The Economy and Work

Craig Tracey Excerpts

Thursday 26th May 2016 Commons Chamber

[Craig Tracey (North Warwickshire) (Con)]

Thank you, Madam Deputy Speaker. Many of the measures in the Gracious Speech will bring benefits to North Warwickshire and Bedworth, but, in the short time available to me today, I wish to focus on the digital economy Bill. The Bill is vital, not just in my constituency, where there are large pockets of rural communities, but across the whole of the UK, if we are to maintain our position as the fifth largest global economy.

I want Britain to be at the forefront of innovation and to be a nation where technology continually transforms the economy and society, but for that we need to up our efforts in creating a world-class digital infrastructure and delivering on our manifesto commitment to roll out universal broadband. We have made great strides since 2010, when fewer than half of UK properties had access to superfast broadband. Now, 90% of households enjoy it, and that figure is set to increase to 95% by 2017. Many of the benefits are clear: better connectivity brings more choice, more opportunities and greater competition; new markets for businesses are opened up, not just within the UK or the confines of the EU, but globally and in emerging markets; and consumers are more empowered, finding it easier to access a wider range of goods and get access to their finances. But there are other, less recognised benefits that greater connectivity brings: it can help to keep families in touch, including our military based overseas; it can ease pressure on our health services; and it can combat other social issues, such as loneliness, particularly in isolated rural areas. I have long championed the case for high-speed broadband. A great example of these benefits in operation is Prezzybox, an online retail company in the village of Austrey which operates from a farm building. It is wholly reliant on the internet, but has now been able to grow to employ 25 local people, thanks to the connectivity that has been delivered.

I have two observations, however, that I would like to share with Ministers. First, there needs to be better communication with local communities, both before and after the installation of new services. I have been contacted by many constituents who were not aware of the roll-out plans in place for their area and the fact that they were soon to be connected in any case. Once the service is activated, it is vital that the next steps are strongly communicated to those who now have access. I have lost count of the number of constituents who think that once the upgraded broadband is available their speeds will automatically increase. They do not realise that they have to activate a superfast service or often that they can pick from a range of providers able to offer them that service.

My second point relates to the not spots—the 5% who by 2017 will still not have access to superfast broadband and whose number the National Farmers Union puts at 1.2 million households, and the 10% who will still not have access to mobile phone coverage. Many of these affected areas will be rural and farming communities, and I know of several areas in North Warwickshire that offer little or no coverage, and slow download speeds, often of dial-up proportions. We must do everything we can to ensure that these communities are connected as quickly as possible, so as not to be left behind by the digital revolution.

It is clear that the demand is there, so what I am urging the Government to do is act decisively and look at all the available options. In all likelihood, these remaining properties are going to be the most difficult to reach so, in the best of entrepreneurial British spirit, we may need to be creative and innovative. There are opportunities to look at alternative providers who can create separate infrastructure projects. There is the option of providing greater access to satellite provision. Importantly, we need to encourage community projects, for which there is currently no public sector funding.

In conclusion, many things in this one nation Queen’s speech will bring great benefit as they are implemented, not just to my constituents, but to the UK as a whole, The continued focus of this Government on a digital economy can leave a legacy for generations to come.

Oral Answers to Questions

Craig Tracey Excerpts

Tuesday 1st March 2016 Commons Chamber

[Mr Osborne]

We are working to get those arrangements right. They are clearly complex, because of cross-border companies that will pay a single levy rate, but we are having good discussions with the Scottish Government. I think that, as with the agreement on the fiscal charter, we can work together for the benefit of the United Kingdom.

[Craig Tracey (North Warwickshire) (Con)]

I welcome the fact that my constituents have been given more control over their finances, thanks to changes implemented by the Government. Can the Minister advise me on what steps have been taken to ensure that the regulation applied to small high street financial advisers and insurance brokers is both fair and proportionate, given the important service that they provide?

[The Economic Secretary to the Treasury (Harriett Baldwin)]

I thank my hon. Friend for raising this point. We have launched something called the financial advice market review, which will be reporting around the time of the Budget. We will be looking at how to make financial advice more affordable and more available, and also at how to get the right kind of regulatory balance for smaller firms.

Financial Conduct Authority

Craig Tracey Excerpts

Monday 1st February 2016 Commons Chamber

[Craig Tracey (North Warwickshire) (Con)]

I am grateful to you, Mr Deputy Speaker, for the opportunity to speak in the debate. I congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on securing the debate.

I declare an interest: before coming here, following in the footsteps of my parents who ran their own insurance and financial advice business for 45 years, I ran my own regulated insurance brokerage for nearly 20 years. It is fair to say that I have seen first hand the evolution and revolution of the industry over quite a sustained period of time. I fear I might be one of the only Members tonight to stand in support of a particular sector of the industry.

I could talk about many issues, but I want to use my experience and understanding of this area to focus on the impact of regulation on the insurance industry, specifically the insurance broking sector. There is an understanding of the need for, and acceptance of, fair regulation by the insurance industry as a whole, but at the forefront of any such measures should always be the principle to protect the consumer not just from financial risk, but from professional negligence. To achieve that, a regulator should work in partnership with the profession to understand the service it provides and then to create an effective model that targets the key concerns. That regulatory solution should be delivered in a cost-effective and proportionate way that does not unjustly burden businesses of differing sizes and incomes.

Unfortunately, it has not been my experience, or that of many representatives of the insurance industry I regularly speak with, that that is currently the case with the FCA. General insurance brokers contribute 1% of GDP to the UK economy, arranging 54% of all general insurance and 78% of all commercial insurance business. In 2013, the British Insurance Brokers’ Association commissioned research, carried out by London Economics, which found that the UK broking market is the most expensive on the planet in terms of the direct cost of regulation. The UK’s cost is double that of its next global competitor, Singapore, and more than four times the cost of other major European markets with which it is supposed to be on a level playing field. Our regulators’ approach to gold-plating has seen the UK become the butt of European jokes, with the recently retired European Commission head of insurance referring to UK gold-plating by the FCA as “Sauce Anglaise”.

The FCA recently increased the minimum fee for the A19 general insurance intermediary fee block by 8.4%, with the largest UK brokers privately indicating that they pay “comfortably” over £1 million a year in fees to the regulator. Worryingly, in its response to BIBA following the rise, the FCA indicated that, if the increase had been in line with the annual funding requirement, the rise could have been even greater—46% over four years.

The FCA recently divulged the breakdown of the A19 fee block, which showed that £16.4 million, or 56.9%, of that block is used for “supervision”. However, 75% of BIBA members are small firms with fewer than 10 members of staff and would not be subject to regular visits or in-depth inspections. Therefore, the proportion of the fee block that is used for supervision appears distorted and suggests that UK insurance brokers are paying for supervision of other, non-insurance broker entities. Furthermore, £1.8 million, or 6.3%, is used to pay for “markets”, principally the UK Listing Authority. That is not an area of regulation that general insurance brokers would face, which further suggests they are cross-subsidising others’ regulation.

In addition to the direct cost of regulation, there are also substantial indirect costs, which include the need to employ either in-house staff or consultants to ensure that the numerous regulations, thematic reviews, market studies, consultation papers and ad hoc requests for information are managed.

[Graham Stuart]

I wonder whether there has been a reduction in small companies. Heavy regulation often favours larger organisations, so it cuts out the entrepreneurial and small business in a market town in my constituency above a shop, while it favours the large companies, which then gouge the public for higher fees. Does my hon. Friend agree?

[Craig Tracey]

My hon. Friend is absolutely right, and that was indeed my experience. I was coming on to say how many firms have disappeared since regulation was introduced. To put it into context, in my final years as a broker, 80% of my time was spent working on compliance rather than being productive in my business. That was a small brokerage providing a valuable high street presence to people who needed access to somebody they knew and trusted. A clear case can be made that firms that abide by the rules should not be the ones that pay for the misbehaviours and increased regulation caused by other firms.

Another area that requires review is the Financial Services Compensation Scheme, which provides the compensation fund of last resort for customers of authorised financial services firms and rightly protects consumers of companies that have ceased trading. Currently, insurance brokers are included in the same funding pot as credit intermediaries that mis-sold payment protection insurance cover, several of which have failed, resulting in claims on the FSCS. That has led to an increase in the levy that insurance brokers face. Indeed, insurance brokers contribute 72% of that particular funding pot, but have made only 2% of the claims made upon it—a gross distortion that the industry feels is both unfair and difficult to budget for owing to its volatile and unpredictable nature. I appreciate that the FCA is currently reviewing the funding structure of the FSCS, but ask the Minister to look into how that can be fair, equitable and manageable to the broking sector.

It would be prudent to note at this point that insurance brokers do not pose the same risks as banks or insurers, owing to the fact they do not hold client money and generally have risk-transfer agreements in place. With better understanding and a working relationship with the profession, especially with small firms, I believe the FCA would conclude that the insurance broking sector is low risk and would be compelled to regulate it as such, leaving its own resources free to pursue those financial services that pose the greatest threats to consumers and the UK economy.

To conclude, the insurance industry as a whole is a vital part of our economy, which is rightly proud of its long-standing tradition of being the best in the world, but the current regulatory system is potentially putting that in jeopardy. I do not believe it to be a coincidence that the number of brokers registered with the FCA fell by 32% between 2006 and 2014. The knock-on effect of that is the great danger of limiting the choice of our consumers—the very consumers whom the Financial Services Authority set out to protect—at a time when access to good, independent financial advice is needed more than ever.

As I have said, the insurance industry is not afraid of fair and proportionate regulation, and I appreciate that the FCA has moved a long way from its predecessor, but there is so much more that it can do to achieve its purpose while still promoting a thriving insurance industry. It can do that by concentrating its resources effectively on protecting the consumer and enhancing the reputation of the industry both at home and overseas, while also securing the long-term crucial and positive impact of the broking sector on the United Kingdom economy.

Oral Answers to Questions

Craig Tracey Excerpts

Tuesday 1st December 2015 Commons Chamber

[Greg Hands]

The UK Guarantees scheme has already been approved for eight projects, including the Mersey Gateway bridge, the northern line extension, and Hinkley Point C nuclear power station. It has not always been necessary, and a further 18 projects worth almost £9 billion have been supported without the need for a guarantee.

[Craig Tracey (North Warwickshire) (Con)]

T7. As chair of the all-party parliamentary group on women and enterprise, I welcome the fact that more women than ever are working in Britain today. One of the barriers to forming a cohesive forward strategy for creating more female business owners is a lack of reliable data on how many there currently are. Will my hon. Friend meet me to discuss that issue and consider possible solutions such as the collection of data on HMRC returns?

[The Economic Secretary to the Treasury (Harriett Baldwin)]

I congratulate my hon. Friend on his appointment to the APPG, and I look forward to working closely with him to provide the data that he seeks.