estimated that the amount of money stolen directly from the bank accounts of hard-working families and businesses through fraud and scams has hit a record high of £1.3 billion. That is bad at the best of times, but it is even worse in the midst of a deepening cost of living crisis. That is because the Government have failed to get to grips with new types of fraud, such as identity theft and online scams, which have seen people’s life savings stolen and their economic security put at risk. I ask the Minister to explain why his Government continue to fail to take fraud seriously and continue to push responsibility on to just the banks. For example, the Bill ignores the fact that digitally savvy criminals are increasingly exploiting a range of financial institutions, such as payment system operators, electric money institutions and crypto asset firms, to scam the public.
In its written evidence to the Committee, Santander UK stated:
“Bringing crypto-exchanges into the scope of the Payment Systems Regulator’s powers to mandate reimbursement for APP fraud would be consistent with the principle of ‘same risk, same regulation’ and would introduce important new protections for consumers in area where risk of fraud is significant.”
I ask the Minister to explain why clause 62 completely ignores the emerging fraud and scam risk that EMIs and crypto asset firms pose to the public. What is his response to Santander’s evidence? Barclays similarly asked for clause 62 to be amended to expand the reimbursement protections beyond faster payments scheme payments to cover payments made over other relevant payment schemes or systems. Will the Minister explain why the Bill provides only for the reimbursement of fraud victims who send money using the faster payments system and why other payment systems have not been included in the scope of the Bill?
I will be brief. We all join hands in taking any action that we can against fraudsters. It is a terrible crime, and one that is on the rise, and the Government will do everything in our power to take action.
I say to the hon. Member for Hampstead and Kilburn that I will take no lessons from the Opposition on fraud. The impediment to cracking down on this issue lies solely within EU law. It is this Government that have withdrawn from the European Union—a policy that her party now belatedly supports, but did not for many years. It is only by bringing forward this legislation and withdrawing from the European Union that we are able to put in place clause 62.
I will happily give way to my colleague, who I think, unlike the Opposition, still wants to be part of the European Union.
Definitely. Is the Minister therefore saying that the European Union was promoting fraud within the financial framework of the United Kingdom of Great Britain and Northern Ireland? Is that what he just said?
I wish the hon. Gentleman was attentive to what I was saying. That was not what I said; I did not use the word “promote” in any way. I said it was an impediment. Clause 62 addresses the fact that under retained EU law, it is not possible to take the action that we wish to take on push payment fraud. That is a fact, and that is why we came forward with the Bill. There are many other things the Government are doing outwith the Bill to tackle fraud, and I will happily sit down and talk with anybody—and meet with any party—who has practical suggestions to tackle fraud.
The Minister is reasonably new to his post, but will he look at the Treasury Committee’s report on fraud, which contains a great deal of very practical things the Government could do to crack down on what is a growing problem? Everybody recognises that the anti-fraud authorities—the people who are trying to fight this—are very fragmented, there is no co-ordination across the piece and there is very little enforcement of the laws that are already there. That is why fraud is a growing problem—the rewards are so fantastic and the risks that fraudsters take are so miniscule that no fraudster is ever put off by the thought that they might get caught.
UK Finance found that fraud has hit a new high under this Government. Is the Minister going to blame the EU, once again, for that record high? Would he like me to send him the UK Finance report?
I am sorely tempted, but I will resist the urge to rise to that.
If my officials can find the report to which the hon. Member for Wallasey refers, I will look at it, and outwith the Bill, I will ensure that our efforts are equal to the task. I accept that fraud is rising, and in particular that this level of fraud is rising. That is facilitated by both online technology—there are other measures outwith the Bill to tackle and police the unregulated online world—and, as we heard earlier, the shift from cash, which suffered from its own forms of fraud and theft, into a more digital world.
Will the Minister refer to the specific examples that Barclays and Which? raised around CHAPS payment and other payments? If he is unable to give a full response today, I hope that he will consider before Report whether we could extend some of the provisions in the clause to cover the specifics that Barclays and Which? raised.
I can confirm to the Committee that, because the measure relates to all payment systems that fall within the remit of the Payment Systems Regulator, the measure is not confined solely to fast payment. Fast payment makes up about 97% of reported fraud—those are UK Finance figures—so of course it makes sense for it to be the first in our sights, but the clause will follow fraud and payment systems as they evolve. That is its whole purpose. It is not confined simply to the faster payment system. If that is the understanding that Barclays and Which? have, we should correct it, because any of the PSR-designated platforms are in scope.
The Bill provides for the reimbursement of fraud victims who send money using the faster payment system. Is the Minister saying that other payment systems are included in the scope of the Bill?
Yes. If that is not correct, I will write to members of the Committee, but my understanding is that all the measures that we have been talking about cover the scope of the Payment Systems Regulator.
Question put and agreed to.
Clause 62 accordingly ordered to stand part of the Bill.
Clause 63
Credit unions
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss that schedule 14 be the Fourteenth schedule to the Bill.
The Government are a strong supporter of the mutuals sector, and recognise the unique role that credit unions play in their communities. Clause 63 introduces schedule 14, which makes amendments to the Credit Unions Act 1979—a particularly good year—to allow credit unions in Great Britain to offer a wider range of products and services, thereby supporting the growth, diversification and development of the sector.
The Credit Unions Act 1979 sets out the regulatory framework for credit unions and specifies the products and services that they can provide. Schedule 14 adds proposed new subsection (3ZZA) to section 1 of the Act, introducing a new optional object, or objective, for credit unions, which specifies additional products and services that they may now choose to offer. The services included are hire purchase agreements, conditional sale agreements, and insurance distribution services. When the Association of British Credit Unions Ltd consulted the sector in 2019, those were the additional products and services that credit unions wanted to be able to offer their members. In order to offer those additional products and services, credit unions must obtain permission from the Prudential Regulation Authority or the Financial Conduct Authority in the same way as other providers, and of course secure approval from their members.
Schedule 14 also grants the Treasury a power to add further products or services to the new object via a statutory instrument. That will ensure that the Government can continue to support credit unions in Great Britain to expand into other areas. The schedule also adds proposed new section 11E to the 1979 Act, which makes provision in relation to those new products and services. It caps the interest that a credit union can charge on hire purchase agreements and conditional sale agreements at 3% per month. That cap already applies to loans offered by credit unions.
The schedule gives the Government the power to amend the cap in the future via secondary legislation. The Government already have that power in relation to other credit union products and services. It allows the cap to keep pace with changes in the economic environment and allows credit unions to offer hire purchase agreements, or conditional sale agreements, to corporate members, subject to member agreement. The aggregate outstanding balance that can be owed to corporate members is capped at 10% of a credit union’s total aggregate balance under those agreements.
The Bill also makes provision for a credit union’s ability to lend to and borrow from other credit unions. Section 11 of the 1979 Act will be amended to clarify that credit unions may offer loans to other credit unions, regardless of whether they have a membership link. That will further support the growth, diversification and development of the sector.
The Bill introduces a requirement for credit unions to submit annual returns to the FCA, and to be subject to the “year of account” provisions in the Co-operative and Community Benefit Societies Act 2014. Those amendments will ensure greater regulatory oversight and support good corporate governance practices. Together, clause 63 and schedule 14 will support the credit union sector to grow sustainably for years to come, and help them to expand their reach as providers of affordable credit. I therefore recommend that clause 63 and schedule 14 stand part of the Bill.
Clause 63 contains some welcome and long-overdue provisions, such as enabling credit unions to offer a wide range of products. However, I do not think the Bill does much to address the outdated regulatory regime facing credit unions as a whole. We will discuss Labour’s proposals to address that, and the barriers facing the wider co-operative and mutual financial services sector, when we debate new clauses 7 and 8.
However, for now, I will push the Minister on some of the areas where the Building Societies Association—and others—has called for bolder action in its written submission to the Committee. First, why do clause 63 and schedule 12 not relax the same-household requirements for family members? Secondly, why does the Bill fail to restrict access to the register of members, in line with best practice for the protection of members’ personal data?
I agree with the official Opposition on clause 63. I must say, we have talked about 1979, but I would mention 1977, when the Dalmuir Credit Union was opened, and I was number 501 with a membership card, around the age of six, on the church hall stage.
I am very aware of the good works that credit unions such as Dalmuir, Dumbarton and Vale of Leven do in my constituency, and, I am sure, across other Members’ constituencies, but I share the concerns expressed by the official Opposition about the existing infrastructure. I hope that the Minister can say something to alleviate concerns about that existing framework—not only for credit unions but for other local banks, which have been diminished over the past couple of years—and about how the legislation helps to grow this sector of mutual financial support in local communities. We know our banks and post offices are closing, but the credit unions, especially, can be a good cause on which we can all agree.
I thank the hon. Members for West Dunbartonshire and for Hampstead and Kilburn for raising those points. I look forward to hearing the debates about the new clauses that have been tabled.
The Government are on the side of credit unions. We would like to see the mutual and co-operative movement flourish. We need more diversity, affordable options and access to credit. The Government introduced this clause with the absolute intention of helping to expand the range and create more economic opportunities for those bodies. If we have, in some way, fallen short of what could be achieved, I look forward to hearing more about that. I cannot comment on the specific point made by the hon. Member for Hampstead and Kilburn about sharing households and data, so perhaps she would allow me the courtesy of writing to her afterwards if I can find out anything about those points.
This Bill is part of a wider set of measures. On Friday, we discussed on the Floor of the House a Bill to help to prevent the demutualisation that has reduced the number of mutuals in recent years. I was pleased to give Government support to that Bill. There is an ongoing conversation with the Law Commission on the options to review the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992. There is a very good case for looking at modernising the legislation in this sector.
Question put and agreed to.
Clause 63 accordingly ordered to stand part of the Bill.
Schedule 14 agreed to.
Clause 64
Reinsurance for acts of terrorism
This clause is targeted to support the effective management and oversight of money on the public accounts. It confers on the Treasury a power to issue a direction in order to oblige public sector bodies extended a guarantee under the Reinsurance (Acts of Terrorism) Act 1993 to comply with the necessary controls so that money on the public accounts is managed appropriately.
The power will be a safeguard to ensure that public sector bodies within scope comply with the requirements expected of a public sector body, in line with Government policy and the expectations of Parliament. The clause also confers a specific power to direct such bodies to appoint an accounting officer.
Ultimately, ensuring compliance with these requirements will provide value for money, probity, regularity and propriety in the public sector bodies within scope. The ability to issue a direction is a backstop power that will only be used if the relevant body does not comply with the requirements expected of a public sector body.
The new power is similar to powers the Treasury already has to issue directions to central Government Departments in relation to their estimates and accounts. For transparency and accountability, the clause also requires the Treasury to publish and lay any given direction before Parliament.
As well as my campaign for financial inclusion, I am sure Members will have heard me talk about flooding. I have not tabled an amendment to the clause, but I might be minded to in order to have a further conversation in future.
The clause addresses reinsurance for acts of terrorism. Has the Minister explored looking at reinsurance for acts of flooding? We have the Flood Re scheme, as I am sure he is aware, but that only applied up to 2007 and properties built after that are not included, nor does it apply to businesses. With this welcome move to consider reinsurance for acts of terrorism, has the Minister thought about other aspects, specifically flooding?
We welcome clause 64. I support the principle of the Treasury guaranteeing support for reinsurance in the event of a terrorist attack, but how will the provisions in the clause ensure that the taxpayer is adequately protected from such risks? How will the Treasury hold any public sector body to account regarding the requirements in the clause? Will the Minister provide some detail on the role of the accounting officer, in terms of ensuring that public sector bodies have sufficient oversight of the requirements of the clause?
On the point about flooding, that is simply outwith the scope of the Bill. The Flood Re scheme is the responsibility of the Department for Environment, Food and Rural Affairs, and it is not something that falls under this Bill or the Acts I have mentioned.
The role of the accounting officer is the same as colloquially accepted in any public body—the person responsible for maintaining financial records and owning that liability. The governance remains with the board of directors of the relevant body and the duty to the taxpayer is exactly the same as it would be. The clause effectively gives step-in rights or the power to direct in particular circumstances. It does not alter where the core cost and liability start and should remain.
Question put and agreed to.
Clause 64 accordingly ordered to stand part of the Bill.
Clause 65
Banking Act 2009: miscellaneous amendments
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
Clause 66 stand part.
Government amendments 5 to 7.
Clauses 67 to 69 stand part.
Government amendment 8.
Clauses 70 and 71 stand part.
Government amendment 23.
Clauses 72 and 73 stand part.
Government new clause 13—Chair of the Payment Systems Regulator as member of FCA Board.
First, I shall speak to new clause 13 and Government amendment 23, which appear in my name, before speaking to clauses 65 to 73 and Government amendments 5 to 8, which also appear in my name.
New clause 13 adds the chair of the Payment Systems Regulator to the board of the FCA. Since the PSR was established in 2014, the roles of the PSR chair and the FCA chair were performed by the same person. As a result, the PSR chair has always been on the FCA board. However, the FCA chair and the PSR chair roles will now be performed by separate individuals, following the appointment of Ashley Alder as the FCA chair in July 2022. The composition of the FCA board is set out in the Financial Services and Markets Act 2000, and the new clause adds the PSR chair to the FCA board. This will help continued effective co-operation between the FCA and the PSR. Government amendment 23 provides for those changes to come into effect two months after Royal Assent.
Clause 65 makes five minor but necessary technical amendments to the Banking Act 2009, to ensure that it continues to function as intended. Clause 66 sets out a small number of definitions to ensure that the provisions of the Bill are interpreted correctly.
Turning to clause 67, the Bill makes a number of changes to the matters that the regulators must consider when they consult on rules. In particular, the Bill introduces a new growth and international competitiveness objective and a new regulatory principle to consider the Government’s net zero target. The clause allows the regulators to fulfil their obligations to consider such matters in consultations that are published before the Bill receives Royal Assent. That means that the regulators can begin acting to meet all their new consultation obligations in this Bill as soon as they are ready to do so, avoiding any unnecessary delays to important regulatory reforms.
Government amendments 5, 6 and 7, which appear in my name, widen the effect of clause 67 to include any obligation to consult introduced by the Bill. That includes, for example, the obligation for the FCA and the PRA to consult their cost-benefit analysis panels.
Clause 68 provides for any expenditure incurred under the Bill to be paid out of money provided by Parliament in the usual way. Clause 69 empowers the Treasury to make consequential changes to other legislation, to ensure that the provisions in this Bill function effectively where they interact with existing legislation. The Treasury will be required to use the affirmative procedure to make consequential provisions that amend, repeal or revoke any provision of primary legislation. That will ensure that there is appropriate parliamentary scrutiny of the exercise of this power.
Clause 70 provides for powers delegated by the Bill to be exercised by statutory instrument. The clause also allows the Treasury to make regulations under this Bill that include ambulatory references to rules and other instruments. Government amendment 8 makes a technical change to clause 70 to ensure that the power to restate and modify saved legislation can rely on the power to make ambulatory references provided for by the clause.
Clauses 71 to 73 are technical in nature. Respectively, they set out the territorial extent of the Bill, when provisions in the Bill will come into force, and the short title of the Bill. I therefore recommend that clauses 65 to 73 stand part of the Bill, and commend Government amendments 5, 6, 7, 8 and 23 and new clause 13 to the Committee.
I will go through the clauses in this group and ask my questions in turn.
Clause 65 will give the Treasury powers to consider whether a payment system using digital settlement assets or a digital settlement asset service provider is likely to threaten financial stability and should therefore be considered for recognition. How will the Treasury consult the Bank of England when making such a decision? How will the Treasury ensure that the Bank has the expertise it needs to have effective oversight of the operators of a new digital settlement asset or recognised payment system?
I understand that clause 67 and associated Government amendments 5, 6 and 7 would mean that all consultation duties arising from the Bill can be met by consultations made before commencement. The Minister can correct me if my understanding is wrong, but will the Government ensure that this does not result in consultations becoming mere tick-box exercises, with no real impact on the design or implementation of the reforms?
We welcome new clause 13, which will enable better integration across the Payment Systems Regulator and the FCA. What does the Minister hope to achieve with this provision, and how will the FCA and the Payment Systems Regulator be held to account against it? I just want a bit more detail from the Minister on this clause. How will the Treasury guarantee that there are adequate safeguards in place to ensure that the chair of the Payment Systems Regulator does not influence FCA decisions where it may not be appropriate?
Finally, the Minister might not be aware of this, but there are rumours in the press that the Government were exploring merging the Payment Systems Regulator and the FCA. They might just be rumours, but that would be an absolute disaster for consumer protection, so will the Minister, if he has heard these rumours—or if he is the source of them—confirm that the Government have no plans to merge the regulators?
I will write to the hon. Lady about digital settlement assets, in order to try and fully understand what she was pushing at with her question.
On clause 67 and the amendment, the propensity to consult in this space is extremely prevalent, because of the need and desire to get the practitioner and the consumer voice fully represented. Indeed, the hon. Lady and I could both spend a large proportion of our lives responding to the many consultations that are held. However, I have seen no evidence whatever that those consultations are merely tick-box exercises, and I can assure her that that is not the intention. I look forward to engaging with those consultations as we go through this, as they are a fundamental part of the regulatory structure.
On new clause 13 and the chair of the PSR being on the FCA board, I think the hon. Lady mostly welcomed that as an opportunity for the two regulators to work closely together. As I explained, that is de facto the status quo. To the extent that there were any conflicts, I would expect the responsibility to manage and police those conflicts to lie primarily with the chair of the board, as it would in any board. That said, I want a Payment Systems Regulator and a Financial Conduct Authority that work hand in hand, cheek by jowl. I do not anticipate many examples of where we would see conflicts. What we want is effective close working together, as more and more of the systemic risk in the financial system sits with payment service providers.
I have not seen rumours of a PSR and FCA merger. Of course, the PSR effectively emerged from the FCA. It is certainly not my intention to merge them, nor am I aware of any proposals to do so. If anything, by establishing the PSR chair as a separate body or separate person, those two organisations are actually become strong siblings rather than being forced together. That is my understanding.
The rumours were in the press and the sector was quite worried about it. I appreciate the Minister’s clarification of his position.
Question put and agreed to.
Clause 65 accordingly ordered to stand part of the Bill.
Clause 66 ordered to stand part of the Bill.
Clause 67
Pre-commencement consultation
Amendments made: 5, in clause 67, page 81, line 2, leave out “relevant”.
This amendment, read with Amendments 6 and 7, broadens the effect of clause 67 so that it applies to all consultation duties arising under the Bill rather than only those duties specifically mentioned in subsection (3) of that clause.
Amendment 6, in clause 67, page 81, line 7, leave out “relevant”.
See the explanatory statement for Amendment 5.
Amendment 7, in clause 67, page 81, line 9, leave out subsection (3).—(Andrew Griffith.)
See the explanatory statement for Amendment 5.
Clause 67, as amended, ordered to stand part of the Bill.
Clauses 68 and 69 ordered to stand part of the Bill.
Clause 70
Regulations
Amendment made: 8, in clause 70, page 82, line 17, at end insert
“, except so far as making provision by virtue of section 4(1)”.—(Andrew Griffith.)
This amendment ensures that clause 4(1) of the Bill (power to restate and modify saved legislation) is within the scope of clause 70 for the purpose of being able to rely on the powers in clause 70, when making regulations by virtue of clause 4(1).
Clause 70, as amended, ordered to stand part of the Bill.
Clause 71 ordered to stand part of the Bill.
Clause 72
Commencement
Amendment made: 23, in clause 72, page 82, line 35, at end insert—
“(aa) section (Chair of the Payment Systems Regulator as member of the FCA Board);”.—(Andrew Griffith.)
This amendment provides for NC13 to come into force two months after Royal Assent.
Clause 72, as amended, ordered to stand part of the Bill.
Clause 73 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)