Financial Services and Markets Bill

Lord Grayling Excerpts

Consideration of Lords message
Monday 26th June 2023 Commons Chamber

[Andrew Griffith]

I thank my right hon. Friend for his work and the work of his Committee, and for being so kind as to suggest that we may be anticipating his conclusions—not that I had prior knowledge of them. The important thing, a point made well by my right hon. Friend the Member for Epsom and Ewell, is that we get on and do this from a practical perspective. We have committed to convening a series of roundtables during the remainder of 2023, which will form the basis of a taskforce to drive forward the work of that important review and support the development of clear due diligence standards.

[Chris Grayling (Epsom and Ewell) (Con)]

I am grateful for how my hon. Friend the Minister has picked up the agenda and moved forward, following pressure both in this House and in the other place. The key to the taskforce that he is establishing is that it delivers not just a direction of travel but tangible recommendations on monitoring a system of due diligence, in a form that is actionable by the Government and by Parliament. Will he give that mandate to those he puts in to the taskforce for the job that he expects them to do?

[Andrew Griffith]

I would love if it “Action” were my middle name. Certainly, my right hon. Friend has that commitment from me and from Baroness Penn, who leads on green finance. The whole purpose of the taskforce is to drive forward action and support the development of clear due diligence standards. That is the important unlocking that we seek. We commit to doing that against a genuinely ambitious timeframe of just nine months following the first relevant regulations under the Environment Act 2021 being made. Those are important, as they are the starting point, but we will not sit idly by; once the Bill receives Royal Assent, that work can happen quickly. I pay tribute to him for his consistent work in this area and for raising the matter throughout these debates, and I hope he recognises the Government’s dedication to tackling illegal deforestation through our amendment.

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[Peter Grant]

As has been said throughout the passage of the Bill, our chief concern has always been that too many provisions in it do not go far enough. I am pleased to say that the other place has tightened up some aspects of the Bill. It is disappointing that this evening the Government seem determined to oppose some amendments that could have addressed more of our concerns and, in at least one case, seem determined to make an amendment that makes things even worse.

In the interests of brevity, I will not go through all the Lords amendments that the Government are happy to accept; I ask Members to take those as read. The first Government proposal that I have some concern about is their motion to disagree with Lords amendment 7. I appreciate that they have tabled alternative amendments, which they might think say pretty much the same thing or better, but Lords amendment 7 explicitly refers to targets set by any of the UK’s national Parliaments. They are not mentioned anywhere in the Government’s amendment (a) in lieu. I hope the Minister can explain why the Government are opposed to giving targets set by the devolved nations of this Union of equals the same status as those set in this place, because some of those targets and activities will relate to responsibilities that are explicitly devolved to one or more of the other nations of the United Kingdom. It does not seem very equal that some Parliaments can have their targets effectively regulated and others cannot.

I do not have any issue with Government amendments (b) and (c) in lieu of Lords amendment 7, although it seems strange that they have been tabled as alternatives, because they are entirely compatible with it. In fact, the Government could quite easily have tabled them in the Lords at the time.

As was said by the Opposition spokesperson, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), Lords amendment 10 is a good amendment. I do not understand why the Government want to take it out. Are they against financial inclusion? If they think that financial inclusion is a good idea but that this amendment is not best way to pursue it, I would remind them that they have had months to come up with a better amendment. “Take it back, don’t agree it just now, and we promise to bring something back in the near future.” However, we have been promised effective measures on financial inclusion since before I was a Member of this place, but it has not happened yet, and the problem is getting worse all the time.

To answer the right hon. Member for South Northamptonshire (Dame Andrea Leadsom), it is all very well for the Government to find ways to make post offices the last bank in town, but they are being shut left, right and centre as well, so there is no long-term protection for access to cash, especially in our poorest and most deprived communities, of which I represent more than my fair share. It is no comfort to them to be told, “The bank has closed, but you can use the post office,” if, as I have seen happen literally at the same time, the Post Office is saying, “We’re going shut the post office, but you can still use the bank.” That does not give any protection or comfort whatsoever.

Lords Amendment 36, on illegal deforestation and so on, is also a good amendment that we would have supported. We are willing to accept the Government alternative as an improvement in some regards. The biggest concern we have—it is one on which we would very much want the opportunity to give the House the chance to express its will this evening—is about one of the crazy ways in which this place deals with things, especially once legislation has been back and forth between here and the Lords. If this House wanted to disagree with Lords amendment 38, as I think quite a few of us will, we will not be allowed to do that unless the debate finishes within three hours. The ability of the democratically elected House of Commons to scrutinise and perhaps overturn a decision taken by the undemocratic, unelected House of Lords along the corridor therefore depends on how many people want to speak, how long they want to speak for, and how fast they want to talk.

Lords amendment 38 is about politically exposed persons and the way they are risk-assessed in relation to money laundering. It makes a very broad assumption about the amount of due diligence that needs to be exercised to prevent money laundering in the case of a politically exposed person from the UK—someone who, in the words of the amendment, is

“entrusted with prominent public functions by the United Kingdom”.

The assumption is that they are always less of a potential money laundering risk, as are their family and “close associates”, whatever that means. That is far too broad and sweeping an assumption.

I do not have an issue with any regulation being worded in a way that is proportionate to the risk, and I can understand the attraction of being able to designate some individuals as less of a risk than others, but this exemption is far too sweeping. What do we mean by “entrusted with prominent public functions”? As we all know, we have had very recent examples of people who were entrusted with the most prominent public function of all—the office of Prime Minister—turning out to be totally untrustworthy. How do we define a “close associate”? Would, for example, Evgeny Lebedev have been regarded as low risk simply because he could accurately have been described as a close associate of the then Prime Minister, who himself has turned out, as the House now agrees, to have been untrustworthy? When is a close associate not a close associate?

[Chris Grayling]

I want to probe a little on this. Would the hon. Gentleman classify somebody who, for example, gave a parking space to a camper van as a close associate?

[Hon. Members]

Aah!

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[Peter Grant]

I stand corrected, Mr Deputy Speaker. Unless I said more than I intended to, I think I was asking a question; I was not expressing an opinion.

Let us not forget that over the last 10 to 15 years a huge amount of dirty money from Russia and other former Soviet republics has been laundered into the United Kingdom by people who, at least financially and in terms of their donations, were very closely associated indeed with leading politicians. It has to be said that, had Putin not carried out a second invasion of Ukraine last year—if he had been satisfied with the original illegal activity in Ukraine 2014—that money would probably still be coming in, because the Government only moved in a big way on dirty Russian money after the second invasion of Ukraine. They did not do anything, or anything like enough, in 2014 or afterwards, so we have to ask whether they are really serious about cutting off this dirty Russian money at source and handing it back to the people that it was originally stolen from.

I thought it was quite interesting that the Minister said that it was a bad idea to agree Lords amendment 10, to improve financial inclusion, at such a late stage, when the Government are happy to accept Lords amendment 38, to weaken our defences against money laundering, at the same late stage. That may give an indication of what the priorities might be of people who wield a lot of influence over the Government—maybe not the Minister’s own priorities.

As I have said, we in the SNP continue to support the Bill. Our concerns on almost all counts have been in areas that did not go far enough, such as the accountability of the regulators—the Financial Conduct Authority, for example. My issue is that the regulators have not been held properly to account for the myriad times they have failed to regulate and have simply not protected the public and investors. Other authorities have not protected pensioners. We can look at Blackmore Bond, London Capital and Finance, Premier FX, the British Steel pension scheme, the AEA Technology pension scheme, and hundreds of other financial scandals that were allowed to happen—or certainly allowed to happen as badly as they did—because the regulators did not do the job they were set up to do. They should be held accountable to this place and to the public for their failures to regulate. I am concerned that if we tie them up with too much regulation about how they regulate, and if they are worried about being dragged into Parliament or politically overruled when they do regulate, there is a danger that they will start to lose their independence from political interference, without which no regulator on these islands can ever be effective.

It is disappointing that the Government seem determined to reject some Lords amendments that would have made the Bill better, and to push through at least one that will significantly weaken it. It would be sad indeed if this elected Chamber were not allowed to express its will on whether amendment 38 makes the Bill better or worse. I for one believe that it makes it worse, and I hope we will be able to divide the House on it tonight.

[Chris Grayling]

I find it slightly ironic that I am following an SNP spokesman demanding more action on financial fraud, but there is always a place for a bit of amusement in the House. I will focus my remarks on the issue of deforestation.

[Peter Grant]

I am absolutely confident that the Scottish National party Westminster group will submit clean audited accounts to the Electoral Commission before the deadline. Is the right hon. Gentleman aware that the Conservative party parliamentary group will not?

[Chris Grayling]

I think I may have touched a slightly raw nerve there, Mr Deputy Speaker.

First, I am personally grateful to the Minister, who has been extremely responsive on an issue that is crucially important, not just to the future of this country but the future of our planet. The loss of forest cover around the world—cleared for the growing of soy, the planting of palm oil plantations and beef cattle ranching—has been ecologically disastrous for the planet. Of course, in many of those areas, it has not created sustained agricultural land, but land that has been used for a few years and is now lying semi-derelict.

One of the great challenges for us as a planet is to restore some of the land that has been lost and replant some of the forest that has been lost, but we cannot tackle this problem unless we bring it to a halt now, and in many parts of the world, there are still real issues with illegal deforestation to produce those products. As a Government, we have already taken steps that I think are pathfinders: the introduction of the Environment Act 2021 has set a path for dealing with forest risk products, particularly in the supply chain and our retailers. That was a positive step that I think will make a real difference, and I look forward to seeing that process completed through the secondary legislation that identifies the individual products we are tackling. Through his amendments, the Minister has clearly set that as a starting point for financial services as well.

However, there is now a broadening consensus about the need to extend the due diligence provisions that we have introduced for the retail sector to financial services. The financial sector is lending money to, investing in, and doing bond issues for international businesses that have sometimes done a good job of monitoring their supply chains, but other times simply do not do enough to protect the products they are sourcing from the risk of illegal deforestation. The Minister may reference the Global Resource Initiative work led by Sir Ian Cheshire, who has been a great champion of this issue, and the Minister was very right to have been willing to pick up the initiatives set out in that report.

It is also something that is increasingly backed by the financial sector itself. I do not believe there is any contradiction between a successful financial services sector and proper responsibility in key areas such as deforestation, and we now see that the GRI report and the direction of travel set out in Lords amendment 7 is attracting support from institutions, including well-known ones such as Aviva, that amount to nearly £3 trillion of funds under management. The support is there, and I am grateful to the Minister for picking up that initiative and being willing to run with it. My request of him is not simply that we get on with it; we need to ensure that what he has announced today does not end up as just another review. Governments have review after review—not all lead to action. I take the Minister at his word that he will make this a process of action, rather than simply a further stage of looking at the issues again.

Financial Services and Markets Bill

Lord Grayling Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[John McDonnell]

I entirely agree with what the hon. Member for West Worcestershire (Harriett Baldwin) has said, and I apologise for not signing her new clause; I wish I had.

I will be very brief, Madam Deputy Speaker. This is an appeal more than anything else. I am concerned about the way in which the Bill will undermine the constraints on commodity market speculation that were introduced during the financial crash of 2007-08. I was in the House before and during that crash. People remember that it was a banking crash based on the sub-prime housing market, but what is less discussed is what then happened with regard to commodity speculation. The funding shifted from housing to commodity and, in particular, food speculation, and we saw massive food price increases as a result. The price of wheat rose by 168% during that period, and the price of rice doubled. This was largely not to do with supply, which at that time was relatively stable; it was to do with commodity speculation.

We supported, on a cross-party basis, reforms to regulate the market. We gave the FCA the task of setting position limits. We also opened up the whole commodity market to greater transparency. I accept that there has been a watering-down of those regulations since then, particularly by the Trump Administration but also by signals from Ministers in the UK Government. That weakened regulation and weakened culture have opened the door to what is happening now, which is billions shifting into food commodity speculation. This is fuelling the cost of living crisis. It is not just about energy; it is now also about food prices, some of which have gone up by as much as 16%.

Of course, we cannot ignore Ukraine, climate change or the breakdown of supply chains with regard to covid, but another severe factor that is influencing this is commodity market volatility. Speculation is creating price rises, and this is making fortunes for individual speculators, but I have to say that the banks themselves are also making a killing at the moment.

I say this not as some kind of Cassandra—I was the first to raise Northern Rock in this Chamber, although others have claimed that too—but economists on both sides of the Atlantic are saying that this could be a systemic crisis unless we get to grips with it and accept that we need to strengthen, not weaken, regulation. One of the reasons I am concerned is that the Lighthouse report suggests that a lot of commodity investment is taking place by pension funds themselves. That could have an effect not only on prices but on the stability of people’s pensions.

The Government will say, “Don’t worry, we’re not scrapping the limits. We’re handing over control to the trading floors.” That is madness in itself. The trading floors have an interest in attracting traders, and the lesson of history is that they cannot be relied upon to regulate themselves. They do not worry about the interests of the whole economy. That is the job of the Government and Parliament. Also, I see no rationale for scrapping the transparency element of MiFID II. I would love to know what possible justification there could be for undermining access to more transparent information, because the markets are already opaque and this would make them worse.

A final comment from me—you will note that I am well under time, Madam Deputy Speaker—is one that I have made before. The best writer on the banking crash of 1929-30 was J. K. Galbraith, who said that, yes, we would put institutions in place to protect against a repeat of that kind of crash but one of the most significant things would be memory; people would remember what had happened. Unfortunately, I fear that we are now replicating the circumstances of 2007-08 and undermining the very regulations that we as a House put in place to protect against the food speculation, the price increases and, I have to say, the starvation that occurred as a result of that crisis. I never want to see that again. I think this is a mistake by the Government, and I hope that they will think again. I also think we might be able to bring forward some amendments in the other House that will help the Government to move along a more constructive path than the one they are on at the moment.

[Chris Grayling (Epsom and Ewell) (Con)]

I rise to focus on new clause 24, tabled in my name and with the support of a number of Members on both sides of the House. It focuses on one of the great challenges of the moment, which is how we reverse the loss of habitats and forests around the world. Deforestation in South America, Asia and, to an increasing degree, in the northern parts of the world is a real crisis for our planet. It is appropriate that we are having this debate today, the day on which the biodiversity summit begins in Montreal. It is my hope that that summit will lead to a new international agreement on tackling habitat and biodiversity loss around the world.

New clause 24 focuses on taking the battle against illegal deforestation to the next step. This Government and this House took the first important step last year in the passage of the Environment Act 2021, which introduces a requirement for those dealing in potential forest risk products in the United Kingdom to have a due diligence process in place to ensure that they are not sourcing their products from areas of illegally deforested land. That was a substantial and very positive step, and I am pleased to see that the European Union has taken a similar step this week and is perhaps going slightly further in tackling the issue of forest risk products.

But a substantial area that remains untouched both here and in many countries around the world is the question of financial services investing, whether through equities, loans or bonds, in companies that source forest-risk products. We know from the work of organisations such as Global Witness that, over the years, there have been far too many examples of banks knowingly, or sometimes unknowingly, financing the activities of companies that purchase directly from those who are illegally deforesting areas of the Amazon, for example, for beef production or soya production.

We need to extend the work we have already done on forest-risk products, and those who directly deal in them, to the financial services sector and the banks that fund companies that have the potential to participate directly or indirectly, knowingly or unknowingly, in illegal deforestation.

I hope the Government will take this on board, and I am grateful to the shadow Minister, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), for her words of support. New clause 24 would replicate almost exactly what this House has already approved in the Environment Act 2021, translating it into a duty on the financial services sector to carry out similar due diligence to ensure that its work does not support illegal deforestation.

The reality is that these financial services businesses already do due diligence. No major institution simply lends or invests in a business without doing very careful due diligence on where it is putting its money, on the likely return on that investment and on the likely risks of that investment. New clause 24 would not ask them to do something wholly different from what they are already doing; it would simply require them to extend their due diligence into this area, which most institutions, at a senior level, would say is vital to all of us.

[Anthony Browne]

My right hon. Friend is making an incredibly important point about an issue I also massively care about, and I totally support the ambition to get some form of regulation in this space. When I was environment editor of The Observer and The Times, I often wrote about deforestation. There is a real problem with doing due diligence on supply chains, as the loggers in Brazil log illegally but tell their intermediaries that they log legally, so the intermediaries say they are logging legally, and so on. That is all quite difficult to trace. If there is not a robust due diligence system, and many people have struggled on that, my fear is that financial services companies will end up not backing any wood product companies at all, as even the legitimate ones would be seen as a risk.

[Chris Grayling]

My hon. Friend makes an important point. What makes it possible for big organisations to track their supply chains is the presence of Earth observation data, which many supermarkets now use to understand where they are sourcing from. Interestingly, it is a central part of this week’s proposal by the European Union. The data is available, but it is complicated. I recently had a meeting with a major institution that financially supports companies in Brazil, and it said it is incredibly difficult to track, all the way down the supply chain, where products are coming from. Well, it may be incredibly difficult, but it still has to be done.

New clause 24 would place a duty on financial institutions, as we did with retailers, to carry out proper due diligence on their investments, to understand and to be absolutely certain that the companies they deal with have due diligence processes in place themselves, so they know from where they are buying beef, soya or palm oil and so they work properly to ensure they deliver products from sustainable sources in a responsible way.

We hear warm words coming from the executive suites of our major financial institutions all the time about their commitment to sustainability, to net zero and to being responsible citizens. Sometimes they do it, sometimes they do not. There might be the will in head office, but sometimes a local branch does not deliver. New clause 24 would make it a clear duty on those institutions to do due diligence to make sure they know where products are coming from and so they know where investments are being made. This country has been a leader, and new clause 24 would be one further step in dealing with the blight of deforestation, which affects everyone’s future.

[Siobhain McDonagh]

I rise to support new clause 7, which stands in my name and those of dozens of right hon. and hon. Members from all corners of this House. The amendment is simple: it proposes that the Treasury must not only make provision to guarantee a minimum level of cash access, but ensure that this access is free. Why? Because surely it cannot be right in 2022 that almost a quarter of our cash machines charge people to access their own money.

Greening the Financial System

Lord Grayling Excerpts

Wednesday 30th November 2022 Westminster Hall

[Olivia Blake (Sheffield, Hallam) (Lab)]

I beg to move,

That this House has considered the matter of greening the financial system.

It is a pleasure to serve under your chairship, Mr Bone. Before I begin, I would like to thank the numerous organisations, especially ShareAction and the WWF, that offered advice and briefing in the run-up to this debate, which is on quite a technical subject.

This is a very important area of debate. Not only do we face the twin climate and nature crises as possibly the greatest existential challenge of our era, but to meet them we will have to engage every part of economy and society, especially our financial system. Globally, the volume of privately invested financial assets is expected to reach $140.4 trillion by 2025, a 250% growth in less than 20 years. In the UK alone, pension assets amount to almost £3 trillion. Across the globe, investment in pensions constitutes half of all the money in the world.

An estimated £32 trillion of investment is required to decarbonise the global economy. In the UK, private investment in carbon-cutting activities such as home insulation and electric vehicle charging points needs to grow by an extra £140 billion over the next five years to reach our current net zero goals. It is therefore not only right but essential to mobilise these vast global and national resources to tackle the climate and nature emergencies; however, our finance system is not serving the interests of people or planet. Just 100 of the richest companies are responsible for over 70% of all global emissions. The world’s three largest asset managers have a combined £300 billion invested in fossil fuels, including money from private savings and pensions. In the five years since the Paris agreement, the world’s 60 largest banks have financed fossil fuel projects to the tune of $3.8 trillion.

Britain is a financial giant and the biggest net exporter of financial services in the world. Our weight in the global financial system means we have the influence to reshape it for the better, but we remain part of the problem. If the City of London were a country, the emissions it finances would make it the ninth largest polluter in the world. Between 2016 and 2021, UK banks HSBC and Barclays provided $107.44 billion to the top 50 companies expanding upstream oil and gas.

So far, efforts to change the system, such as through the Government’s green finance strategy and new benchmarks such as the TCFD—Task Force on Climate-related Financial Disclosures—recommendations, have emphasised greater reporting, transparency and information. Initiatives have often been sector-led. However, while they are necessary, they are certainly not sufficient. We also need action and regulation, not only to shift financial flows away from carbon-intensive areas and towards climate-friendly investment, but to ensure that financial institutions play their own role in tackling the systemic problems in the sector.

[Chris Grayling (Epsom and Ewell) (Con)]

I am grateful to the hon. Lady for giving way and congratulate her on securing the debate. Does she agree that a very important part of the issue to be resolved is the impact of financial investment in countries and organisations involved in deforestation, and that it is important for the City of London and our financial services sector to face the same kind of due diligence requirements that the Government rightly put in place for retailers in the Environment Act 2021, in terms of forest risk products? I encourage the Minister to consider that as an important next step in our battle against the loss of ecologically important forests around the world.

[Olivia Blake]

I thank the right hon. Gentleman for that intervention, and I completely agree: deforestation is a massive issue, and finance plays a huge role in it.

As I was saying, we need financial institutions to play their own role in tackling the systemic problems in the sector, alongside the overarching role. The Financial Services and Markets Bill, which is due back in the House next week, was an opportunity to do that, but the Bill has sent the wrong message. Take the priorities that the Bill sets out for regulators: that they should aim to enhance the competitiveness of the sector, but should only “have regard to” the Government’s net zero target.

That undermines the Government’s green finance strategy, which has two objectives:

“To align private sector financial flows with clean, environmentally sustainable and resilient growth…and to strengthen the competitiveness of the UK financial sector.”

A principle does not have the same force as a statutory aim. The Bill, therefore, represents a significant downgrading of the first target of the ambition set out in the green finance strategy.

The Bill was also an opportunity to move more rapidly on instituting mandatory net zero transition plans for financial institutions, but they are so far missing from the legislation. Plans are important, because they move us away from simply reporting and sharing information, to concrete climate action. We should also be doing much more on investor stewardship and fiduciary duty.

We need not only to encourage and incentivise fossil-fuel divestment, but to ensure that investors are engaging with and making demands of companies on climate action. That means raising capital requirements on fossil-fuel investments and raising the bar on stewardship, so that climate and nature form critical points of engagement with companies. That should also mean expanding the concept of fiduciary duty. The purpose of a pension is to provide a standard of living to the beneficiary when they retire. We need to shift the concept of fiduciary duty away from gaining returns at any cost, to thinking about the kind of world beneficiaries will retire to, or the world in which their children will grow up. Pension investors have a duty to their customers to ensure that the world is not wracked by flooding, flash fires, famine and freak weather, all driven by the climate emergency.

It is clear that the Financial Services and Markets Bill does not go far enough; it may even exacerbate some of the results of the climate crisis. Global heating has made our food supply even more insecure. In dumping the MiFID II regulations, the Bill makes speculation on food even more likely, driving up prices and worsening the consequences of the climate emergency.

However, the issue is not just regulation: so much needs to be done to create markets for green investment. In the green finance strategy, the Government set out their approach to leveraging private investment in five key areas: power, homes, transport, environmental land management and business energy use. On power, we have seen an effective ban on onshore wind, blocking of oven-ready new solar and nothing on tidal. On homes, since the Government “cut the green crap”—I am quoting—in 2013, home insulation has flatlined.

On transport, unless we are talking about building more roads for cars, the system is ravaged by underinvestment. In my constituency, people can wait more than an hour for a bus. On environmental land management, the Government appear to have scrapped or delayed environmental and land management schemes, and are now umming and aahing about their replacement. On business energy use, I repeatedly hear of small and medium-sized enterprises that want to do much more about their emissions, but do not feel they have the support to monitor them and cannot afford the upgrades to do anything about them.

I have long argued for a green new deal, and it is obvious from what I have just said that we are desperately in need of one. One way to kick-start that would be to re-examine the mandates of public financial institutions, such as the British Business Bank, offering discounted financial products to SMEs to make green investment in their business.

Energy (oil and gas) profits levy

Lord Grayling Excerpts

Tuesday 22nd November 2022 Commons Chamber

[Tulip Siddiq]

I welcome the hon. Member’s intervention. If he listens carefully to my speech and pays careful attention, he will hear all our economic plans laid out, so please pay attention.

The Minister kept talking about how the Government have no choice and how they have made difficult decisions, but the truth is that there is always a choice, and if the Labour party were in government, we would be making fairer choices and better choices that would suit our constituents.

[Chris Grayling (Epsom and Ewell) (Con)]

If I am not mistaken, we have just increased substantially the national living wage, increased benefits in line with inflation and increased pensions in line with inflation, while, unfortunately and regrettably, putting up taxes on the wealthy. Exactly what does the hon. Lady not like about that?

[Tulip Siddiq]

The things we do not like about this Budget are the fact that the Government will still not impose a proper windfall tax, which I am coming to, will still not abolish non-dom status and will still not listen to us about private schools. If the right hon. Gentleman pays close attention and listens to my speech, he will learn about the things we do not like in his autumn statement.

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[Chris Grayling (Epsom and Ewell) (Con)]

Madam Deputy Speaker, you would never imagine from listening to Labour Members that we had just been through the biggest public health emergency in a century, the biggest European war for three quarters of a century and the biggest energy crisis since the 1970s. That is not a light task for any Government to deal with. Yes, of course, as the Prime Minister said, some mistakes were made in the handling of things back in September, but the reality is that this is a challenge facing Governments across the western world. Despite all the rhetoric that I hear from the Labour party, there is much in this country to feel that we can benefit from—it is not universally a bad news story. None the less, like other countries across the western world, we face enormous challenges in turning things round.

I absolutely agree with my right hon. Friend the Member for North West Hampshire (Kit Malthouse) about the need to drive growth. He was absolutely right to look back over the discussions of recent years about inflation and whether it had gone away. A simple lesson of economics is that the moment somebody says that something will never come back is the moment we need to start worrying that it will come straight back. Inflation is here and we have to deal with it. It has been driven by a huge increase in energy costs, the destabilisation caused by the war in Ukraine, the collapse in global supply chains in the wake of the pandemic and the continued lockdowns in China, which have created real issues for businesses here and internationally.

I want to focus on three things. One of them is very much a UK problem, which we have to deal with as a matter of urgency: the number of people who have left our labour force in the past few years. This country is much more seriously affected than other nations. We have to get to grips with the problem. The explanations for it are multifarious—it is not simply about long covid or backlogs in the NHS—but if we do not solve it, it will be a continuing issue.

I call on Conservative Front Benchers to look back at what we did in 2010. As the Labour party has conveniently forgotten, we inherited unemployment at nearly 3 million and rising, and real difficulties in our labour market. The programmes we put in place made a real difference to the long-term unemployed and to people who were sick, off work and claiming employment and support allowance: they helped them, step by step, back into the labour market. Over the years, they made a real difference to the situation that the long-term unemployed in this country face.

The reality is that the longer someone is out of the workplace, the more difficult it is to get back in. People need support and guidance. I was very encouraged by what the Chancellor said about increasing Access to Work coaching, but we need to go much further. We need to learn from what was done in the Work programme and other programmes and look at how we can put support back in place for the long-term unemployed. If we do not do something about it, they will become further and further away from the workforce.

[Stephen Crabb]

My right hon. Friend makes an important point. Does he agree that one of the most worrying aspects of the trend that he highlights is the increase in younger people being signed off as long-term sick, often with mental health issues? They are not being treated effectively by our NHS and are not getting effective employment support either, so they are at the greatest risk of spending the rest of their life cut off from the labour market.

[Chris Grayling]

Absolutely—that is a crucial issue. We need to start working with those people to help them back into a workplace environment. They are better off there: if people are out of work, they tend to have poorer health, live less long and have mental health problems. My right hon. Friend is absolutely right.

We must now put back some of the conditionality that, for understandable reasons, was taken away during the pandemic. There cannot be an expectation that people will simply stay on out-of-work benefits indefinitely. Our welfare state should be a ladder up which people climb, not a place in which people live.

My second point is about energy. There is no doubt that we have to do more to drive energy independence in this country. I have listened to Labour and SNP Members: they seem to think it is better for this country to ship gas all around the world in great tankers, with much higher emissions as a result, than to generate it from the sources available in this country. We need UK gas and we should develop it. The tax measures that have been put in place to encourage investment in the North sea are the right thing to do.

It cannot just be about fossil fuels, however. It is also right to develop nuclear. I completely disagree with the SNP on the issue: renewables are an essential part of our future, but the reality is that the wind does not always blow and the sun does not always shine. We need a core capacity to generate electricity in this country, and nuclear will be a crucial part of that. We also need to drive more progress on the renewables front. The most obvious missing piece is to ask why we do not have an obligation in this country, as a matter of rule, to put solar panels on the roofs of new houses and commercial buildings. I say to Government Front Benchers that that should be central to our policy. I have supported it for a long time, and I know other Conservative Members support it. We really need to get on with it.

Thirdly, a project that commands support on both sides of the House and that must drive future growth is the expansion of Heathrow airport. When we voted on it in this House four years ago, it had a majority of nearly 300. There was support from Labour and from the SNP—not the party, but individual Members. There was support from Northern Ireland, from Wales and from across England. It is a project that would lead to better regional connectivity, helping the levelling-up agenda, and would strengthen our trade ties around the world. It is essential. It is a project that has somewhat lost its way because of the pandemic’s impact on aviation, and there are clearly issues to address around aviation emissions, but this is not a project that will happen overnight. It will take a decade to bring to fruition, and by the time we get into the 2030s we will have short-haul planes coming on to the market that will be driven by new generation fuels such as hydrogen and sustainable aviation fuel.

We cannot simply say to future generations, “We are going to can this project. We are not going invest in our main gateway to the world; we are going to leave this to one side.” Those on the Labour Benches, the Northern Irish and Scottish Benches and the Conservative Benches all voted for it, and there is a duty on all of us to throw our political weight behind the project to get it back on the agenda and moving forwards. We need to take a symbolic step that would send a message to the world that this country is focused on growth. I say again to those on my Front Bench: please bring the Heathrow expansion project firmly back on to the Government’s agenda. This country needs it. We have needed to take difficult decisions. It has been essential in the short term to take decisions that are going to be difficult and unpopular, but now we have to focus. My right hon. Friend the Chancellor is absolutely right about the Budget in the spring. We need to focus on getting the economy growing again.

Economic Update

Lord Grayling Excerpts

Monday 17th October 2022 Commons Chamber

[Jeremy Hunt]

The right hon. Gentleman will know, because I have said it many times today, that I am not making firm commitments on any individual elements of tax and spending, but I hope he is reassured by the fact that I have been very clear about the values through which we will take those decisions.

[Chris Grayling (Epsom and Ewell) (Con)]

I congratulate my right hon. Friend: he has hit the ground running in his job. These are difficult decisions, but they are the correct decisions right now. We all aspire to tax cuts in the future, but he is right to say that we have to have the money to pay for them. May I ask him, as he prepares for 31 October, to look in detail at how we should address what is the most—in my view—deep-rooted problem that the country faces and has faced for decades, which is our current account deficit? We will not truly get rid of these issues until we restore a better balance in our national finances, and I ask him to make that a priority.

[Jeremy Hunt]

I thank my right hon. Friend for his question. I agree: ultimately, it is not sustainable to have a permanent current account deficit and that is something that we need to address.

Financial Services and Markets Bill

Lord Grayling Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Richard Fuller]

The hon. Lady is right to point to the importance of the objectives that are set for the regulators in financial services, but surely she will accept that the most fundamental principle for each of them should be the stability of financial services in the United Kingdom, and we pay regard to that in the Bill. We have added, as she pointed out, some focus on global competition and on achieving growth across the United Kingdom. Those are the fundamental demands that the British people have of the financial services sector. However, it is important that we have regard to the issues that the hon. Lady has mentioned, and I am sure we will discuss them, and the priority that should be attached to them, in more detail in Committee.

[Chris Grayling (Epsom and Ewell) (Con)]

May I pursue the point about environmental issues? I take my hon. Friend’s point about the need to secure the stability of the sector—that is not in dispute—but one of the things we have not done in this country is to take steps to place a duty on financial institutions not to invest in businesses that support deforestation around the world. Our combat against deforestation has run through a range of policies that the Government have pursued, and it should be continued. I will be asking my hon. Friend, as we go through this process—ahead of, possibly, tabling amendments on Report—to consider placing such a duty on the financial services sector, so that before it invests internationally, it at least asks the question “Will this lead to deforestation?”

[Richard Fuller]

I am grateful to my right hon. Friend for that addition to the debate. It is clear that there is interest in the House in debating the priority that is given to these particular issues, and I look forward to hearing the contributions of my right hon. Friend—and those of Opposition Members—in Committee, to establish whether we have got these matters right.

Budget Resolutions

Lord Grayling Excerpts

Wednesday 27th October 2021 Commons Chamber

[Chris Grayling (Epsom and Ewell) (Con)]

It is a pleasure to follow the right hon. Member for Newcastle upon Tyne East (Mr Brown). He is right that many of us share common ambitions across the House—ambitions for COP26, and to bring better jobs to his constituents and constituents across much of the country in areas where such jobs have not necessarily been in the past.

I was Employment Minister back in 2010, in the wake of the last economic crisis. It is therefore with a particular sense of pride—I emphasise, pride—that I listened to today’s Budget and I congratulate the Chancellor. Back in 2010, there were 2.7 million people unemployed; the numbers were rising, the pressures were upward and the challenges were enormous. I listened to economists saying, “This is going to get worse and worse.” The achievement of the Conservative party, over a decade in government, of which I am proudest is the transformation of employment prospects for the people of this country. As we went into the pandemic, we were as close as we have been in modern times to full employment. After some tough economic and spending decisions, and some tough challenges met after 2010, we collectively—through smart management of the economy and the right employment programmes to support the long-term unemployed—delivered a transformation in job prospects, particularly of young people in the United Kingdom.

It was with huge trepidation, at the start of the pandemic, that I saw that work at risk, with forecasts of 3 or 4 million people unemployed and a whole generation’s prospects disappearing. I have to say that the Chancellor stepped up to the plate. It was not easy—he was right in saying that these have not been easy decisions for a Conservative Government, but they were the right thing to do. After a large amount of money spent on the employment support programme, the furlough scheme and the loan support for businesses, we are coming out of this pandemic with unemployment at 5.4%. Yes, that is higher than it was, but there are not many in the House who, in March 2020, contemplating the prospects for the labour market, would not have been pleased and surprised to see unemployment at that level coming out of the pandemic, and falling, with 1 million vacancies in the economy and decent prospects for people. The Chancellor, single-handedly—and we have to bear in mind that he had only been in the job for about half an hour when this all started—delivered programmes that have made a massive difference to this country. I hope he will always be proud of that.

But we do now have 1 million vacancies in this country. We have businesses with skills shortages, against all our expectations. We will not solve that through mass immigration. One reason that the haulage sector is lacking people is that there was so much cheap migration of both migrant workers and trucks from eastern Europe that drove down prices and left people thinking, “This is not an industry to be part of—I am going to retire, or go elsewhere.” The solution in that industry will be about paying more, but the solution in our country to these labour shortages will be about automation and productivity.

We have taken too much advantage of a steady flow of unskilled or semi-skilled labour over a long period of time. I remember talking a few years ago to the logistics director of a big retailer, who said to me, “If we leave the European Union, where am I going to get my warehouse staff from?”, to which my answer was, “Why do you need warehouse staff—surely you are automating your warehouse?” He said, “Actually we do not need to automate our warehouse because we have access to low-cost staff.” That has to change. I welcome the measures taken by the Chancellor last year and this year to drive business investment. Much of the solution to the skills shortage in our society—although not all; there are areas where it is a real problem—will come through a drive on productivity, innovation and automation. That is the way forward and that is the challenge that not just Government but business in this country has to grasp right now and deliver on, because that will be as big a part of transforming our economy and transforming our prospects as anything the Government do.

The Chancellor was also right to stress the benefits of leaving the European Union. We have only just started to scrape the surface of the benefits that can be obtained. I look forward to seeing a process of sensible deregulation. I am not in favour of the abolition of all regulation—it is there to protect people, and rightly so—but there are things we can do in areas like artificial intelligence, and financial services and the City, to make the UK more competitive. The job of getting that done has only just started. There is work to be done. I look forward to seeing, I hope, in the months ahead more announcements from the Treasury and from other Departments about what we will do in future to maximise the potential of Britain outside the European Union.

I have two final points, briefly, because I know we are short on time. First, I welcome the return to 0.7% because we must help countries around the world to deal with the challenges they face, particularly around energy and climate change, but also in something that I feel passionately about—the protection of the natural world and habitats. Deforestation happens for a number of reasons, but one of them is simply that people cut down trees to make charcoal to cook their food. I want to see more support provided for the creation of proper sources of renewable energy in the developing world so that that element of deforestation no longer happens. There is a huge amount that we need to do in tackling climate change, but looking after the natural world is one very important part of that.

My final point is about what the Chancellor said at the end of his speech. As Conservatives, we believe in low taxation and leaving people to make their own choices. He set a direction today. My message to the Treasury is that I—and, I am pretty sure, an awful lot of people on the Conservative Benches—will be holding the Chancellor’s feet to the fire to deliver on that, because we cannot plan a future, as Conservatives, as a big-state, high-tax party. We are a small-state, free-enterprise party. We know that that is what leads to prosperity and we all want prosperity for the people of this country, particularly those who are struggling and those on low pay. This needs to be an equal, levelled-up society, and we will not do that with a big state and high taxes.

[Several hon. Members rose—]

Oral Answers to Questions

Lord Grayling Excerpts

Tuesday 22nd June 2021 Commons Chamber

[Sarah Atherton (Wrexham) (Con)]

What steps his Department is taking to support the financial services sector following the end of the transition period.

[Chris Grayling (Epsom and Ewell) (Con)]

What steps he is taking with Cabinet colleagues to secure an agreement with the EU on financial services.

--- Later in debate ---

[John Glen]

I am very happy to agree with my hon. Friend. I experienced that myself with my hon. Friend the Member for North Wiltshire (James Gray). The parliamentary export programme is an excellent way of getting that ambition to export out across the country, and it is just another example of this Government’s commitment to grow exports. My hon. Friend the Member for Wrexham (Sarah Atherton) may also be interested to know that I shall be visiting Cardiff tomorrow to meet the first cohort of FinTech Wales’s FinTech Foundry, a new accelerator programme that will support firms as they seek to build their footprint.

[Chris Grayling]

My hon. Friend knows of my concern about the protectionist attitude towards financial services that the European Union has shown over the past few months, and the risks to the City that result from it. We have President Macron hosting people from Wall Street next week, and we have the unlocking of travel in the European Union, which will help the financial services sector there. I hope that the Chancellor and the Minister will do everything they can to encourage ministerial colleagues to do the same here, but will the Minister take whatever responsible steps are necessary in modifying our regulations to ensure that the City and our financial services sector have a strong, competitive future regardless of the behaviour of the European Union?

[John Glen]

I thank my right hon. Friend for his representations on this matter, and I heartily agree with him. We are promoting the international role of the sector and developing ambitious trade and regulatory relationships with other jurisdictions. We keep all these matters under review. We have taken on board the work of the taskforce on innovation, growth and regulatory reform, and just after Question Time, the Chancellor and I will be meeting representatives of banks as we seek to work with them to make those interventions that our financial services sector needs.

Oral Answers to Questions

Lord Grayling Excerpts

Tuesday 26th January 2021 Commons Chamber

[Rishi Sunak]

I will have to go and check the exact figures, if the hon. Lady will forgive me for not knowing the specific paragraph that she refers to. In general HMRC is providing easements over the next few months as we transition to a new set of trading relationships, but she can rest assured that we are always mindful of the impact on revenue and intend fully—very much so—to have a robust set of mechanisms in place. As she will know, there is a phased response for getting to that point between now and July, and hopefully we can work with her to make sure that that path is as seamless as possible.

[Chris Grayling (Epsom and Ewell) (Con) [V]]

The Chancellor has been widely praised for his work in recent months, but he has also been honest about difficult decisions ahead. I have had constituents raise concerns with me about capital gains tax. He will know that the current rates were set to optimise revenue from the tax. I know he cannot comment on individual measures, but can I seek his assurance that he will not take any steps to raise taxes without doing a proper assessment of the Laffer curve principle that higher rates do not always lead to higher revenues?

[The Financial Secretary to the Treasury (Jesse Norman)]

I thank my right hon. Friend for his question, which tempts me into indiscretion. He may be aware of this, but HMRC publishes annual estimates to illustrate the impact of changes in tax rates in a document sexily entitled “Direct effects of illustrative tax changes”. It is worth saying, however, that these estimates are themselves uncertain, because of different levels of behavioural response to tax changes, the potential for wider macroeconomic impacts and, of course, the interaction with other measures.

Economic Update

Lord Grayling Excerpts

Monday 11th January 2021 Commons Chamber

[Rishi Sunak]

I am incredibly sorry to hear about the example of the hon. Gentleman’s constituent, which will be mirrored by many others up and down the country. As I said in my statement, the restrictions we have had to put in place have taken a significant economic toll on the country. Hundreds of thousands of people have lost their jobs, and businesses are suffering. We have tried to protect as many as possible. It is not possible to protect all of them, but with the support that we have put in place, I am confident that we are helping many businesses, protecting many people’s incomes and saving many people’s jobs. I hope that his constituent’s business and many others can bounce back strongly once we are through this.

[Chris Grayling (Epsom and Ewell) (Con) [V]]

I very much welcome the Chancellor’s substantial grant support to smaller hospitality businesses in my constituency, which will at least give them a chance of seeing through this difficult period. I also represent a constituency with a large number of small travel businesses that depend on the revival of the travel industry and, in particular, the aviation sector. As he prepares for the Budget, will he look at any way he can to help that industry and that sector get back on their feet as restrictions are lifted, hopefully in the spring?

[Rishi Sunak]

My right hon. Friend is absolutely right to highlight the importance of the travel sector to our economy. I was pleased to work with him to help to put in place a test and release policy for international travel, which was helping, and to provide business rates support to our many airports—I know that up to £8 million per airport has been of value. I will continue to listen to him and others to see what we can do to support the economy as we recover out of this crisis.