Bank Branch Closures

Chris Evans Excerpts

Thursday 30th June 2016 Commons Chamber

[Mr Mark Williams (Ceredigion) (LD)]

I congratulate the hon. Member for City of Chester (Christian Matheson) on shepherding me and the hon. Member for Wells (James Heappey) to the Backbench Business Committee to secure the debate. I thank the Committee for allowing us the opportunity to have this debate, which is important. It is always a pleasure to follow the hon. Member for Ynys Môn (Albert Owen). We agree on most things rural; our constituencies are not dissimilar. I was touched when the hon. Member for Clwyd South (Susan Elan Jones) described that nonsensical hypothesis and the threshold of 15,000 people, and I instantly started to think about my constituency. No community there would reach that level, except the town of Aberystwyth and that would be seasonal—it would depend on a lot of students. I say that to illustrate the challenge of rurality.

The debate has been very good. We have heard about the cities and what I call semi-rural constituencies. I am going to talk about my constituency, which is particularly rural. It is 1,795 sq km, it has 147 villages and hamlets and 700 family farms—one large community. The hon. Member for Wells described Glastonbury, without the 200,000 visitors, as a smallish town with 10,000 people. A town of 10,000 people in my constituency would be a metropolis. The scenario is very different, but the people there have the same entitlements and same needs and they are still being let down by the attitude and practices of the commercial banks. That has been the message in almost every contribution that has been made.

In 2011 I spoke in a debate in this place about bank closures. The number of branches had halved, from 20,000 in 1988 to about 9,300 then, and that figure has dropped further since. We can have a debate about the reliability of statistics. That is perhaps something on which the banks themselves should reflect, but the University of Nottingham report—the right hon. Member for Tottenham (Mr Lammy) alluded to this—said that

“the rate of closure has slowed more recently”

and that seems to be the case only because of

“the much reduced stock of branches”.

Hardly a positive sign.

The decline is certainly not abating in rural areas. Over the past year, more than 600 bank branches have closed and now 1,200 communities have lost all their banks, putting our high streets and market towns in jeopardy. That is something the banks said would not happen—they said the last bank in the town would stay one way or another.

None of us can deny that there has been a shift in how many people access banking services. For many, that has led to more options and more flexibility from mobile and online banking. According to the British Bankers Association, mobile banking apps have become the No. 1 way that people bank, with 22 million downloads of banking apps, and that is forecast to increase hugely over the next few years. Like the hon. Member for Ynys Môn, I have a cheque book. I will keep it going as long as I can, or as long as the banks allow me.

Many businesses will bank either through call centres or distance banking relationship managers. I always think the description “relationship manager” is slightly inconsistent. The notion is that constituents of mine in west Wales will have a relationship manager in Swansea or Bristol—look at a map; it is a long way away. There is a disconnect between them and as a result local businesses suffer and sometimes the advice that is given can be problematic. The requirement is for local managers who understand the business in the area. That is hugely important and can make a huge difference to the small and medium-sized businesses that they are there to serve.

The issue of broadband and mobile coverage is hugely important. My constituency is in the bottom 10 in the UK in terms of broadband speeds and actual coverage. Next Wednesday, I have a debate in Westminster Hall, for those who are interested in that matter in a Welsh context. That is hugely significant for the debate we are having as is the issue of physical access to a bank. I live six miles from the great metropolis of Aberystwyth. I have the luxury of a car; I own one. I have the luxury of a train and a bus.

[Chris Evans (Islwyn) (Lab/Co-op)]

Stop bragging.

[Mr Williams]

I do not own the bus or the train, I hasten to add. I have that luxury, but most of my constituency does not.

Two weeks ago, HSBC notified me—it sent me a letter—rather than consulted me of the fact that the Aberaeron HSBC would be shutting in September. They did not ask my opinion beforehand when they came to see me and the local councillor, Elizabeth Evans, to discuss the branch closure. This is a significant community and a tourist community—not on the scale of Glastonbury, but a significant community on the west Wales coastline. Local businesses need the bank—it is essential—in order to cash their takings. The closure is simply another nail in the coffin for that vibrant community.

In respect of the protocol, this is an instance of putting the cart before the horse. We were told that arrangements would be put in place before the closures happened, but we left that meeting still very unsure about whether the town of Aberaeron would have any cashpoint provision. In case HSBC is listening, if it is still intent on moving the bank to a local store there is a challenge: the pressure is on to provide us with at least a cashpoint machine in the town.

There have been two cashpoints in Aberaeron in the past. The hon. Member for Clwyd South mentioned the railway in her community. People can arrive there anticipating their railway trip for the weekend and find that they have no money and no means of accessing money. That happened in Aberaeron when the two cashpoints dried up. Visitors as well as locals found that they had no access to money in that community, raising the spectre of a long drive elsewhere.

With the continuing loss of bank branches, the importance of post offices has grown substantially, with more post office branches now providing banking facilities. We are told that 99% of the population live within three miles of a post office branch, with over 11,500 branches nationwide. All of those branches handle automated transactions, offering “cash-in and cash-out” banking services. Although the services provided by the Post Office are welcome and the initiator of this great idea should be commended—it is important and is providing more than a stop-gap—by the Post Office’s own admission, post office branches

“cannot offer the high value, complex and regulated financial services previously offered to the bank’s customers.”

Where can a customer receive financial advice or take out a loan in an area that has no local bank branches and a post office branch is the only access to banking? These are things that neither post office branches nor internet banking services can provide in the way that I think is still required—in a personalised and focused manner.

One of the successes of the previous Government was that the post office network was retained after years of decline, with a commitment to keep 11,500 post offices. However, that has not necessarily stopped closure. What has happened is that the word “closure” has been replaced with the idea of “movement to somewhere else”. If high street bank branches close and post offices follow, rural communities will be hardest hit. With relatively limited public transport making it harder to travel far and with rural areas having the weakest broadband speeds, our rural population is being financially left behind. As we have heard, there are age and demographic issues because not all people are capable of accessing the internet even if it is available.

When banks move into post offices and post offices move into shops, we need to recognise that those places were not designed with bank transactions in mind. There is considerable concern about privacy and security, which will be particularly off-putting for local businesses and elderly residents who rely on face-to-face transactions. Another positive move was the access to banking protocol, but I can only concur with the eloquent and passionate remarks of the right hon. Member for Tottenham on that issue. The protocol was good as far as it went, but it did not go far enough. It has not been monitored and I think it has been breached. I look forward to the review when it happens. When the protocol was announced, my former colleague, Vince Cable, said that

“banks have a duty to ensure that all their users and especially vulnerable customers, small businesses and those in rural communities can continue to access over the counter banking services.”

That is extremely important, and we look to the Minister for reassurance that a renewed protocol to address those concerns will be robust and will be enacted.

As well as the Aberaeron branch, we have lost a number of others. The roll call is significant. We have lost banks in Llandysul, New Quay and Tregaron. Tregaron is a particularly notable example, because following the closure of the Barclays branch there, customers face a 22-mile round trip to the nearest branch in Lampeter. It is not good enough for a bank to put a poster in a window, or on a boarded-up window, telling people that their nearest branch is X miles away. That closure has hampered local businesses, and local residents have felt the loss of face-to-face services. New Quay/Cei Newydd, in my constituency, has lost its last branch, although the town has a huge population in the summer because of all the visitors.

I could go on, but I will not do so. Others want to speak, and we want to hear from the Front Benches, including, of course, the Minister. Let me end by saying that rural communities are going through very challenging times. There is a characterisation of the high street in a small market town, involving banks, post offices, shops and readily available public transport—buses that stop and take people to their destinations. I do not want to be a Luddite; I do not condemn the march towards a digital economy, with services that can be accessed online and business that can be conducted by means of a call centre rather than face to face; but there is a universality in that, which does not currently apply to all rural areas. Perhaps it will in the future, given technological advances. Perhaps we will all be content to sit in our homes, not talking to each other and playing on computers. But we are not there yet.

Rural areas are being left behind. Broadband, and broadband speeds, are not equitable across the country. A generation of people, and certain businesses, depend and rely on physical banking. I sincerely hope that, if the way forward is the access to banking protocol review, the realities of rurality—the reality of the 20% of us who live in rural areas—will be considered.

The hon. Member for Wells ended his speech by using the phrase “fair play”. In Welsh the phrase is “Chwarae Teg”, and we demand that too.

--- Later in debate ---

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to follow the hon. Member for East Lothian (George Kerevan). I hope that Mr Ross McEwan meets him really soon because I can see the hon. Gentleman’s passion on this issue. I pay tribute to my hon. Friend the Member for City of Chester (Christian Matheson). I know how deeply he feels about this issue and how he has been campaigning for this debate through the Backbench Business Committee. I am pleased that his campaigning has come to fruition. It would be remiss of me not to mention the hon. Member for Wells (James Heappey).

We found out today that the hon. Member for Ceredigion (Mr Williams) is lucky enough to have access to a train, a bus and a car. He represents a beautiful part of Wales and I always like hearing him talk about places in his constituency because that reminds me of my childhood holidays and good memories come flooding back. I also pay tribute to my hon. Friend the Member for Ynys Môn (Albert Owen), who has again shown his passion and devotion to his island constituency. His fantastic speech was one of the best that we have heard in the Chamber for a long time and I thank him for it. It would also be remiss of me not to mention another Welsh colleague, my hon. Friend the Member for Clwyd West—

[Susan Elan Jones]

Clwyd South.

[Chris Evans]

I promised my hon. Friend before I stood up to speak that I would not say “Clwyd West”, but I knew I would get it wrong. My hon. Friend the Member for Clwyd South (Susan Elan Jones) has been a good friend for a number of years. Like my hon. Friend the Member for Ynys Môn, she cares about these issues. I thank her for her passion and for the strength that she has shown, especially this week, given the difficult circumstances.

Sadly, the debate has come at a bad time for me. Only last night I received the terrible news that yet another bank—Lloyds in Newbridge, a town in my constituency—is to close in October. That follows the closure earlier this month of HSBC in Risca, another town in my constituency. Sadly, such closures are not unique to my constituency. They are widespread throughout the whole country, and some sections of society are experiencing a considerable loss. The BBC reported in May that between April 2015 and April 2016, more than 600 bank branches were closed across the UK. More have closed since, including that HSBC branch in Risca, and soon there will be that closure in Newbridge and others across south-east Wales.

Local residents are being given the usual reason by their bank, namely that more customers are turning towards online banking and footfall at branches is falling. It is hard to deny that online and telephone banking are on the rise. Although I use bank branches from time to time, my own daily banking needs are usually met over the phone or through an app. This trend is underlined by Barclays, which says that on average its customers use mobile banking more than 28 times a month, but visit their local branch less than twice in that time. The banks say that it therefore makes commercial sense to close branches that are expensive and not being utilised enough to justify their cost. When I worked in banking in the early part of the 21st century, I noticed that footfall was going down, but the banks were not really very nice places because we would have a customer’s arm up behind their back trying to sell them as much as we could as soon as they walked through the door.

If we look only at statistics and reduce customers to numbers on a graph or spreadsheet, saying that they are only one of a minority who do not use online or telephone banking, we ignore the cost and the burden that closures place on the individuals who are left out. When we dig a little deeper to see who exactly loses out the most from the closure of a bank branch, it is almost always the most vulnerable in the community. I have spoken in the House about the perils of payday lending, legal loan sharks and doorstep lenders. If someone needs a loan, they will trust the person at the door if there is no bank at the end of the road to meet their borrowing needs. That is the danger. When a bank closes a branch, that person, who is usually unbanked, becomes even more vulnerable than they already are.

I have to make an example of HSBC and the branch closure in Risca. When I launched an online petition, which was signed by hundreds of residents, some of the comments truly summed up the problem with branch closures. One constituent said:

“My parents use this bank. If this branch closes they will not have a branch within a 5-mile radius. The nearest branch will be at least 30 minutes away by bus. Both of them are in their 70s and cannot use internet banking as they have no internet connection nor computer. They are hard of hearing, so telephone banking is also out of the question. How are customers like them supposed to deal with any issues if they cannot speak to someone face to face?”

HSBC’s closure of Risca’s branch was bungled, and the same goes for branches all over the country. The first I heard about it was in an email on a Friday night. I was told, “Do not say anything, because we have not told the customers or the businesses. Keep it to yourself.” I wrote to the bank and asked for an exact closure date and when it was going to be announced, but I was met with silence. It was only when I put it in the press and set up the petition that HSBC wanted to talk to me. Even then, it was like pulling teeth.

I asked to speak to the chief executive—like the hon. Member for East Lothian did with RBS—and I was given a regional director who popped by in Risca for the day. Guess what I found when I walked into the HSBC? Did I find a branch on its last legs? Did I find a lack of staff? No, people were queuing out the door to use the services. The average age of the people was 70s or 80s and they were complaining that the branch was going to close, yet the representative was in the office telling me that no one was using the service. Who am I supposed to believe?

Another thing that I have to say about HSBC is that when it did finally put out a press release, it told me that footfall had dropped by 70% in Risca. That was very good, and I accept that, but when branches were closed in the constituency of my hon. Friend the Member for Rhondda (Chris Bryant) in Porth and Tonypandy and in the constituency of my hon. Friend the Member for Ogmore (Chris Elmore), the bank said exactly the same thing: footfall had fallen 70% as well. I am sorry, but I do not believe that figure.

[James Heappey]

The hon. Gentleman makes an excellent point. The difficulty is the ambiguity over the definition of “regular users” that the banks try to use in their impact statements. I am not absolutely sure what it is, even though I spent some time researching for today. There needs to be a clear definition of what a regular user is so that the number in an impact statement can be interrogated.

[Chris Evans]

I totally agree. When I go to a bank that is about to close, I want to know the exact figure. I want to know what the footfall is even if that means just clicking the numbers as people walk through the door. At least then there would be some raw data that could be used to justify a branch being closed.

There is also a social impact. Risca once had several banks and building societies, including branches of Lloyds, HSBC and Barclays. Lloyds and HSBC have now closed, leaving the town with one remaining bank, which is fortunate because people still have the option of moving to Barclays if they want to continue to bank locally. What happens if, as in so many communities up and down the country, Risca or Newbridge lose their last remaining bank as the long trend of bank branch closures continues, as predicted by fintech companies?

I say to my hon. Friends the Members for Ynys Môn and for Clwyd South and the hon. Member for Ceredigion that I am lucky in Islwyn because we have good transport links. We have a trunk road that goes right through the constituency, the bus service is good, and there is a new train service. People can get from town to town. However, Ceredigion, which is a huge constituency that I know quite well, Anglesey and Clwyd South all have country lanes and one-track roads. How can people get from one branch to another? It is a major outing for many people.

Before a bank closes, it is imperative that a full assessment is carried out of the impact that the closure will have on the local community and that local stakeholders are consulted. Steps have been taken. In March 2015, banks published their access to banking protocol, which laid out their commitment to ensure financial inclusion and to undertake an impact assessment through community engagement when a branch closure was planned. I look forward to the publication of the independent review led by Professor Russel Griggs of how banks have implemented the protocol. In my anecdotal experience, however, they have not. They have been found absolutely wanting.

It is very clear that some banks provide a better service than others. For example, I compare the closure of Barclays in Newbridge with the way that HSBC was closed in Risca. When I see something good, I say so. The way that Barclays managed that closure was far better than what happened at Risca. Barclays had the raw data, there was a point of contact, it spoke to all the customers, and I pay tribute to its community relations manager, Jonathan Brenchley, who was fantastic all the way through that process. The great thing about him is that if customers have a problem, they can pick up the phone to him and he will deal with it. It is an example that many other banks should look into.

In May 2013 Barclays launched its Digital Eagles programme, which is designed to support and educate customers to help them feel comfortable with using digital channels not only for their banking, but in all aspects of their lives. So far it has trained over 16,000 Digital Eagles across the country and has held 5,200 learning sessions. The expansion of such programmes among other banks would be a very important step towards ensuring that nobody was left behind as banking changes.

However, switching to online or telephone banking alone will not be enough to ensure that nobody is badly affected by branch closures. The parents of my constituent, who have no computer or internet, should not be expected to buy a computer, and their hearing problems make telephone banking an obstacle. If they are to keep their independence as more bank branches close, banks must move towards a model whereby the bank will go to the customer if the customer cannot get to the bank physically, digitally or otherwise.

I pay tribute to NatWest for its service, which is akin to a mobile library. Its van turns up once a week in hard-to-reach communities so that people can do their banking there. A promising solution might be a vast expansion of mobile banks which, although they are not perfect, could at least dampen the impact of bank closures. Customers who seek the kind of banking and financial advice they would otherwise receive at a branch should have the option to request one-to-one meetings with bank staff, either at home or in a nearby public space, such as a library.

It is important to remember that among the biggest customers of local bank branches are small businesses, with regular trips to their local branches to make deposits. The closure of branches means that they have to go further and further and waste precious time when they could be chasing sales and business. If time is money, they are certainly losing out. As in the case of personal banking, I believe banks must change their approach so that they are the ones to come to the customer. In January 2016 Barclays introduced a Barclays Collect service, which will travel directly to business and corporate customers to collect deposits directly from their door. I welcome that news. Barclays plans to roll out the scheme more widely next month. I hope the scheme is successful and that other banks follow suit.

We have to consider other options, and credit unions must be part of the mix. Earlier my hon. Friend the Member for Harrow West (Mr Thomas) said that in the new banking world credit unions must play a role. They will bring people to banking. I know that the Minister has been a champion of credit unions in the past. They bring people to banking, but very often they are the victims of their own success. Because they are voluntary organisations, when they get huge they get even more difficult to manage, as people do not have the necessary skills and experience.

Credit unions do not know where to go as they get bigger. I think building societies have a role and should offer back-up to credit unions, as should post office credit unions. There is much work to be done in credit unions, but there needs to be a next step for them, such as the opportunity to become a community bank, a post office-style credit union, or even a building society. I urge the Minister to look into this. Legislation is needed to enable huge credit unions run by voluntary staff to become the new banks or smaller community banks or building societies. I hope she and her officials will give some thought to that.

We need to start thinking about the social impact when a bank closes. The premises usually remain vacant or become a pub, for example, which is a waste.

[Mike Wood (Dudley South) (Con)]

In my constituency, rather like in the hon. Gentleman’s, Lloyds Banking Group announced two further bank closures yesterday. He is speaking movingly about the impact of bank closures on our communities, but that impact also extends to the staff. Does he agree that banks need to do far more to redeploy staff, and, where redeployment cannot take place, to make sure that retraining and support are in place so that staff are treated fairly?

[Chris Evans]

As a former employee of Lloyds TSB, as it was in those days, I have every sympathy with any member of a bank’s staff who is made redundant.

To go back to my earlier point, I hope the Minister will think about a piece of social legislation that says that banks should offer members of staff to credit unions, to give those organisations the expertise and professionalism they need to manage once they get bigger. There is a real space there for some action.

Banking is changing, but banks have to change with the times; they have to reach out to the customer and to find new ways of delivering their services. I come from a banking background, and I know that things are not perfect, but today’s debate has given me hope that all of us in the House want the best deal we can get for our constituents and for the customers of banks.

--- Later in debate ---

[Harriett Baldwin]

The hon. Gentleman is right to pay tribute to the wonderful staff up and down the land who staff our bank branches. The older members of our communities really value that interaction. It can be very important in protecting them against some of the online fraud, which, we have to acknowledge, targets older customers.

It is clear from the points raised today, and from the regular discussions I have with Members, that we are all in agreement that bank branches are an important part of the solution when it comes to access to finance for our local communities. It is one of my top priorities as Economic Secretary to ensure that financial services work for everyone and that they are on the side of people who want to work hard, do the right thing and get on in life. Having a good branch network is part of that. The role of banks in society is essential. I am glad that that has been acknowledged today.

In the interests of time, I want to just highlight some of the issues raised in the debate. First, in the past year we have made significant progress on access to banking services by improving access to the basic bank account. Many more banks now offer that. We have also reduced the practice of charging for failed payments, which was unacceptable. The industry has moved forward on that. I pay tribute to the hon. Member for Walthamstow (Stella Creasy). She has not participated in this debate, but she made such an impact in terms of bringing payday lending under the regulation of the FCA and the progress we are making on that. There has been much discussion about the access to banking protocol.

[Chris Evans]

Does the Minister know of my interest in real-time credit scoring? Has she had a chance to look at that?

[Harriett Baldwin]

The hon. Gentleman knows that that is worth a whole Adjournment debate in itself, so I will talk about the access to banking protocol instead.

The protocol means that when a bank decides to close a branch it must think carefully about the consequences of doing so, particularly when it is the last bank in town. We have heard today—this debate is timely—that Professor Russel Griggs has been appointed by the BBA to review how it has been working in its first year. All the points raised by Members will be excellent submissions to that review. I hope he will take the opportunity to meet hon. Members to hear at first-hand the feedback on the independent review of the protocol. I would like practical recommendations to come out of the review on how we can move forward. I think we all recognise there will be an ongoing review by banks on how they can best use their branches.

Oral Answers to Questions

Chris Evans Excerpts

Tuesday 7th June 2016 Commons Chamber

[Mr Osborne]

I completely agree with my hon. Friend, and I know how much she champions skills in her constituency in Wiltshire. The apprentice levy, which has now been legislated for, will ensure that we are able to increase the number of apprentices in this country towards the 3 million that we committed to in the manifesto. Crucially, more money will go into skilled apprenticeships in fields such as design and engineering. She wants to see more of those, and so do I.

[Chris Evans (Islwyn) (Lab/Co-op)]

Many constituents of mine, including those working at RF Brookes, tell me that their employers are attacking their terms and conditions because of the national living wage. Does the Chancellor agree that this abuse should not go on as it is giving constituents of mine an overall pay cut?

[Mr Osborne]

We certainly expect businesses to pay the national living wage and to honour not just the letter of the law—we have increased enforcement of the living wage through HMRC—but the spirit of it, which means that employers should pay that wage and not find ways to cut other allowances to make good on the pay bill.

Budget Resolutions and Economic Situation

Chris Evans Excerpts

Wednesday 16th March 2016 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

When the Chancellor of the Exchequer was appointed to his post nearly six years ago, he was faced with several challenges: a record deficit, an increasing number of welfare claimants, and the fallout from a banking crisis of a scale that had not been seen since the 1930s. Along with each of those challenges, the Chancellor was faced with an opportunity. He could have reformed the tax system, changed the terms of welfare forever, and restored confidence to our banking system. However, he wasted each of the opportunities that accompanied those major challenges.

For a start, the Chancellor failed to tackle the deficit by 2015, although in 2010 he had confidently predicted, at the Dispatch Box, that he would. The plan, we were told then, was to start paying off the national debt by the end of the last Parliament. In the emergency Budget statement that he delivered to the House on 22 June, he went so far as to claim:

“The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget.”—[Official Report, 22 June 2010; Vol. 512, c. 167.]

Here we are at the beginning of 2016-17, and the budget deficit stands at £72.2 billion. Now the Chancellor tells us, in all hope, that he will turn that into an absolute surplus of £10.4 billion in 2019-20. It is Cheltenham week, and I wonder who will win the wager that he will achieve that.

The only conclusion that can be reached is that austerity has failed to produce the growth and the tax receipts that we need if we are to end the deficit and begin to pay off the national debt. I believe that there are two solutions. We need tax reform in the short term to ensure that tax is collected efficiently and effectively, and we need to increase radically long-term investment in new and emerging businesses. The Chancellor is intent on cutting public services by £8.1 billion by 2020-21, but what is he doing to ensure that the large multinational companies that do business in our country pay their fair share of tax? Is it fair for a small business to face demands and eventual court action for non-payment of tax while a corporate giant like Google can negotiate with HMRC? Of course it is not.

The cases of Google and Facebook demonstrate that corporation tax has had its day. The UK Government raise about 7% of their revenue from corporation tax, but much of that would be collected as income tax on dividends even if corporation tax did not exist. Taxing companies locally on a fraction of their worldwide income calculated by reference to their domestic activity could be one solution to this issue. Alternatively, the Government could be bold and radical and abolish all tax incentives and other loopholes, making it almost impossible for anyone to avoid paying their fair share of tax.

The Chancellor should look at ways of spreading wealth to the regions that are traditionally reliant on the public sector, such as the north-east, Northern Ireland and, yes, Wales. As someone who travels across the Severn bridge on a weekly basis, it would be churlish of me not to welcome today’s announcement of the halving of the Severn bridge toll. However, I must qualify my welcome by saying that I wish the proposal had been for the maintenance-only toll for which my hon. Friend the Member for Newport East (Jessica Morden) has been campaigning for years. We look forward to hearing the details, but I really wish that, rather than the cut being introduced in 2018, businesses could benefit from it this evening or tomorrow.

HMRC estimates that in 2015-16 there are 3,000 additional rate taxpayers in Northern Ireland, 4,000 in the north-east and 5,000 in Wales. In Wales, additional rate taxpayers pay £302 million in income tax. I urge the Government to look at regional tax rates tailored to encourage people to start up businesses in areas such as Northern Ireland, Wales and the north-east. That would also encourage wealth creators to relocate to those areas.

However, tax reform will go only so far towards paying down the deficit. Whether the Government like it or not, they have to put their money where their mouth is. In the future, we will face challenges ranging from ageing to climate change to antibiotic resistance, and it will be our researchers and innovators who are at the forefront of sustaining our way of life, as the hon. Member for Macclesfield (David Rutley) has just mentioned. We have a responsibility to safeguard both the quality and the productivity of our science base to ensure that we are in a position to meet those challenges. In our increasingly knowledge-based economy, the pursuit of excellence in research and innovation will be at the heart of effective strategies for sustainable growth, increased productivity, competitiveness and the creation of high-value jobs. This is the nation that broke the Enigma code and discovered DNA. Our competitors across the world recognise the value of the knowledge economy and are investing heavily in science, technology, research and education. If we want to remain world leaders in tomorrow’s knowledge economy, it will not be enough to ring-fence the science budget. We need to increase it and invest more in it.

I turn now to the final challenge. Despite being given a mandate to reform welfare, the Government have failed to grasp the problem. Focusing on jobseeker’s allowance, they have peddled the myth that most of the money goes on unemployment or incapacity benefits. In fact, 47% of UK benefit spending—£74.22 billion a year—goes on vital state pensions, which is more than the £48.2 billion that the UK spends on servicing its debt. That is followed by expenditure on housing benefit of £16.94 billion and on disability living allowance of £12.57 billion. Jobseeker’s allowance is actually one of the smaller benefits, with £4.91 billion being spent in 2011-12, an increase of 7.6% on the previous year. We can no longer tinker around the edges of welfare reform. The budget is getting too huge. We need a cross-party report that all the major parties can sign up to—a modern-day Beveridge report, if you will—to seek solutions to how benefits can be delivered in a way that reflects the modern world.

Nothing rouses the anger of the British public more than the banks. Following the financial crash of 2008, banking reform was at the top of the agenda. Sadly, this Government have been found wanting. Just this week, HSBC announced plans to close its local branch in Risca in my constituency. Already, hundreds have signed a petition expressing their anger at the closure. On four occasions over the past five years, HSBC has threatened the Government that it will leave this country, yet it does not even think it important to consult the local community before closing a branch.

The Financial Conduct Authority launched a review into banking culture, but it has now been scrapped, despite the fact that customers and taxpayers are still paying the price for the failed culture in the banking sector that has been widely attributed to be one of the main causes of the crash and the scandals over LIBOR and price fixing. We need to introduce competition into the banking sector to finally challenge the dominance of the big six banks. A start could be made with real-time data sharing to help consumers and promote competition. It is vital that better and more accurate information is shared more quickly and that banks’ current account and credit card account data, which are currently excluded, should be shared if consumers want them to be. Banks have an incentive to stop those improvements. The case is strong for regulation to make safe and effective sharing happen.

As we have seen across the world, such as in the rise of Donald Trump and Bernie Sanders in America, the public desperately want change. The Government’s response, which has been the same since they were elected, is business as usual. To people all over the country, business as usual is just not good enough any more. The system has a sense of inherent unfairness. People who are not on benefits or rich enough to pay their way out of the system are fed up with the same old slogans. They are angry and they want change. This Budget is the latest in a long line of wasted opportunities. In the light of all the evidence, it is time for the Government to rip it all up and start again.

Real-time Credit Scoring

Chris Evans Excerpts

Tuesday 2nd February 2016 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

Thank you for calling me to speak, Madam Deputy Speaker; it is a pleasure. I have been in this House for six years in May, and this is the first time I have ever been granted an end-of-day Adjournment debate.

I am delighted to have the opportunity to debate the topic of real-time credit scoring. For me, this is a very important issue, especially in the wake of several financial scandals over the years. The financial crash of 2008 proved one thing—that banking needs reform.

Whenever I think of banking, I think of the need for reform. Most people who use banks will want to borrow money and, unfortunately, personal lending and personal loans are the last area to be considered for reform by the Government.

Real-time credit scoring makes complete sense. The term describes the sharing of data from the credit reference agencies in real time or as close to real time as possible. This requires sufficiently up-to-date and complete relevant data from all the banks and financial institutions. People expect choice in any walk of life. It is what our system is based on. In the market for personal loans, the choice is too narrow and too clearly focused on the banks. Real-time credit scoring would shake up the market and bring about real change for consumers and banks.

The Financial Conduct Authority is looking at the issue. The case for regulation to enable data sharing to happen safely and effectively is compelling. If consumers could ask their banks to share real-time data about their account with a prospective lender, lenders could assess affordability more accurately, meaning that they could make more capital available to consumers with lower risk, thereby driving down cost.

[Julian Knight (Solihull) (Con)]

I congratulate the hon. Gentleman on securing this debate on a very important topic. I support his call for real-time credit scoring, which needs to be explored further. In my previous occupation as a financial journalist, I dealt with a lady who got into £107,000 of debt in three days, following a relationship breakdown. If real-time credit scoring had been in place on the high street, she would not have got into such enormous debt, which caused further mental health issues. Perhaps the hon. Gentleman will reflect on that.

[Chris Evans]

I will develop that argument further. The hon. Gentleman identifies the nub of the problem—the delay in credit scoring needs to be addressed. That is common sense and I hope the Government will grasp the nettle.

[Yvonne Fovargue (Makerfield) (Lab)]

I congratulate my hon. Friend on obtaining this debate. Does he agree that it is not just consumers who would benefit, but new entrants to the market who are lending for the medium term would be able to come in without having to buy two databases: the payday loan database, which operates in real time, and the other database that operates for banks and other financial institutions, which is at least a month behind?

[Chris Evans]

My hon. Friend speaks with some expertise. I pay tribute to the amount of work she has done on payday lending and raising the issues associated with it. She is right. The real problem is that the banks have a stranglehold on lending. They jealously guard their data and they are suspicious of the Data Protection Act. They therefore keep out of the market major competitors who could bring down interest rates, which is what we all want to see.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman is very gracious and I thank him for giving way. Credit risk is one of the top issues in financial services and there is a need for services to be automated. Is there a possibility through real-time credit scoring to provide new, exciting jobs in a well-paid high-end market? That would be a plus, if it was done in the right way.

[Chris Evans]

The hon. Gentleman is right. The more competitors there are in the market, the more jobs and the more specialised jobs there will be. I pay tribute to the hon. Gentleman, who speaks on every single topic. We have often joked privately that Westminster Hall is his lounge in the morning, as he speaks there so often. Coming from Northern Ireland and Wales, which have great similarities—both are heavily reliant on public sector jobs—the hon. Gentleman and I know that real-time data sharing and more competitors in the market would bring the private sector jobs that areas such as mine, his and the north-east are crying out for.

Currently, consumers pay the high costs in two ways. Consumers who can afford credit pay more than they should, and consumers to whom lenders ought not to lend are able to access credit even when it is not affordable. Better data would reduce both these problems, to the benefit of all concerned. So who would be the big losers if the Financial Conduct Authority acts? The banks and the incumbent lenders, but I do not think they would be losers. They would have to up their game and offer innovative products such as those that the hon. Gentleman mentioned. The FCA should also be ready to act in the teeth of resistance and entrenched interests, to further the interests of the consumer and our constituents.

I want to provide some background information to data sharing in consumer credit markets. An important interaction in the consumer credit market is the way in which lenders, particularly unsecured lenders—or, as we know them, high-cost, short-term credit lenders—assess a prospective borrower’s creditworthiness before agreeing whether to lend to them and setting the terms on which the loan is made. Lenders rely on information about a borrower’s creditworthiness from a range of services, including information supplied directly by the potential borrower as part of their loan application and information obtained from credit reference agencies.

Credit reference agencies aggregate information about the individual borrower’s personal information, past credit history and current credit commitments, and they supply that information to lenders on commercial terms. The three main credit reference agencies in the UK are Experian, Equifax and Callcredit. The way in which credit reference agencies aggregate and supply information is not regulated by the FCA, but operates on an industry-wide reciprocal basis. There is no requirement on individual lenders to share information, and although banks, which hold the most critical current account information, have the most detailed overview of a customer’s financial position, they do not in general supply data to credit reference agencies—of course not, because the data give them a leg up into the market and an advantage over other providers.

Veritec states that payday lenders have, as we all know, consistently failed to act in the best interests of consumers. Previous efforts to allow the UK payday lending industry to self-regulate have not succeeded, and tragic cases have come to light whereby individuals have become trapped in a downward spiral of debt through multiple, simultaneous loans. The actions of payday loan companies should be monitored by the FCA, and a database with real-time information on existing loans is required.

I do not want anyone to think that I want short-term lending to be banned. It is a massive industry that creates jobs for people. There is obviously a need for it, otherwise there would not be so much money in the market, but I believe that tools have to be made available so that decisions can be made about creditworthiness.

Crucially, not all lenders report data to more than one credit reference agency, and a reliance on credit reference agencies has played a key role in the downfall of the implementation of FCA rules and consumer protection. It is disappointing that the FCA will not consult on real-time data sharing requirements at this time.

Only a database with real-time information on existing loans will protect consumers from potential harm. A system should be considered real time only if every inquiry and every lending decision is updated instantaneously across 100% of the market. That would allow for lenders to know immediately if a consumer is eligible for a loan under the FCA’s responsible lending rules. However, the reciprocal principles that underpin data sharing require that lenders provide data to credit reference agencies “on a regular basis”, usually a minimum of once a month. Even where data are provided monthly, they can be as much as 60 days old by the time they are made available to other lenders.

The fact that lenders may routinely not have access to the most recent 60 days of a consumer’s credit history creates serious consequences for competition and, above all, consumer welfare, with the potential for unaffordable levels of debt. The question as to which lenders share information is an entirely commercial decision, and it is left to lenders to assess whether it is in their interests. They do not have to take into account any other information, such as the wider benefits to consumers.

Rather than just talking about affordability, it is very important to take a customer’s lifestyle into consideration, as happens when people take out mortgages. If we had real-time data sharing, that practice could be spread right across the board in personal lending.

Incumbent lenders, such as bankers, have no incentive to share data. Banks hold the most critical current account information, and the marginal benefit of sharing information and receiving reciprocal information is very small compared with the much larger marginal benefit to smaller lenders, such as unsecured lenders, or high-cost, short-term credit lenders. That creates a very important market failure. Having unrivalled access to credit data puts the banks in a unique position in considering whether to lend to consumers, and it allows them to lend at the most competitive rate. As a result, smaller lenders and new entrants are placed at a significant competitive disadvantage. That not only restricts competition, but distorts it in favour of one sub-market over another.

In addition, that risks cutting off some consumers from access to credit altogether. If they are unable to obtain a bank loan, such consumers must either rely on other forms of credit, such as unsecured lending or high-cost, short-term credit, or make do without a loan. Lenders want to lend to such under-served customers, but for lenders to be able to offer loans at reasonable interest rates, it is essential that they can minimise the risk of default. That means conducting rigorous affordability assessments, for which they require access to complete and up-to-date credit data.

The Competition and Markets Authority considered real-time data sharing in its payday lending market investigation. In its final report, it stated that it saw significant benefits to implementing real-time data sharing, but:

“We consider that further development of RTDS, specifically the frequency of updates, would benefit borrowers and lenders and that our recommendation is not redundant”.

In response to the report, the FCA was asked to consult on a range of issues, including real-time data sharing, in the high-cost, short-term credit market. In its consultation paper, the FCA stated:

“Although we see clear benefits to real-time data sharing, we do not propose to consult on introducing real-time data sharing requirements at this time.”

The FCA’s proposed approach is, in effect, to do nothing and assume that the issues associated with real-time data sharing will work themselves out through a combination of time and commercial pressures. It is true that entrepreneurial new companies are developing systems and services that use existing arrangements that are already available to consumers, such as online banking, to offer something approaching real-time credit data. Although there is scope for technology to make sharing faster and easier, unless real-time data sharing is supported by regulatory requirements from the FCA, it is likely to be opposed as a result of commercial pressures by large incumbent lenders to prevent more effective competition.

New technological solutions show that there are few material costs to implementing real-time data sharing. IT systems are already geared to real-time data sharing, and it is clear that financial institutions can mobilise their account information to support real-time data sharing for their own purposes without any difficulty. I have also been informed of the benefits of a regulatory database. A database would allow instant monitoring of loans and of the whole high-cost, short-term credit market, which can be simplified into a traffic light system for lenders and alerts when loans are made outside regulatory rules. If all applications were processed using the database, regulators would have certainty that the rules were being followed at point of sale in store or online. In addition, because the data are not shared among creditors and are used only by the regulator, commercially sensitive information and customer data are not bought and sold.

The Financial Conduct Authority should ensure that any real-time data are used to ensure compliance at every step of the lending process. That can be achieved only if all lenders of short-term, high-cost credit report data into a real-time FCA database. The payday loan market operates best, and consumers are best protected, when a database is in place. Alongside that, high-level scrutiny and enforcement activity are required to limit and prohibit illegal lending.

The absence of real-time data sharing is important for two principal reasons. First, it is a partial cause of unaffordable personal debt. Consumers may be granted loans which they cannot truly afford, because providers do not have up-to-date information about their most recent liabilities and missed payments. Secondly, it is a critical factor that limits the degree and effectiveness of competition within many overlapping consumer credit markets, because it discourages providers from entering the market and limits their ability to compete fairly if they do enter. The FCA must revise its proposed strategy and develop long-term, future-proof regulatory solutions that promote real-time data sharing and enable the innovative use of new technology.

In our society, many people, whatever their political persuasion, believe that the Government are no longer on their side. Real-time data sharing, to me, is absolute common sense, and it can be adopted with a few simple steps. It is time, through this simple measure, for the Government to show that they can stand up to large corporations and organisations that are quite clearly trying to rig the market in their favour.

Oral Answers to Questions

Chris Evans Excerpts

Tuesday 1st December 2015 Commons Chamber

[Mr Osborne]

My hon. Friend always speaks passionately on behalf of her constituents—in this case, those seeking to buy their first home. The Help to Buy ISA is, of course, available in Cornwall and will help her constituents buy their first home. The new stamp duty charge on second homes and buy-to-lets will raise money, and a portion of that will be given to local authorities and areas such as Cornwall, where there are quite a lot of second homes.

[Chris Evans (Islwyn) (Lab/Co-op)]

Low interest rates have meant that many people have had to look at other savings vehicles such as buy-to-let. Measures in the Budget will deeply affect the buy-to-let market, as the Chancellor will be aware. What measures is he taking to help elderly people looking for better savings returns?

[Mr Osborne]

There is general agreement across the House that there should be a level playing field, so that people trying to buy their first home are not disadvantaged by people trying to buy a second home or a buy-to-let property. The changes that we have introduced help to do that. Alongside that, we have made the ISA more generous and have created new pension flexibility, so that people can get the most out of their pension savings. The low interest rates, decided independently by our central bank, are part of the vital support for our economy going forward.

The Economy

Chris Evans Excerpts

Wednesday 18th November 2015 Commons Chamber

[Stewart Hosie]

I have heard that argument before. I am not sure about its efficacy and I am not going to comment on it. On the substantive point, however, there is absolutely no contradiction at all between a general attempt to decarbonise, which is the right thing to do, and a clear recognition of the costs of high energy-using industries that are of strategic importance. There is no contradiction there whatsoever.

There is one final point of failure in the UK Government’s mismanagement of the economy: last week’s announcement of HMRC closures. If the UK Government are serious about clamping down on avoidance, evasion, fraud and even error, if they are serious about reducing the £16.5 billion tax gap from small and medium-sized enterprises, if they are serious about reducing the £14 billion tax gap from income tax, national insurance and capital gains tax, and if they are serious about maximising tax yield for investment, then closing 137 HMRC offices, including almost every single one in Scotland, is a catastrophic mistake.

[Chris Evans (Islwyn) (Lab/Co-op)]

I draw the hon. Gentleman’s attention to the Public Accounts Committee report, which said that HMRC is answering less than 50% of the calls put through to it. He, like me, is a constituency MP, so he will know that the biggest frustration for businesses is that they cannot get through to HMRC on the phone. This is a real problem for small, medium and large-sized businesses. Does he condemn the cuts to HMRC as much as I do?

[Stewart Hosie]

I absolutely condemn them. That point is extremely well made. Most individuals and businesses want to be honest. They want to pay their tax. They want to go to a counter, face to face, to make sure everything is absolutely as it should be and then pay the bill. If less than half the calls are being answered now, it will only get worse. Given that in Scotland there will be no face-to-face point of contact north of Edinburgh and Glasgow—Dundee, Aberdeen, Inverness and the whole of the highlands—or south of Edinburgh and Glasgow, including the whole of the borders, this is an idiotic and counterproductive thing to do.

What are the Tories’ plans all about? As the shadow Chancellor hinted, it is ideological to insist, as the Chancellor has done, that the economy not simply breaks even but runs a current surplus hitting £40 billion by 2019-20. It is economically foolish. To do that by delivering additional welfare cuts totalling £33 billion in this Parliament, alongside £5 billion of cuts to essential capital investment—announced in the summer Budget—is, frankly, vindictive, nasty and counterproductive. In short, to cut £40 billion more than is necessary to run a balanced current budget, with almost all of it paid for by punishing the poorest and stripping the capital budget by another £5 billion, is a policy we reject. It is a policy we have already seen fail. It is most certainly a policy the people of Scotland did not vote for.

--- Later in debate ---

[Chris Evans (Islwyn) (Lab/Co-op)]

It is interesting to hear speeches in this House. Since I was elected five years ago, I have been hearing the same thing from Conservative Members. The word “conservative” means to preserve a way of life. The Conservatives live in the past, they look back to the past and they are trying to preserve it, but the old certainties have changed. Globalisation is here to stay. Whether we like it or not, the way people go about their daily lives has changed for ever. Nobody will have a job for life any more. People will work in the same job all day and then come home to trade on Gumtree, eBay or Amazon. They will not see themselves as entrepreneurs but they will live an entrepreneurial life. It is up to Government to ensure that people can achieve their opportunities and ambitions.

The No.1 problem that anybody has in this country, whether or not they go to work, and whether or not they are in high-intensive industries, is climate change. Today’s motion is actually talking about green industry. Green technology is the last best chance for this country. Highly labour-intensive jobs go where cheap labour is, and that is not here. That is why we must invest in green technology.

As is often the case, it is America that is providing the most innovative solutions. In 2006, the Californian Global Warming Solutions Act set some of the most ambitious targets for carbon reduction anywhere in the world. Emissions were to be reduced by 30% by 2020 and by 80% by 2050. It was not just the targets that mattered, because the Californian Government attacked greenhouse gases from every angle—from industry, cars, households, cities, motorways and even farms. The law impacted on them all and provided the base on which to reduce emissions. We often talk about how Government action can only go so far, and that is true, but the Global Warming Solutions Act not only changed the approach of Government, but shifted the market.

California is one of the most polluting and car-crazed cultures in the world. Its most popular car for two years running was the Toyota Prius, which lost its crown last year to another hybrid, the Honda Accord. The California example is one the UK must begin to follow. It is a fallacy to say that there is a trade-off between tackling climate change and economic growth. The Act aimed—and it is succeeding—to create a whole new clean-tech industry. It created jobs, developed cutting-edge technology, supported established companies and helped entrepreneurs.

Nearly 10 years on from the passing of that Act, California has become the developed world’s second least carbon-intensive economy. For every dollar of goods and services, it emits less carbon than any nation except France. California is a living example of what research tells us to be true—that we can tackle climate change and dramatically boost our economy.

In 2011, Google.org compared a “business as usual approach” to the American economy pursuing a clean-tech approach. The report found that such a shift would do the following: grow the economy by $244 billion a year; create 1.9 million jobs; save consumers nearly $1,000 a year; and reduce total US greenhouse gas emissions by 21% before 2030 and by 63% by 2050. We have the ultimate opportunity to develop a carbon-neutral economy that creates jobs.

In my final 30 seconds I wish to focus on graphene. It was developed by British scientists, but it is the Chinese and Americans who are forging ahead with it. Of the patents on it, 24% come from either China or America. Only 1% comes from Britain. We must encourage our firms to ensure that when we make breakthroughs such as that, they have every opportunity to develop them for commercial purposes. That is the point that I really want to make to the Government.

Finance (No. 2) Bill

Chris Evans Excerpts

Wednesday 25th March 2015 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

Let me begin by expressing my disappointment that there is to be no Public Bill Committee. I have served on every single one in the present Parliament. I do not know what I did wrong in the Whips Office, but I feel that I am missing out on something.

I congratulate the hon. Member for Redcar (Ian Swales), who is, of course, a Liberal Democrat. Following the embarrassment of the Chief Secretary standing on the steps of the Treasury with his Fisher-Price lunch box, announcing a Liberal Democrat Budget the day after the real one that he said he had signed off, I admire any Liberal Democrat who can stand up now and defend the Government’s policies.

I want to say something about the Finance Bill and the Budget. This is the truth as I see it: for one hour, the Chancellor, simply because a general election is on the way, changed his tune from that of the Conservative party conference in October, when he told us swingeing cuts were on the way and we should prepare for an age of austerity. Now, 44 days before a general election, he tells us, like a latter-day Harold Macmillan, that we’ve “never had it so good.”

Those of us who are historians remember what happened after the complacency of that Conservative Government of the 1950s and the eventual devaluation of the pound in the 1960s. The problem is that for vast swathes of constituencies like mine across the country which are trying to deal with the post-industrial age the Government did not offer any hope or optimism for the future. Families in my constituency are £1,600 worse off than they were five years ago; that is the truth, and I challenge any Government Member to come to Islwyn, walk down the streets with me and go to the food bank in Risca where I was taken the other day. I could not get through the front door because so many people there were in need. Some might say they were there for kicks, but so many of them just needed help with benefits or the health service—they were there because there was nowhere else to go. That is a sad indictment of this Government’s policies.

Islwyn is a constituency dealing with the post-industrial age. Under the last Labour Government we attracted investment, but the problem is that this Conservative- led Government have created two Britains. There is the Britain of the affluent, who are enjoying a tax cut because we are in the grip of an economic theory that failed and only brought about deficits in the ’80s. That continues with the tax cut from 50p to 45p. We also see a different kind of Britain, however: a Britain of people gathered around the kitchen tables worried about paying the bills—about how they are going to pay the mortgage, how they are going to pay the rent. These are the people who deserve the tax cut.

It is all very well the Prime Minister committing today at Prime Minister’s questions not to put VAT up. He made that commitment before the last general election, yet VAT went up. It is only ever the Tory party that puts VAT up. VAT is regressive because everybody has to pay it, whatever goods they buy; whether they are a pensioner, a student, in work, a lord or a duke, they have to pay VAT. It does not matter what they earn. That is why VAT is a regressive tax.

The Government have forgotten who pays the bills around here. It is not the millionaires. It is not the business people. It is the people on the ground. I have nothing against anybody earning big money; I have no problem with success or aspiration, or ambition or achieving anything. However, if we give a tax cut to the very rich in society, they will employ accountants who will hide the money, but if we give a tax cut to people in the middle, they will spend it in the shops and businesses and get the high streets moving. That is not what is happening. That is not the reality on the ground.

We can talk all we want, but the simple fact is there is a problem with the word “conservative”. It means preserve or conserve—to conserve a way of life that never existed. If we want examples of how the Conservatives constantly look back to a golden age that never existed, we need only listen to the references to Agincourt. This is what I say: if we are looking back constantly, we are not moving forward.

The NHS is in crisis but the Budget says nothing about that most important public service in Britain. The Tories last week confirmed plans for extreme spending cuts in the three years after the election, which will put our NHS at risk.

[Ian Swales]

I always enjoy listening to the hon. Gentleman’s speeches, but he ought to note that the Budget included a huge £1.25 billion for mental health spending in the NHS.

[Chris Evans]

I welcome any money that goes towards mental health, and I think anybody suffering from a mental health issue would welcome that as well, but I have to say this to the hon. Gentleman: I am fed up, especially as a Welsh MP and a Welshman, at the way the Welsh NHS has been attacked by this Government. It is a shame because when the Government attack the NHS in Wales, they are attacking the nurses, the doctors, the cleaners, the porters—everybody who works so hard to provide the best possible health care to our patients.

[Charlie Elphicke]

The hon. Gentleman is making a passionate and powerful speech highlighting why it is such a travesty that he is not at the forefront of the Leader of the Opposition’s team, as he should have been. Does he join me in regretting the fact that the Leader of the Opposition seems to be planning a jobs tax were Labour to get elected at the general election?

[Chris Evans]

I thank the hon. Gentleman for his kind comments, and I have to say that over the years that we have served together in this House he has always been courteous to me and I count him as one of my friends from the other side.

[Jake Berry]

The dark side.

[Chris Evans]

Yes; I thank the hon. Gentleman for that, and admire his cheek in trying to get me into trouble. I shall move on quickly.

Working people know they are worse off than they were five years ago.

[Jake Berry]

The hon. Gentleman must accept that five years ago the personal allowance was just over £5,500, and after this Budget it will be in excess of £10,000. That is an enormous tax break, putting money into the pockets of all our constituents, some of them on the minimum wage, some of them on the lowest pay. Surely he must welcome that when he talks about working people.

[Chris Evans]

I would welcome it had VAT not been hiked up from 17.5% to 20%, which has affected many people and squeezed their wages down.

I do not have long left—[Interruption.] I hope I have longer in this place, but I do not have long left in terms of my speech. The people I speak to did not want the Chancellor to present an image of something that they were not experiencing. The statistics may speak differently, but for the many families I speak to who are worried about their job security and jobs being offshored, that was not their reality.

I want to end my last speech in this Session by thanking everybody on both sides of this House whom I have come to know for their various kindnesses and friendships. I have been immensely proud and honoured to represent the Welsh valleys that I was born in and grew up in, and I thank everybody for their help and advice over the years.

Bankers’ Bonuses and the Banking Industry

Chris Evans Excerpts

Wednesday 25th February 2015 Commons Chamber

[Guy Opperman (Hexham) (Con)]

It is a pleasure to speak in this debate. I must first mention the Register of Members’ Financial Interests and point out that I am attempting to create two banks in the north-east at present. My life savings, virtually, are in the Atom bank, which is an internet start-up that has been set up by individuals just outside Durham. We are also attempting to merge the Tynedale community bank with the Prince Bishops bank in Stanley in County Durham, with a view to creating an enhanced credit union.

Having made that declaration, I would like to take the House on a journey. The very first constituent who came to me after I had been elected in 2010 had had his bank finance taken away and, for that reason, his business had failed. It was not through any fault of the business, but because of the bank lending provisions at the time. The bank was local, in Newcastle and then London, and was one of the large banks. That case made it patently clear to me that we needed greater competition. To that end, we have spent much time in this Parliament, both as the Government and individually, trying to create that greater competition.

When we assess the quality of the Labour proposals—I confess that I have not had the great joy and pleasure of reading the shadow Chancellor’s proposals for banking reform, to which the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) referred, but I have glanced at some of the issues—we must look at the record over the last few years. That must start—and I twice raised this with the hon. Lady and did not get a reply—with the Financial Services Act 2012. On 23 April 2012, I spoke in the debate on the Bill. To the Labour party’s eternal shame, it tabled amendment 28, which sought to delete clause 5 of the Act. That would have removed “The competition objective”. Labour claims to be in favour of competition, but I find it utterly illogical and wrong that it should have sought to vote down the specific proposals in the Act that encourage competition. The proposals are simple and I would have thought that those who profess to want competition in banking would be in favour of them. They include

“the ease with which consumers who obtain those services can change the person from whom they obtain them”—

bank switching, and

“the ease with which new entrants can enter the market”.

That is challenger banks and local banks. The clause also includes

“the ease with which consumers who may wish to use those services…can access them”.

I could go on.

I refer to clause 5 because the House and the country will have to judge Labour on what it has done in the past. I have looked briefly at the grave and weighty tome—I speak ironically, I am afraid—published by the shadow Chancellor and the shadow Financial Secretary on proposed banking reform. It says that Labour wants to see

“At least two new challenger banks”.

I hate to say it, but over the last four years some 20-plus new challenger banks have been created under this Government. I have met many of them, including Metro, which is the biggest and the best, Aldermore and Virgin. Those of us who have been trying to increase competition would view the hon. Lady’s argument—which is, presumably, that 20 is good but we want two more—as illogical. I want an awful lot more than two more. Why she chose two, rather than one or 10, I am at a loss to understand, but doubtless when I read the grave and weighty tome, all will become clear.

We need to assess the way in which the Government have addressed the creation of greater competition. The creation of a new bank faces four fundamental challenges—I know because I have attempted to navigate my way through them over the last four and three quarter years. The first was a lack of legislation to facilitate such change. My hon. Friend the Member for Chichester (Mr Tyrie) and I went to see Sir Hector Sants, the then chairman of the regulatory authority, and he agreed and changed the rules. Previously, if I wished to create a challenger bank or new local bank, I would have been judged on the same basis as Barclays or the other big banks. I would have to have capital up front massively in excess of £50 million and my board would have to be set up years in advance—to say it was bureaucratic would be an understatement.

The point I was trying to make to the hon. Member for Kilmarnock and Loudoun was that, in some respects, for the creation of local challenger banks, regulation had to be tweaked slightly so that it was not light-touch—to return to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) who, as usual, is not in his place—but different and better. First, we introduced the Financial Services Act 2012, which provides the framework for the regulatory authorities to encourage greater competition. Secondly, having passed that legislation, notwithstanding Labour opposition, we tackled the length and complexity of the authorisation process. Setting up a new bank traditionally took years and a huge amount of money. We all want greater competition, and for the FSA to abbreviate the process—in planning, this is done through a pre-authorisation process—and help a potential new bank through it. The long and short of it is that the FSA has dramatically reduced the bureaucratic process and the number of years it took to set up a new bank. As a result, some extraordinarily successful new banks—for example, the Hampshire Trust and the Cambridge and Counties bank, which is effectively a local authority utilising its pension fund to do LEP-style investments in local businesses and communities—have come forward in the past few years.

The third big change was the reduction in the capital requirement. Huge amounts of money were needed to create a local or any kind of bank, but local banks are not now being judged on the scale of Barclays, because they do not want to be like Barclays or any other high street bank. Finally, the scale and complexity of the infrastructure and the information exchange between all the bank authorities was changed, as it needed to be.

I will be nice to the hon. Member for Kilmarnock and Loudoun: of course I would welcome two more new challenger banks. The consequence, however, of the past four and three quarter years of change in the regulatory, legal and bureaucratic process and in the general climate of FSA behaviour is that we have in excess of 20 new start-ups. For the first time, we have new banks taking people on in the high street. I see that myself, because not only am I able to play a tiny part in the creation of a significant new bank in the north-east based in County Durham, but we are trying to fill a gap in the high street in my community in Northumberland.

The Government have changed the rules on credit unions to make it possible to have two types of credit union. You and I, Mr Deputy Speaker, will know that the traditional credit union model requires people to borrow for a very long period of time. The credit union is a very laudable and good thing and we should continue to support it, but there is a gap in the market. That gap has been filled, in my community and up and down the country, by payday lenders. As a result of high street banks not being able to lend in one way and credit unions being relatively restricted, there is a gap. The gap can be filled by community banks, which would effectively be bulked-up credit unions. There is a fantastic number of examples. Several are in large Labour areas, such as Glasgow. The Salford credit union is going from strength to strength. I have spent considerable time getting to know the Prince Bishops bank, which is based literally on the high street in Stanley in County Durham. It competes with what we would think of as high street banks and is, effectively, a bulked-up credit union. That surely shows that the Government are taking things in the right direction.

[Chris Evans (Islwyn) (Lab/Co-op)]

Many credit unions, which are run mainly by volunteers, are the victims of their own success, as they become too large and usually disband because they cannot handle the administration, the back-office work, that comes with it. How does the hon. Gentleman envisage credit unions being able to manage themselves as community banks and, potentially, as building societies? What legislation would help with that?

[Guy Opperman]

The legislation is already there. The hon. Gentleman should speak to the hon. Member for North Durham (Mr Jones), who is doing a fantastic job on the board of the Prince Bishops bank. I happily praise him for the work he is doing with the local community—with the church, the local authority and the housing association. To improve the quality of a credit union and make it viable, one has to, for example, ensure that payments to local authorities and housing associations go through the credit union, so it becomes a clearing bank in the normal way. There must be a greater degree of lending on a long-term basis. To put it bluntly, the credit union needs to go after middle-class lenders, because they are the ones who will make the deposits.

In Northumberland, a large proportion of my constituents are off-grid and have to purchase 500 litres of oil at a time. That costs approximately £350, now about £275. Banks will not give the lending facility to many unbanked people, because the number is too low, but if they were to save with a bulked-up credit union or community bank, that community bank could be the lender of choice for that specific purpose. Such people would, because they are mostly homeowners, be the sort of new lenders and new depositors who can provide the critical mass and the clout for the enhanced credit union-community bank to be more viable. The traditional problem with a credit union is that it does not have the deposit savings unless it has a white knight or a very strong church or trade union backing it.

We can discuss this another time—Mr Deputy Speaker will say that I am straying from the substance of the motion—but opportunities are out there. The point goes to the substance of the motion, which is competition. A credit union should provide competition on the high street to high street banks. Traditionally, credit unions have struggled. The Government’s changes have made it easier for them.

I will touch on two further points and then bring my remarks to a close. The sins of the bad, all of which we deprecate, are now paying for the good works of the good. We cannot have this debate without talking about LIBOR and about the terrible things that happen. However, the Government have done a wonderful thing in saying that the 96 military charities should receive the funds of the LIBOR fines and that air ambulances should receive a considerable amount of money. Last night, I was at No. 11 Downing street with the Chancellor. Representatives of many of the air ambulances throughout the country, including from Essex, were there. They are receiving significant sums of money by reason of the Chancellor’s decision on LIBOR funds. That is a fantastic thing. It was first announced in the 2012 autumn statement, originally for just military charities. It has now developed into other areas—the Minister spoke of GPs and other health services. The great work done by the air ambulances should be noted. The support we are giving to them is crucial.

I want to make one final point on the motion, which refers to tackling unemployment and youth unemployment as the purpose behind everything that it proposes. It is hard to read the House of Commons Library unemployment statistics and find a single Member of Parliament who has not benefited from a dramatic reduction in unemployment.

--- Later in debate ---

[Liz McInnes (Heywood and Middleton) (Lab)]

As the motion states, we believe bonuses should be a reward “for exceptional performance” and not a compensation for failure. This applies in other industries and it should in banking, too. Many industries, particularly those in the public sector, manage to get by without awarding bonuses. In industries such as banking, where the bonus culture does exist, there needs to be more accountability. Pay must be more closely linked with long-term performance.

[Chris Evans]

Does my hon. Friend have sympathy for the high-street bank worker, who has had nothing to do with the scandals, but has often had to take abuse from customers for them? As someone who worked in a bank, my hon. Friend will know that these same high street workers are under strong pressure to achieve sales targets and that when they do not, they often face disciplinary action. Does she think that is fair, particularly when the senior executives are taking such massive bonuses?

[Liz McInnes]

I thank my hon. Friend for his series of questions. I will try to answer them in the order he asked them. I think my hon. Friend alluded to my having worked in a bank—

[Chris Evans]

I worked in a bank.

[Liz McInnes]

It was my hon. Friend who worked in a bank; now I understand. My two elder sisters both worked in banks and both were forced out because of the selling culture overtaking the “service to the customer” side of banking, so I fully understand the plight of the ordinary bank worker and the pressure they are under, not to mention the abuse they sometimes suffer because of misunderstanding on the part of the general public about the role of ordinary workers in banking. I thus fully appreciate my hon. Friend’s points, and I hope that answers his questions adequately.

I was referring to the scandals over the last year, most recently, as we are all aware, at HSBC. Regrettably, it looks like this year’s round of bank bonuses will be very generous once again. That is why Labour is determined to repeat its tax on bankers’ bonuses in order to fund a paid starter job for every young person out of work for more than a year. We will also extend clawback of bank bonuses that have already been paid, where inappropriate behaviour has come to light, to at least 10 years.

This Government have not done nearly enough to rein in excessive pay and bonuses. They have refused to repeat Labour’s tax on bankers’ bonuses and they have stopped short of implementing all the recommendations of the Parliamentary Commission on Banking Standards. Instead of repeating Labour’s tax on bankers’ bonuses, the Chancellor of the Exchequer has instead wasted taxpayers’ money by mounting a misguided and ill-fated legal challenge to the EU cap, which limits bonuses to 100% of salary—or even up to 200%, with shareholder approval.

The next Labour Government will guarantee a job for all young people on unemployment benefits for over a year and also for all adults aged 25 and over who are on unemployment benefit for over two years. This is the only policy we will fund with the proceeds of the bank bonus tax.

Being unemployed when young really damages prospects years into the future, so this is an important policy for Labour to champion. According to the latest labour force survey, youth unemployment stood at 740,000 in the three months to December 2014—an increase of 3,000 in comparison with the last quarter. Research shows that young people unemployed for a year will, on average, be £125,000 worse off over their working lifetimes. That means someone on the average wage would have to work nearly six years longer to make up for the cost of being unemployed when young.

The performance of the banking sector is vital to the health of the UK economy. The finance and insurance sector makes up around 8% of the total UK economy, employing more than 1 million people who carry out essential roles working with businesses and consumers to manage their money and ensure that they are able to invest, make profits and plan for the future. Too often in recent times, however, banks have continued to pay high bonuses in the face of falling profits and falling standards. This has led to a level of pay and bonuses to some highly paid bankers that has become disconnected from banks’ performance and their wider economic contribution.

Last year saw a marked increase in the level of bonuses paid by banks, with three out of four major high-street banks increasing their bonus pool in comparison with the previous year. While thousands of bank employees, along with millions of other taxpayers, are struggling by on modest salaries and face a rise in the cost of living, those at the top are benefiting from high bonuses, reinforced by the Government’s tax cuts for the top 1%.

Bonuses have remained high in the face of a series of high-profile scandals. Barclays, HSBC, RBS and Lloyds have paid £1.5 billion in compensation for mis-selling interest rate hedging products. Other recent scandals include HSBC’s role in facilitating tax avoidance, the LIBOR fixing scandal and the mis-selling of payment protection insurance. At the same time, however, many banks are failing to fulfil their core functions. Lending for businesses has fallen by £55 billion since 2010, with several Government lending schemes having little impact. Labour believes that action is needed to ensure that banks act with greater restraint, that pay mirrors performance and that bonuses can be clawed back for up to 10 years in cases where malpractice has come to light.

Following the LIBOR scandal, the Parliamentary Commission on Banking Standards examined how the culture of the banking sector should be reformed. Although this led to some important reforms, such as the introduction of a ring fence between investment and retail banking, the Government’s implementation of the recommendations has too often fallen short. The Government have also failed to implement the institutional reform we need around access to finance, such as the setting up of a proper British investment bank, which could provide vital financing to small and medium-sized businesses and start-ups.

The banking sector plays a vital role in the UK economy. As the global financial crisis showed, the dislocation of the banking sector undermines the whole economy. Financial incentives for bank employees need to be better linked to the long-term stability and performance of their banks.

--- Later in debate ---

[Helen Goodman]

My hon. Friend is absolutely right. The extortionate charges put on the most vulnerable have been a total disgrace and there is something interesting to say about why a significant proportion of people in this country are unbanked. That is generally put down to being about the high lending risk in that community. It is partly about that, but it is also about the costs of having the institutional infrastructure to reach that community. That is one area where the main high street banks have failed disastrously in this country.

[Chris Evans]

My hon. Friend might know about the basic bank account, which was introduced when I worked in a bank. It allowed people on benefits to pay in their jobseeker’s allowance. There was no credit scoring for overdrafts, credit cards or anything like that. People would pay in their benefits and they would be largely forgotten about by the banks. There would be no account management, and if those people needed to borrow, they would fall into the hands of the payday lenders. They were completely ignored. How do we ensure that banks manage these people into mainstream banking as their needs change—as they get a job, look for a house or something similar?

[Helen Goodman]

Gosh, I am not sure that I have an instant answer to that complex question. This is the kind of thing that we need to think about more. When we hear that in the middle of the financial crash bankers phoned Treasury Ministers from New York worrying about their bonuses and not about the kind of people my hon. Friend has just described, we are bound to say that there is a culture problem in this industry. I also want to say something about the problems that—[Interruption.] The hon. Member for Dover (Charlie Elphicke) needs to show a little more respect.

I want to say something about the need to provide more finance to manufacturing. One thing I am really puzzled by is what performance these bonuses are for. I have a lot of metal-bashers in my constituency and in the middle of the crash they had a lot of problems with their banks. I am sure that other hon. Members will have experienced this. They thought it was absolutely dreadful because they had to drive all the way down to Leeds, and blah-di-blah-di-blah.

The problem with that is that the assessments were being made by people with no scientific understanding and with very little understanding of industry. We are seeing phenomenally high bonuses for people who are no doubt absolutely brilliant and a whizz at the latest hedge fund hoojimaflip and at how to make four more basis points, but who are not very good at what they really need to be good at, which is understanding the financial needs of British industry. That is what we want, but that is not what we are getting. That is why the Opposition are proposing a British investment bank with regional arms and regional focus. The industrial base in the north-east is clearly different from that in London, so we need different expertise in different places. We are just not seeing that in the banks at the moment.

It is alarming that Lloyds, which is 24% owned by the taxpayer, is expected to have a bonus pool of £375 million this year. I could not understand the remarks made by the Economic Secretary. I think she said that no one at Lloyds was going to get a bonus of more than £2,000 this year, but my understanding is that the chief executive could receive more than £7 million in a three-year pay deal. I hope that the Exchequer Secretary will explain whether people will be getting £2,000, several hundred thousand pounds or millions of pounds. RBS, which is 79% owned by the taxpayer, was fined £400 million for its part in the forex fixing scandal, yet it is reported to be considering a bonus pool of around £500 million. There is a general problem with the culture of the banks and the level of bonuses being paid, but there is a specific problem with banks in which we the taxpayers have large equity stakes. Treasury Ministers have a particular responsibility to look at what is going on in those banks and to think about how they are going to control it, in our interests as shareholders as well as our interests as taxpayers.

I wonder what Ministers think about the report in the Financial Times yesterday, headlined “Rothschild eyes early bonus round to avoid possible windfall tax”. It stated:

“Rothschild, the boutique investment bank,”—

for those of us who had never heard of Rothschild—

“is considering paying its 2014 bonuses early to avoid the extra taxes Labour has vowed to introduced if it returns to power, two sources familiar with the bank’s thinking said. The deliberations show how seriously businesses are taking the prospect of Labour winning the May 7 election”.

Those people are good at assessing risk, and it is clear that they are expecting a Labour Government.

It is worth thinking about the purpose of the banking system. It is a shame that the Economic Secretary is no longer here, because I am sure that she has seen the book produced by the Church of England, “On Rock or Sand”, in which the Archbishop of Canterbury writes an extremely interesting essay about economic purpose. He says that there are three criteria against which economic institutions should be judged. The first is fairness, and we can see the problem in the banking sector in that regard. The second is generosity, but that does not mean that banks should be generous to those who have the most. The third is sustainability. Judging by what is happening at the moment, the institutions seem to be failing on all three counts. However, taxing bankers’ bonuses and rechanneling the money towards providing employment for young people would help banks to meet those criteria, and that is what we are proposing to do. I believe that that is what people in this country expect from the financial institutions.

[Charlie Elphicke (Dover) (Con)]

It is a pleasure to follow the hon. Member for Bishop Auckland (Helen Goodman), as I did last week. I hope that there will also be sufficient time to allow my hon. Friend the Member for Warrington South (David Mowat) to follow me. I shall therefore try to ensure that my remarks are more to the point than they might otherwise have been.

I have always been a strong believer in having diversity and competition in the banking system, and I share the concern expressed by many that we have an oligopoly in our system. That is not healthy; there is not enough choice or competition. We need more competition, and I personally would be quite radical and ensure that the banks were separated up to a greater extent than they are today. It is also a concern that the establishment of the banking system in this country has meant that the banks are too big to fail. We could cure that by having depositor preference, because it would then be a matter for the bondholders, who would be much more interested in ensuring that the banks behaved and did not overpay bonuses.

What will not work is Members of this House pontificating about bonuses and what the bonus levels should be; waving a magic wand and saying that they should be this, that and the other; and trying to micro-manage banking business from afar. What makes it even worse is the way the previous Government carried on and the shameless hypocrisy of the Labour party that we have heard today. Let us not forget that the forex and LIBOR scandals happened under the previous Labour Government. Our Government have sorted out the regulatory system and have been cleaning up the mess. Under the previous Government bonuses tripled in four years and £66 billion of bonuses were paid out. The Labour party wishes to forget that. Fred Goodwin became Sir Frederick Goodwin then, and honours, baubles, bonuses and bag slaps were scattered around happily in those days. Labour now wishes to forget that. Under our Government bonuses are now a fifth of what they were then.

[Chris Evans]

Does the hon. Gentleman think the Conservative party is being wise after the event? Was it not the Conservative leader, the current Prime Minister, who argued in 2007 for less red tape and less regulation for the banking industry?

[Charlie Elphicke]

The issue is not the extent of regulation, but the format of regulation and the fact that the previous Government took the Bank of England out of the picture. The one organisation that understands the prudential nature of risk management was pushed to one side. That, together with the failure to police risk, was at the heart of what went wrong with our banking system, so I completely reject the hon. Gentleman’s point.

The Opposition say, “Let’s have a bankers’ bonus tax, so we can raise some money.” Yet again, we have heard that the Opposition want to spend it, this time on

“a guaranteed paid starter job for young people who have been out of work for over a year”.

That is what they say today but that is the 12th time over that they have spent it; I hate to correct my hon. Friend the Member for Redcar (Ian Swales), who thought it was only the 10th time and had lost count. That is understandable, because previously the Opposition have spent this on: the youth jobs guarantee; reversing the VAT increase; more capital spending; reversing the child benefit savings; reversing tax credit savings; more money for the regional growth fund; cutting the deficit; turning empty shops into community centres; spending more on public services; building 25,000 new houses; and free child care. Now it is being spent on starter jobs for young people, but perhaps next week it might be spent on houses again—who knows? It just depends on the thing of the moment, does it not? That underlines the ludicrousness of the Opposition’s position: they simply cannot add up and cannot spend their various banking bonus tax ideas in any competent way at all.

Leaving that aside, the permanent bank levy introduced by this Government is expected to raise £2.9 billion in 2015-16 and then £2.8 billion each year thereafter. That is more than was raised by the one-off bonus tax introduced by the previous Government. I suspect what will happen is that the Labour party will end up with its madcap plans raising less money and the party then being in a quandary as to where to spend it, because it has committed it on multiple occasions. That goes to the heart of the massive contradictions of Labour policy making.

The one thing I want to touch on is the idea that we should have the European Union decide on the levels of pay, bonuses or indeed anything in this country. Let me gently remind the Opposition of a couple of things. First, we are an independent nation. Secondly, we have an independent currency—we are not part of the eurozone. I do not understand why the Opposition think it is a good idea to have the European Union tell us how to manage our banking system. We are competent enough as a country—goodness knows, we have run our own affairs for the past 1,000 years—to decide how we should organise our banking system, and pay, bonuses and bonus taxes in our banking system, without needing help from the European Union.

Taxation of Pensions Bill

Chris Evans Excerpts

Wednesday 29th October 2014 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

Having worked in the industry myself, I share many of the hon. Gentleman’s frustrations. Does he believe that half an hour of independent guidance is enough for people on the journey of managing a pension pot that has to last them 30 years? How does he see that relationship developing so that they make the right decisions along that 30-year journey?

[Crispin Blunt]

Obviously, the precise mechanism that ends up being set up by the FCA is immensely important. If it is as the hon. Gentleman characterises, and it does not lead people to come to a proper assessment of their situation, we will be left where we are now. Companies such as Partnership and Just Retirement, operating in the annuities industry, have been brilliantly successful because when people examine their situation it usually makes sense for them to move to such companies when they annuitise, rather than stay with their existing provider. The only problem is that people have been subject to consumer inertia and have not been aware that at that point they should be making the decision in the current market. The great thing about this liberalising reform, and the anxiety shared across the House to make sure that the guidance works, is that we will now be waking people up to the opportunities presented to them. If we have many tens of thousands of pounds in our retirement fund, a half-hour chat is probably insufficient. Many people will have hundreds of thousands of pounds available to them after a lifetime of saving into a pension fund, and it will pay them to take serious, proper, independent advice. They will need to pay for that, but it will represent serious value for money if they get proper advice. If the guidance can push people in that direction, to properly regulated and properly informed independent financial advisers, we will have properly informed consumers making proper choices.

The Financial Secretary and the Treasury will need to assure themselves that the FCA is alert to the needs of all consumers with direct-contribution pension benefits ahead of April 2015, and ensure that their delivery is closely monitored as these important reforms are made. As I said, we will not get this right first time, and whatever system is set up will need the capacity to improve as we learn how to improve the capacity of consumers to take informed decisions.

Additionally, the companies in my constituency continue to be concerned that the regulatory rules affecting a number of key changes in the Bill are still not clear. The Association of British Insurers is discussing these points with the Government and the FCA, but without clarity soon there is a risk of some customers not being able to access flexibility and there could be an uncertain environment and an uneven playing field between different types of product and providers. This is not solely the role of the FCA. It requires coherent and achievable measures from the Treasury, Her Majesty’s Revenue and Customs, the Department for Work and Pensions, the FCA and the Pensions Regulator.

For instance, the regulatory position on accessing a pension pot in one lump sum, whether through flexi-access drawdown, or an uncrystallised funds pension lump sum—I am grateful to the Financial Secretary for UFPLS. I had a go at “golden annuity uncrystallised kapital enhancement” fund, a GAUKE, which would rely on “capital” being spelled as in “Das Kapital”, which may mean it loses some of its attraction, but I guess we will have to settle for UFPLS. I am sorry that the imagination of Her Majesty’s Treasury officials was not able to produce a real GAUKE for him, to leave his impact on these highly important, liberalising measures for all time.

To return to the substantive point, the regulatory position around those two funds remains unclear, making it very difficult for providers to plan and develop requisite systems. This is despite taking a pension pot in this way being a key expectation raised as a result of the Budget reforms. Indeed, the whole regulatory regime around the uncrystallised funds pension lump sum route, which forms the basis of the Government’s pension bank account analogy, has yet to be resolved. In addition, there could be gaps in regulation between contract-based and trust-based schemes in two areas: how drawdown in trust-based schemes will be regulated, as well as protection for customers and expectations of providers if a customer wants to transfer out of a defined-benefit scheme after receiving advice not to do so.

My constituents welcomed the sensible reduction of the 55% tax charge on death, which the ABI had previously asked the Government to consider, which overtly conflicted with the wider Government policy of making pension saving more popular by giving people more options on how to use their retirement savings. However, without further clarification it creates an advantage for drawdown customers over annuity customers, which will change behaviour. To ensure that the policy is not skewed against income, tax on pension payments to a beneficiary after the customer’s death must be treated equally, whether paid through an annuity or drawdown, as income or as a lump sum.

I want to use the occasion of the Second Reading of this rather technical Bill, which in concert with the Pension Schemes Bill is a profoundly liberalising measure, to draw attention to other associated reforms that are interdependent. Our country has an obsession with investing in property, and there are vast reserves of wealth tied up in household equity. We face a growing crisis in our ability to provide decently for a rapidly growing older population. Failure to enable the equity release industry to grow in a competitive way to produce value-for-money products that look after the interests of the elderly and their families, rather than those of the estate agency industry, when we force people to realise their assets by expensively selling their homes when they do not need to do so and when they deserve stability in their lives with regard to their homes, will be critical to the well-being of every family in this country.

Last year, I led a delegation from the European equity release industry to lobby the European Parliament, the European Commission and the Council of Ministers, to seek changes in the trialogue stage of Solvency II to protect this industry. Under the leadership of my right hon. Friend the Member for Tunbridge Wells (Greg Clark), then the Paymaster General, the British team in Brussels helped to secure some useful space in the interpreting recitals to Solvency II that would help to ensure that the capitalisation demands placed on the equity release industry are significantly in the hands of national regulators. That is immensely important to this Bill, because the successful advance of the equity release industry and the successful development of freedom around pension provision go hand in hand. That relies on a sensible interpretation of the European Union’s Solvency II regime.

I am profoundly concerned that the hard-won space to enable the British equity release industry to advance, achieved by Ministers and their officials, alongside work done by the Equity Release Council, under the chairmanship of our former colleague Nigel Waterson, will, in the classic tradition of British gold-plating of European regulations and directives, be entirely undone by the implementation and regulation imposed by the FCA.

The Economic Secretary has assured me that the FCA is under thoroughly sensible and business-like leadership, and I believe that is the case, not least because last night I met the splendid Robert Taylor, who earlier this year became an excellent addition to the FCA’s senior leadership team. However, I have to say to the Financial Secretary that there are regrettable early signs, as the policy is being developed, that the overriding need to advance the equity release industry to support the reforms being implemented in the Bill, and unrealistic proposals around the matching adjustment that would apply to property as an asset, could seriously hamper the necessary growth of that industry.

If the FCA persists in its unnecessary programme of gold-plating, it will be all of us who have to pick up the bill, and it will be a profound missed opportunity for the United Kingdom, and not only for our citizens; it will be a missed opportunity for the industry to advance around the world, as many of our financial services industries have done, to the immense benefit of the people of the United Kingdom.

I joined the overwhelming tide of opinion that identified that measure as one of the most profound and welcome changes being made by this Administration. The Chancellor of the Exchequer is rightly winning the admiration of his fellow Finance Ministers for the remarkable transformation of the British economy under his leadership. That measure will be a profound part of his and his Treasury colleagues’ legacy. It remains up to them to ensure that it is delivered effectively in detail so that it can be an unalloyed adornment to their golden record.

Finance Bill

Chris Evans Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to follow the hon. Member for Cities of London and Westminster (Mark Field), who always speaks with great expertise in his field. I served on the Bill Committee—I have not missed a Finance Bill Committee since I entered the House. On the first Committee on which I served in 2010 I was full of enthusiasm and, having listened to the Minister, I am still filled with that enthusiasm as he has negotiated a thousand different ways to say no. I pay tribute to all the Members who served on that Committee.

As we approach the general election, the public are crying out for help to ease their burdens as the economy belatedly shows some green shoots of recovery. People around their kitchen tables wondering how they will pay their bills, those in the workplace who are worried about their job security, and those running a small business will judge the Bill on three tests—are taxes fair for my family and myself, do business taxes encourage growth and are they fair, and how will pensions reform—

[Mel Stride (Central Devon) (Con)]

The hon. Gentleman mentions business taxes. The shadow Minister was repeatedly pressed to say whether business taxes might rise under the next Government. We know from what the Opposition have said that business taxes could rise to 26.5%, the level that they are at in Canada. Does the hon. Gentleman share my concern that that could be a major brake on business development in the future?

[Chris Evans]

Of course I share the hon. Gentleman’s concern. I shared the concern that the very first act in the very first Budget of this Government was to put VAT up to 20%, increasing the tax burden by 2.5% for businesses all over the country. That was not exactly pro-business, but I am not here to talk about what the Tory Government have done or not done.

Let us deal with facts. Working people have seen their wages fall by £1,600 a year on average under this Government. Real wages will have fallen by 5.6% by the end of the Parliament. People feel worse off. On growth—the one test that the Tories said they would achieve—after three years of a flatlining economy, we see the economy growing by only 4.6%. The Chancellor does not talk about his forecast that the economy would grow by 9.2% in 2010. Our present rate of growth is far slower than that of America at 6.6% or Germany at 5.7%. GDP growth this year is still expected to be lower than the independent Office for Budget Responsibility forecast in 2010.

On borrowing, on which the Conservatives attacked the Labour Government, the present Government promised to balance the books by 2015, but borrowing will be £75 billion that year. Over this Parliament borrowing is forecast to be £190 billion more than planned at the time of the first spending review. National debt as a percentage of GDP is not forecast to start falling until 2016-17, breaking one of the Government’s own fiscal rules.

All the headlines following the Budget were about pension reform. Yes, annuities need to be reformed, and I support increased flexibility for people in retirement and reform of the pension market so that people get a better deal. However, the Labour party has consistently called for reforms to the annuities market and a cap on pension fund charges over the past three years. The Government have failed to reform the private pensions market to stop people being ripped off and to create a system that savers can trust. The Government are failing to prevent savers from being ripped off by delaying bringing in a cap on charges. This is costing savers up to £230,000. The Government are failing to make tax relief on pensions fair, with 15% of all relief—£4 billion—going to the richest 1% of taxpayers.

When we talk about the reform of pension markets and the ending of annuities, I believe we should set three tests. The first is the advice test. Is there robust advice for people providing for their retirement, with measures to prevent mis-selling? Forget the patronising “buy a Lamborghini”. I do not believe the people of Britain are so naive as to go out and buy a Lamborghini. As a former financial adviser, I am talking about good advice. With the reform of the annuities market there will be new products—products that we have not thought of before, such as bonds, investment trusts and all sorts of vehicles that people can invest in. Those will be complicated and people will need advice, but that will not be achieved by 15 minutes of guidance, where advisers cannot sell.

The second test is fairness. The new system must be fair, with those on middle and low incomes still being able to access products that give them the certainty they want in retirement. The billions we spend on pension tax relief must not benefit only those at the very top.

The third test is cost. The Government should ensure that this does not result in extra costs to the state, either through social care or through pensioners falling back on means-tested benefits, such as housing benefit. The Treasury must publish an analysis of the risks it considers when costing this policy. I was deeply concerned when the Minister said this afternoon that this change, which is the biggest ever to the pensions market, is still to be worked out and that a consultation on advice is still running. For those facing this change, advice is vital.

I talked for little short of half an hour yesterday on the other major change introduced in the Bill: exchanging employment rights for company shares. I will try to break it down into two fundamental arguments. First, if an employer has an employee they are suspicious of, why would they give them shares in the company? Equally, if a company wants to trade shares for rights, does that mean it trusts the employee? Will they be hard-working and industrious for that company? Secondly, if a company is going to dismiss an employee, why would it give them shares in the company anyway? Surely share save schemes should be used to reward employees for hard, industrious work, but that is not happening. We still need reform.

We have talked about a report and analysis. Even though the statistics now show that after a 33-week consultation only five of the 200 companies that responded said that they were interested in taking up the scheme, the Government still say that it is far too early to even think about a report.

As we bring to a conclusion our consideration of the Finance Bill, which I am sure all of us who served on the Bill Committee are excited about, the one question we have to ask ourselves is this: is it fair to the people of Britain? Based on the statistics, it is not. I will therefore be joining my colleagues in the Lobby tonight and voting against the Bill.