Financial Services Reform
Debate between Emma Reynolds and Lindsay Hoyle(6 days, 14 hours ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
With permission, Mr Speaker, I shall update the House on the content of the Leeds reforms.
The reforms encompass the Government’s financial services growth and competitiveness strategy, which is our 10-year plan for financial services. This plan will make the UK the global centre of choice for financial services investment by 2035, with all parts of the country benefiting from its success, building on our thriving regional financial services clusters around the country.
The financial services sector is one of this country’s largest and most productive sectors. It is worth 9% of total economic output and provides 1.2 million jobs across the UK’s nations and regions. Our strategy will unleash the potential of the sector to catalyse growth, enterprise and opportunity in the rest of the economy. That will mean that working people will get better returns on their savings, that home ownership will be unlocked for tens of thousands more people, and that more businesses will get access to the capital that they need to grow.
The Secretary of State for Business and Trade recently presented to this House our modern industrial strategy in which financial services was identified as one of the key eight growth driving sectors on which the Government will focus. This builds on the successes of our first year in office, which I am proud to highlight: the fastest growth in the G7 in the first quarter of this year; four interest rate cuts; faster wage growth in the past 10 months than the previous 10 years of the last Government; the FTSE100 yesterday at a record high; and business confidence at its highest in nine years. [Interruption.] I will not take lectures from the Conservatives, who presided over inflation at 11% and debt rising year after year.
Our vision is of an active state working in partnership with business, and the Leeds reforms were co-designed with industry. The Chancellor and I undertook extensive engagement in its preparation, and I was pleased to see financial services firms across the country and the Confederation of Business Industry welcome our reforms publicly. The reforms reintroduce informed risk taking into our financial services system to deliver prosperity for working people. We will always ensure that financial stability is a prerequisite for economic growth, and we continue to uphold our commitment to the high international standards that underpin the resilience of the global financial system.
I will briefly set out the details of our package to the House. First, the Government are delivering a competitive regulatory environment to attract investment and drive growth. We have set out plans to deliver the most significant reform to the Financial Ombudsman Service since its inception, ensuring that it no longer acts as a quasi-regulator and returning it to its original purpose as an independent, impartial dispute resolution service for complaints between consumers and financial services firms.
We are also streamlining the senior managers and certification regime to reduce the burdens imposed on firms by 50% and to reduce approval times. We have tasked the Financial Conduct Authority to report back by September on how it plans to address concerns about the application of the consumer duty for firms primarily engaged in wholesale activity.
Secondly, our reforms unlock capital for investment into our infrastructure and businesses. We are doing this by supporting the Bank of England’s changes to MREL—the minimum requirement for own funds and eligible liabilities—and by confirming our approach to Basel 3.1, implementing lower capital requirements for domestically focused banks from January 2027 while preserving flexibility in our approach for international banks to ensure that the UK remains competitive and aligned with international standards.
We are also committing to meaningful reform to ringfencing, while maintaining the aspects of the regime that support financial stability and protect customer deposits. We welcome the Financial Policy Committee’s review of the overall bank capital levels needed for UK financial stability and its decision to ease its loan-to-income restriction on mortgage lending. I am delighted that this decision will enable up to 36,000 additional first-time buyers to access mortgages in the first year.
Thirdly, we are making the UK the location of choice for fintechs to start up, scale and list, and we want the wider financial services sector to embrace innovation too. The FCA and the Prudential Regulation Authority will launch a scale-up unit to ensure that fast-growing businesses have the support they need to grow. The regulators will also introduce a new streamlined authorisation regime that will enable innovative firms to start operating while they await full approval. We are modernising and future-proofing the regulatory framework for payments and e-money, including stablecoin, and we are establishing a new model to deliver next-generation retail payments infrastructure.
Fourthly, we are seizing opportunities in key areas of UK leadership, from speciality insurance and asset management to sustainable finance. Our insurance sector has been world-leading for centuries, and we are committed to staying at the front of the pack by creating a new captive insurance framework and holding an industry showcase event later this year to sell the sector globally. We are also future-proofing the regulatory regime for our asset management sector, which is the second largest in the world, and we will publish draft legislation on that early next year.
The UK is already a leading global hub for sustainable finance. We have set out plans for a stable regulatory framework, and we are giving industry clarity by deciding not to pursue a green taxonomy and by focusing instead on ambitious policies that support investors to invest in the transition. I look forward to continuing to work with Lord Alok Sharma and the Transition Finance Council, which he chairs, to make the UK the leading international hub for raising transition finance.
Fifthly, we want to go further in building a new retail investment culture and boosting our capital markets’ competitiveness. We have taken great strides to reform our pensions system, led by the Parliamentary Secretary to the Treasury, my hon. Friend the Member for Swansea West (Torsten Bell), so that people can have better savings in retirement. We want savers to get the best returns on their savings. For too many their money is not working hard enough, and for too long advice on investments has been the preserve of only the wealthiest in society. To address this, the Chancellor has announced the biggest reform of the financial advice and guidance landscape in more than a decade and the introduction of targeted support in time for the new tax year. The Chancellor and I welcome the steps being taken by industry to help consumers engage with investing. I particularly thank Chris Cummings of the Investment Association for the work he is leading on that.
We are also considering reforming the individual savings account system to ensure better outcomes for both savers and the UK economy. We are allowing long-term asset funds to be held in stocks and shares ISAs next year. This will allow more individuals to invest in assets that will support the UK’s success while seeing better returns on their savings. To ensure that our capital markets support British business, we are announcing a new listings taskforce with the Office for Investment to attract world-leading businesses towards initial public offering in the UK. We are publishing a wholesale financial markets digital strategy to harness innovation as well as our ambitious design for the digital gilt instrument pilot.
Finally, we are taking steps to enhance the UK’s leadership in financial services, ensuring that the UK remains the most open and connected financial centre in the world. We will launch a concierge service—the Office for Investment: Financial Services—to attract international financial services firms to invest in the UK and grow their business. We are further facilitating cross-border activity with the publication of guidance on our overseas recognition regimes and a memorandum of understanding with UK regulators, a copy of which I will place in the Library in both Houses.
Through these steps, the Government have placed financial services at the heart of our growth mission. Our 10-year strategy is ambitious, includes the most far-reaching reforms to financial services for a decade, and will unleash the fantastic potential of our world-leading financial services sector. We are backing British businesses, unlocking home ownership for tens of thousands of people across the country, supporting savers to get better returns, and investing in our shared future. I commend this statement to the House.
Emma Reynolds
Well, half of that was all right, I suppose. I do want to start constructively and thank the hon. Member for his welcome for some of the reforms. I will answer some of his specific questions before I come to the wider points.
On the Financial Ombudsman Service, we have set out in great detail what we will do. As he will be aware, some of the changes require primary legislation. We are proposing an absolute time limit of 10 years, but with discretion for the FCA to give longer periods in the case of products with a longer lifetime. I cannot comment on the ongoing car finance issue, which as he knows is working its way through the courts.
The hon. Member talked about the regulators’ different objectives. We have been very clear with the regulators that we expect them to embed their secondary objective to facilitate economic growth and competitiveness while obviously complying with their other objectives. He will see that in the remit letters that the Chancellor sent to the regulators at the last Mansion House speech last November.
On ISAs, I welcome what the hon. Member said about long-term asset funds, which we think will unlock great opportunities for savers. We continue to consider reform to ISAs. We would like to ensure that more people have the opportunity and confidence to invest, which is why we hope that targeted support, which will be introduced by firms by the end of this tax year—we have worked at pace on this—will really shift the dial and give people that confidence to invest.
I think the hon. Member said he was in favour of what we are doing on MREL, and I know that he agreed with the Bank Resolution (Recapitalisation) Act, which we put through the House and is coming into force today. I thank him for his support on that.
On ringfencing, we have detailed which areas we will look at. I am happy to write to him further on that, but one area, for example, is sharing resources across the ringfenced and non-ringfenced parts of banks. We want to ensure that we strike the right balance between growth and stability.
I turn to the hon. Member’s points about economic stability. I will take no lessons from the Conservatives—I hate to say it. We had inflation at 11%, people paying extremely high mortgage rates and debt rising year after year. The only thing that was stable under their Government was wages, which were flatlining.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I thank the Minister for the statement and look forward to the Treasury Committee talking to—or interrogating—her, and indeed the Chancellor, about the detail as it emerges. Since the election, one of the things the Government have been talking about, leading on from the previous Government, is the secondary remit letters to the regulators about encouraging growth as a secondary objective. Can she tell us when the Government will be clear about their own appetite for risk in the sector so that both firms and the regulators know how far the Government will be prepared to go? She and I know from our experience in this place that if too many consumers suffer under any changes, this place is where that will be raised, and then there is a tendency for the Government to turn around and say, “Well, you went too far.” For the sake of the sector, the regulator and our constituents, will she tell us—or will she tell us when she can—where the Government’s line on risk will fall?
Oral Answers to Questions
Debate between Emma Reynolds and Lindsay Hoyle(3 weeks ago)
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Emma Reynolds
As my hon. Friend will know, we launched funding of £15.6 billion for transport for city regions in his constituency. I am pleased that this Government recognise the potential of places like the one he represents. We are going to unlock that regional growth across the north and in other parts of the country.
Mr Speaker
I will just make the point again that we are a long way from Eastleigh; I do not understand how the questions are grouped in this way. Other people listed on the Order Paper are being left behind and are missing out as a result.
The Economic Secretary to the Treasury (Emma Reynolds)
We understand the importance of in-person banking, in my hon. Friend’s constituency and elsewhere, which is why we secured a commitment from the industry to roll out 350 banking hubs across the United Kingdom. I am leading the work on a financial inclusion strategy, which we will publish later in the year and which emphasises the importance of access to banking, and I am always happy to meet my hon. Friend.
Oral Answers to Questions
Debate between Emma Reynolds and Lindsay Hoyle(2 months ago)
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Emma Reynolds
As I said in my previous answer, we have secured the commitment of the industry to open 350 banking hubs by the end of this Parliament. The FCA keeps the access to cash rules under review. As legislated for under the last Government, it has the power to make rules to ensure that there is access to cash across the country.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
Yesterday, there was a lot of coverage of the Chancellor’s comments about the ISA limit. She pledged to keep it at £20,000 but did not specify how much within that would be cash and how much would be investments. Can the Minister reassure me that she is seriously considering the impact on the mortgage-lending market of changing the cash ISA limit?
Oral Answers to Questions
Debate between Emma Reynolds and Lindsay Hoyle(3 months, 2 weeks ago)
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Emma Reynolds
Nice try. In terms of north-east growth, I have already said that we are working very closely with the Mayor of the North East combined authority. I suggest that the hon. Gentleman asks questions about roads relevant to his part of the country at Transport questions.
Mr Speaker
I now call the Minister to answer Alistair Carmichael’s question on the potential impact of changes to agricultural property relief and business property relief on farmers, which was omitted in error from earlier versions of the Order Paper.
Emma Reynolds
The Chancellor delivered the biggest ever settlement for Scotland in October 2024, and I think the answer is “thank you”.
Mark Garnier (Wyre Forest) (Con)
There is a great deal of speculation about the future of the cash individual savings account. As we know, it is an important savings mechanism for many savers across the country, all of whom will be dismayed at the loss of a significant cash savings opportunity. Just as importantly, cutting cash ISAs will deprive building societies of important funds for their balance sheets, reducing the amount of capital available for the residential mortgage market. This point has been raised with me by the mutual societies. Given that the loss of the cash ISA would have a profound effect on mutuals’ ability to raise debt capital, what research have the Government undertaken to establish the extent of the damage that such a measure might inflict on the residential mortgage market, which is not just important for all our constituents, but crucial for the 1.5 million new homes that the Government propose building?
Oral Answers to Questions
Debate between Emma Reynolds and Lindsay Hoyle(4 months, 2 weeks ago)
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Emma Reynolds
I could not agree with one of my predecessors more. The right hon. Gentleman is absolutely correct. It is a great scheme and now that we are expanding it, we will take that opportunity to promote it better.
Emma Reynolds
We are committed to promoting savings and investment, as I said in an earlier answer. One measure we are looking at is the Financial Conduct Authority’s review of the advice guidance boundary. As I said in a previous answer, I do not want it just to be the 8% of people who can afford financial advice who reap the rewards of investing in our economy. We keep all taxes under review.
Mark Garnier (Wyre Forest) (Con)
The City of London has been a leader of innovation in the world of finance and savings for a few hundred years now, and it has been successful because it has always seized opportunities and innovation when presented. In that spirit, we are pleased that the Chancellor in her Mansion House speech embraced the concept of securities tokenisation, but we now find that the catalyst for this innovation in the UK—a pilot for the digital gilt instrument known as DIGIT—has found itself in a two-year black hole. Innovation is not something that can hang around for two years, so will the Minister give assurances that she will do everything she can to deliver DIGIT as soon as possible?
Oral Answers to Questions
Debate between Emma Reynolds and Lindsay Hoyle(7 months ago)
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Emma Reynolds
We will not reconsider that decision, because as a result of the £22 billion black hole that we inherited from the Conservative party, we have had to take tough decisions in a very tight fiscal environment. However, my hon. Friend has given me the opportunity to remind people that they have until Saturday to make a pension credit claim, which can be backdated and will passport them to winter fuel payments and other related benefits.
The Parliamentary Under-Secretary of State for Work and Pensions (Emma Reynolds)
I place on record my thanks to the 160 local authorities that have worked with the Department for Work and Pensions to raise awareness of applying for pension credit, and also to the various charities around the country that have worked with us. The number of people claiming pension credit has doubled—a record number—and we are processing those claims at pace.
Social Security Advisory Committee: Winter Fuel Payment
Debate between Emma Reynolds and Lindsay Hoyle(8 months, 1 week ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Emma Reynolds)
We welcome the letter from the chair of the Social Security Advisory Committee. We were hoping to respond to the letter on the day of the Budget. Regrettably, there has been an unexpected further delay, and we are due to issue the response this week. However, my officials met the committee in August to discuss the regulations, prior to the committee’s formal scrutiny in early September.
I want to explain briefly why it is important to invoke the urgency procedure in this case. We needed to make the necessary Exchequer savings in the current financial year, as the regulations needed to come into force on 16 September. The previous Government left us with a £22 billion black hole, with Treasury reserves spent three times over. The day-to-day departmental spending set out by the previous Government in their spring Budget was not even close to reality. It is now up to us to clear up the mess of the previous Government, so we had to take some difficult decisions, such as means-testing the winter fuel payment, but we remain determined to do everything possible to support the poorest pensioners.
We have taken immediate action to increase the take-up of pension credit, working with charities and local authorities and through a campaign in print and broadcast media. The Government have written to more than 12 million pensioners about the changes to means-testing the winter fuel payment. We have also written to 120,000 pensioners on housing benefit, who could be entitled to pension credit, to encourage them to claim. We have extended the household support fund until March 2026. Thanks to our steadfast commitment to the triple lock, more than 12 million pensioners will see their state pension rise by up to £470 next year, and up to £1,900 over the course of this Parliament. The warm home discount, which we heard about a minute ago, is worth £150 off energy bills for low-income households. The warm homes plan will in the longer term insulate 5 million more homes.
By taking these difficult decisions, we were able to provide a cash injection of £22.6 billion to the NHS budget, which is the largest real-terms growth in day-to-day NHS spending—outside of covid—since 2010. That will bring down waiting times for people across the country, including many pensioners. We are taking the responsible and difficult decisions to clear up the mess of the previous Government, to fix the foundations of our economy and rebuild our public services.
Helen Whately
Thank you, Mr Speaker, for granting this urgent question.
This Government made a choice to take away the winter fuel payment from 10 million pensioners this winter and to rely on the notoriously under-claimed pension credit as a system of means-testing it. That choice will make life harder for pensioners across the country. It will see 750,000 of the poorest pensioners miss out on much-needed help with the cost of heating, and according to the Labour party’s own research, it could lead to 4,000 additional deaths this winter. The Government know that. That is why they have not done an impact assessment. Perhaps it is why, after seven weeks, they still have not responded to the concerns of their own advisory committee.
The committee wrote the Secretary of State a letter containing its concerns about how the policy will affect the poorest people. It said that 70% of disabled pensioners will miss out on their payment this winter, and it suggested expanding the eligibility for winter fuel payments beyond pension credit because the committee knows that the Government’s savings are based on a third of the poorest pensioners missing out. In direct contrast to the Government, the committee said that
“a more detailed assessment is urgently required”,
as colleagues from all parts of the House—including Labour Members—charities and pensioner groups across the country have also said.
Here we are, seven weeks later, and the Secretary of State is yet to even respond to the advisory committee. In fact, she is not even here to answer this urgent question. I ask the Minister: will the Government now, after seven weeks, respond to their own advisory committee? Will they now, after seven weeks, publish a full impact assessment for everyone to see? Does she accept that her Government have got this wrong? Does she recognise that they have negligently underestimated how many people will fall through the cracks? I suspect that deep down she is worried, as I am, about pensioners who cannot afford to heat their homes. I am sure her Secretary of State has been lobbying the Chancellor behind the scenes—perhaps that is where she is right now, instead of being here. Will the hon. Lady go back to her Chancellor one more time and try to make her think again?
Emma Reynolds
I am proud of the last Labour Government’s record of lifting over a million pensioners out of poverty. We do expect to make savings of about £1.4 billion this year through means-testing the winter fuel payment. That is not an insignificant proportion of the £5.5 billion of savings that the Chancellor set out on 29 July.
Steve Darling (Torbay) (LD)
Many of us in the Chamber accept that the new Government inherited a financial mess from the old Government. It is a pity that that is being balanced on the backs of pensioners. The Minister quite rightly highlighted how many of us have been championing our residents to claim pension credit, as I am in Torbay. She talked of unexpected delays. Many of us, including her own Department, face unexpected delays. In the light of that, will she extend the deadline for pensioners to claim the allowance beyond 21 December?
Oral Answers to Questions
Debate between Emma Reynolds and Lindsay Hoyle(8 months, 1 week ago)
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Emma Reynolds
I thank the hon. Lady for her question. We want people who are eligible to get support, and we have redeployed 500 staff to process those claims. I can assure her that that is something that we are focused on.
Danny Kruger (East Wiltshire) (Con)
The withdrawal of the winter fuel payment from 10 million households, including 70% of disabled pensioners, is a huge change, as is using pension credit to distribute the benefit to the minority of people who will still get it, yet the Government have rushed this change through without giving their own statutory advisory committee the chance to properly scrutinise it. Ministers have not even responded to the chair of the committee, who wrote to them several weeks ago with suggestions on how to mitigate the effect of the policy. On top of that, they have failed to provide a full impact assessment to show what the effect on poverty would be. Will they finally produce a full impact assessment of this policy, and when will the Minister respond to the chair of the advisory committee?
Steve Darling (Torbay) (LD)
On Armistice Day, it is important that we as a Chamber reflect on the Royal British Legion and its “Credit their Service” campaign. This is a campaign to ensure that when benefits are calculated, military compensation is disregarded. In the light of this, will the Secretary of State give serious consideration to disregarding military compensation when calculating pension credit?
Oral Answers to Questions
Debate between Emma Reynolds and Lindsay Hoyle(8 months, 3 weeks ago)
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Emma Reynolds
I am very pleased to say that there has been a 152% increase in the number of pensioners who are applying for pension credit. That is good news, and is a result of the pension credit awareness campaign that we have been running since early September. We are putting in place all the resources we can to process claims as quickly as possible.
Nigel Huddleston (Droitwich and Evesham) (Con)
We on the Conservative Benches are deeply concerned about all those who will lose their winter fuel payments under Labour. Some pensioners will keep the winter fuel payment if they claim pension credit, but we know that some will not apply or will have difficulty applying. Can the Minister confirm how many people the Treasury assumes are eligible for pension credit but will not claim it, therefore losing their winter fuel payment, and what is the Treasury doing to close that gap?
Emma Reynolds
As the hon. Gentleman will understand, the estimates of how many people might be eligible for pension credit are an imperfect science—they are based on a survey. Means-testing what is a very complex benefit, as all means-tested benefits are, requires an assessment of not only people’s income but their savings; it is about pensioner household units, too, so it is a complex set of procedures. All I can say is that I am glad we are targeting support at those most in need, something that was outlined in the 2017 Conservative party manifesto, which stated:
“we will means-test Winter Fuel Payments, focusing assistance on the least well-off pensioners, who are most at risk of fuel poverty.”
Daisy Cooper (St Albans) (LD)
As the newly appointed Treasury spokesperson for the Liberal Democrats, this is my first opportunity to welcome the Chancellor and Ministers to their places. Notwithstanding that, on the winter fuel payment, the Government need to think again. I recently spoke with representatives of Citizens Advice in St Albans, who are deeply concerned that letters from the Department for Work and Pensions will be sent out only in December to people that it believes are eligible, meaning that many people may lose out. We have urged the Government to either reverse the cut and make it taxable or look at, for example, raising the pension credit limit. Could the Government confirm whether they are going to look again at any of the measures that we have suggested?
Luke Taylor
We know that no impact assessment was carried out prior to the decision to cut the winter fuel payment, but was any consideration given to the burden that the daunting application form places on the elderly, and the extra burden on charities such as Age UK, which advise them on completing it? Evidence of that daunting burden is the 60% limit to uptake over the past decade. Will she work with her colleagues to simplify the application process, ease the burden on those who are losing the winter fuel payment, and help them receive the broad benefits that pension credit provides?
Mr Speaker
I think the Minister got it in the first two minutes, never mind the last three.
Emma Reynolds
The Government did an equality analysis on the change, which was published in September. I recommend that the hon. Gentleman take a look at it. It was such a long question that I have forgotten what he asked. On application forms—
The Parliamentary Secretary, His Majesty’s Treasury (Emma Reynolds)
We are not hiding the figures. If I had had the chance, I would have said that 455,000 pensioners are paying the higher rate of tax and that 39,300 are paying the additional rate. Many wealthy pensioners have said to me that they do not need the winter fuel payment—[Interruption.] The right hon. Gentleman says that, but there are a number of—
Mr Speaker
Order. I think the Minister has answered the question. I call Emma Foody.