Financial Services: UK Economy

Bim Afolami Excerpts

Thursday 9th December 2021 Commons Chamber

[Bim Afolami (Hitchin and Harpenden) (Con)]

It is a pleasure to speak in such a well-informed and thoughtful debate.

First, on the contribution of the financial services sector, I do not want to repeat what has been said by my hon. Friend the Member for South Cambridgeshire (Anthony Browne) and others about the tax paid, the growth or the jobs, but I want to bring up something that has not yet been discussed: the contribution during the acute phase of the covid pandemic in 2020, when about £75 billion was facilitated through the UK financial services sector. To illustrate what that means, in my constituency, which does not have a huge number of businesses compared with many other constituencies, over £100 million was facilitated through the financial services sector for businesses. That is a practical demonstration of the positive impact that the financial services sector can have on the lives of our constituents.

Competitiveness has been mentioned by many Members. I support what the Treasury want to do in adding growth and international competitiveness as a secondary obligation for the FCA and the Prudential Regulation Authority. I support the action in the Budget to reduce the bank surcharge on banks in particular. Had we left the surcharge where it was, from a tax perspective, it would have made the UK one of the most expensive jurisdictions in the world in which to operate a bank, and that is not in the UK’s national interest. I support the work that the Hill review did on listings, the general approach to public markets, the share trading obligation and the double volume cap. On a lot of these technical things, I think the Government are in the right place; we are going in the right direction, we are doing the right things and, as many others have said, the Minister is doing a great job.

On ringfencing, I will make a confession: before I came to this House, I spent some time at HSBC, where I worked in restructuring, and I had a lot to do with ringfencing. I can say from bitter personal experience that it is deeply complicated. It was well intentioned, but a review is overdue. I am glad that the Government are going to look at it. I ask them to look not just at whether ringfencing has done a reasonable job so far, but at the asymmetry of how it is imposed on UK-domiciled banks compared with our competitors, including the sheer complexity and cost associated with it, not just in terms of compliance and what we think of as regulation, but in terms of the IT systems, where people are and how the buildings operate. It costs a considerable amount of money and a huge amount of focus for big banks such as HSBC, Barclays and others. Without prejudging the outcome, I think that review is critically important.

Let me pick up something that my hon. Friend the Member for Kensington (Felicity Buchan) said about trade deals. The Government, and indeed the country, are right in pursuing our strategy on trade internationally, looking beyond Europe and seeking to strike as many good trade deals as we can across the world. We need to make sure that those trade deals are best in class. What I think of as a best-in-class trade deal today, in the modern world, has to include services, and it has to include financial services and other professional services, not just because that is a good thing for this country but because the nature of modern international trade is increasingly moving towards services rather than goods, particularly for advanced western economies such as our own.

We have a great opportunity to pioneer that at an international level. In particular, our regulators must seek to have many more regulator-to-regulator exchanges across the world as part of those trade deals. A lot of the regulations that are in place for financial services often happen at sub-national level, so it is so important that our regulators do that. I am sure those regulator-to-regulator exchanges will be very good fun indeed for all concerned.

My hon. Friend the Member for Wimbledon (Stephen Hammond), who is very experienced in these matters, talked about levelling up and about the positive regional aspect of the financial services sector and the jobs it creates outside London and the south-east. I completely agree, but I think of levelling up as not so much about levelling up places as about levelling up people. It is about people’s opportunities. Alongside all the technical work that we have already talked about, with regulations, ringfencing, the double volume cap, listing, public markets, prospectus directives and all that stuff, the financial services sector needs to do more—and I think it can do more—on levelling up in the United Kingdom.

What does that look like for the financial services sector? It means the industry doing more on alternative routes into the sector—apprenticeships and others. It also means the industry doing more not so much to provide more jobs outside London and the south-east, although that is always welcome, but to help to develop regional clusters around Edinburgh, Leeds, Bournemouth and various other places. There are significant numbers of financial services jobs in those places, but what more can the industry do to develop those regional clusters to give more opportunities to people from all over the country and from different backgrounds?

Let me briefly mention debt advice for those who have found themselves in problem debt after the covid pandemic. I think we all recognise that, for some people, debt has grown significantly. I think there is more that the industry can do to work with people with problem debt and help them get out of that situation, with the help of the legislation that is already in place.

Finally, if my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) were here, I am sure he would talk about small and medium-sized enterprises and access to finance. I do not want to steal his thunder, but we must think about SMEs getting access not just to debt but to equity finance, and about ensuring that underrepresented groups of entrepreneurs—often ethnic minorities or women—get more and better opportunities to raise funds for their businesses. That is the skillset—the core determinant—of a financial services sector: providing funds for people to realise their aspirations as individuals or as part of a business.

I will be doing some more work on this in the new year, as the Minister knows, but I urge the sector to do more on the levelling up agenda in its broader sense, in addition to working with the Government, with me and with colleagues, including the people here, on the technical regulatory aspects that are critical for our international competitiveness.