Building Societies Act 1986 (Amendment) Bill

Gareth Davies Excerpts

Report stage
Friday 19th April 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Let me first congratulate the hon. Member for Sunderland Central (Julie Elliott) on reaching the Third Reading of her important Bill, which will help to ensure the future growth and success of the building society sector. She is a strong advocate for the sector, and has introduced a Bill that will help it to grow and compete with retail banks, so that it can continue to provide vital diversity to the UK financial services sector.

I also congratulate my hon. Friends the Members for East Kilbride, Strathaven and Lesmahagow (Dr Cameron), and for Milton Keynes North (Ben Everitt), and especially my hon. Friend the Member for Darlington (Peter Gibson), who I was delighted to join back in November to open the Darlington Building Society in the middle of town. I saw from him and the employees just how impactful they are in his community, and I am sure that they will go from strength to strength.

[Peter Gibson]

While the Minister is on his feet, I wonder whether he could outline to the House the gift he received from Robin Blair, our veteran fruiterer and vegetable trader in our historic market hall, who joined him on that opening day.

[Gareth Davies]

I was not expecting an intervention on that of all subjects, but I did enjoy the satsumas that were provided by the very nice gentleman, who I understand is an institution in the town of Darlington.

As I was saying, building societies are important to all our communities, not least mine in Grantham and Bourne. In Grantham I have the Nationwide Building Society, the Nottingham Building Society and the Melton Mowbray Building Society, a new branch of which is opening in Bourne in April.

Today I wish to outline a few things: first, the Government’s support for the mutuals sector; secondly, the importance of mutuals to our overall financial services sector; and, finally, how this Bill will further support the future growth and success of mutuals. The Government want to promote the growth of mutuals, which make a vital contribution to the UK economy. As outlined in the mutuals prospectus, there are over 9,000 mutuals operating throughout the country, with a combined annual turnover of some £88 billion in 2022, which equates to 3.5% of UK GDP. However, beyond their vital financial contribution to the UK economy, mutuals play an important role in supporting people across the country. Their unique ownership model means that these businesses are rooted in their local communities, and working to make society better.

It is for those reasons that the Government are committed to supporting the growth and success of the mutual sector. For example, last summer the Government amended the Credit Unions Act 1979 so that credit unions in Great Britain can offer a greater range of products and services. Moreover, as the hon. Member for Sunderland Central said, last year the Government supported the private Member’s Bill introduced by the hon. Member for Preston (Sir Mark Hendrick), which achieved Royal Assent in June 2023. The Co-operatives, Mutuals and Friendly Societies Act 2023 will allow the Treasury to pursue further secondary legislation to give co-operatives, mutual insurers and friendly societies greater flexibility in deciding what to do with their surplus capital and the restrictions on their assets. The Government continue to develop a modern and supportive business environment for mutuals. As part of that, we have asked the Law Commission to conduct reviews of the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992.

Building societies are perhaps one of the best-known types of mutuals. There are 42 building societies operating throughout the country, providing mortgage and savings products to around 26 million members. They play an essential role in supporting their members in building savings habits and buying their own home, as the hon. Member for Bristol North West (Darren Jones) outlined. That cause is supported by Members from across the House, but particularly by the hon. Member for Sunderland Central, who has consistently championed the importance of supporting first-time buyers—not just in her constituency, but across the country.

Building societies are especially well represented in communities outside the south-east. For example, the Melton Mowbray Building Society provides vital support in all areas neighbouring my constituency, and I note that the Newcastle Building Society has a significant presence in the constituency of hon. Member for Sunderland Central. It builds on a 160-year history, and its amazing commitment to its members in the communities in which it operates remains strong. It has partnered with the citizens advice fund to provide expert advice to members, answering questions on a variety of important issues. She also has the Yorkshire Building Society in her constituency, which has done great work on financial literacy through its Money Minds programme.

It is clear that building societies contribute to the wellbeing of communities throughout our country, including in the constituency of the hon. Member for Sunderland Central. The Government are fully supportive of this private Member’s Bill, which will help the sector to compete more effectively with retail banks, so that building societies can continue to work.

This Bill is about enabling building societies to grow and compete with retail banks. We are achieving that by updating the legislation in three short ways. First, the Bill excludes three specified sources of funding from the 50% wholesale funding limit for building societies. This will provide them with greater flexibility in raising additional wholesale funding, while still operating within the mutual model. The detail of the funds will be further specified by the Treasury through secondary legislation in due course. Furthermore, the amendment in the name of the hon. Member for Sunderland Central means that the statutory instruments will be subject to the affirmative procedure, allowing for greater parliamentary scrutiny; that comes on the back of very constructive work from across the House. The amendment does not change the policy outcome of the Bill in any way, but simply amends the parliamentary procedure that will be followed when subsequent regulations are made.

Secondly, the Bill allows for the option of real-time virtual participation at building society meetings. This will improve meeting accessibility and promote wider membership engagement, should the members of any building society choose to permit virtual participation under their rules.

Finally, the Bill will provide His Majesty’s Treasury with the power to further align constitutional provisions. Specifically, it will align provisions in part 2 of the Building Societies Act 1986 on common seals and the execution of documents with modifications made to company law. This will remove outdated and burdensome legislative requirements, and update the 1986 Act, in line with modernisations made to company law.

In conclusion, the Government fully support the hon. Lady’s Bill. We recognise the importance of the building society sector, which supports people and communities across the country. I extend my thanks to the hon. Lady for introducing the Bill and for progressing it to Third Reading. She can be assured that the Government share the vision set out in the Bill for supporting the future growth and prosperity of the building society sector.

Finance (No. 2) Bill

Gareth Davies Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is always a pleasure to see you in the Chair, Madam Deputy Speaker. Let me begin by thanking Members from across the House for their contributions to the debate on this Finance Bill.

Before I address some of the specific points raised, let me briefly reflect on what this Bill is seeking to achieve. It is a Bill for a Budget that rewards work, and it sends a clear message to working people across the country that we support them. We want their work to pay and we want them to have more money in their pocket at the end of the working day. We want to continue to make this country a great place in which to live, work and invest; and to provide our key growth industries with the support and incentives they need to continue to thrive. Taken together, these policies will drive economic growth and productivity for years to come by focusing on workforce participation and stimulating business investment.

Despite going through an incredibly difficult time these past years, with a global pandemic and a war in mainland Europe, our economy has now turned the corner. Inflation is down from its peak of 11% to 3.2%; real wages are consistently rising; and, despite high interest rates, our economy is growing, because of the action that we have taken over the past few fiscal events and the plan that we have put in place—it is always important to have a plan, Madam Deputy Speaker—and this Bill continues our work to execute that plan.

The Bill will support hard-working parents by increasing the high-income child benefit charge threshold and taper, taking 170,000 families out of paying that tax charge, and with almost half a million families gaining an average of £1,260 towards the cost of raising their children. My hon. Friend the Member for Amber Valley (Nigel Mills) made thoughtful remarks about our intention to move to a household basis. We will absolutely take those remarks on board, as he mentioned, and we will be consulting on this issue shortly and his points will also be taken on board in that process.

My hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) pointed out that the Bill will encourage investment in our world-leading creative industries—a key growth sector for the UK—with a new tax relief for UK-made independent films. It will permanently increase the rates of tax reliefs for theatres, orchestras, museums and galleries, backing British talent in film and on the stage, and we will always champion our creative industries, which remain the envy of the world. She raised points about specific challenges, particularly on immersive audiences. Production will qualify for theatre tax relief if the main purpose of the audience is to observe. Some level of audience participation will not necessarily disqualify a production, but it cannot be the main purpose. Further guidance will be issued by the Treasury, and I know that my hon. Friend the Financial Secretary to the Treasury would be happy to meet her to discuss the specific issues her constituents are facing.

My hon. Friend the Member for Waveney (Peter Aldous) has been a consistent champion for the oil and gas industry, and quite right too. He acknowledged that the Bill will provide more certainty to investors in the oil and gas industry, and the finance industry that lends for investment, by putting the energy security investment mechanism into legislation. The ESIM operates on the basic principle that it is only right that when prices of oil and gas come down to normal levels, so too should the tax on exceptional profits. That gives certainty to industry and also brings more fairness.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) made a typically constructive and, perhaps, creative speech, and made a number of points. In particular, his support for our national insurance contribution cuts was much appreciated. He is right to highlight an under-appreciated policy on auto-enrolment, which has seen 10.3 million people brought in to saving for a pension, with 86% of private pension savers now participating more than they were before. We will look closely and work with him on his specific suggestion relating to national insurance contributions to boost savings. We all want the savings culture in this country to grow and grow, and we are always open to suggestions.

The national insurance contributions had a separate Bill, but they continue to be a subject of debate in Treasury discussions. The Opposition’s suggestion that our ambition to remove the double tax on work is some kind of unfunded policy must be addressed. Let me be clear: this is an ambition; it is obviously not happening overnight. Let us look at what we have done over the past six months for hard-working people across the country: we have cut national insurance contributions by 30%, all while increasing pensions by 8.5%, and providing record funding for our NHS. Indeed, having an ambition in public policy is not new. In 2010 we set out a long-term ambition to raise the personal allowance to £10,000, which we did not just meet but exceeded, and it is now over £12,500, as acknowledged by my hon. Friends the Members for Amber Valley and for North East Bedfordshire.

It is important to set out a direction of travel for the British people, and to show ambition for what we want to do in government. Not only do Labour Members not have any long-term ambitions, but none of their ambitions seem to last very long. They talk about change, but the only change that the Labour party offers is a change in its own policies, week after week after week, and that’s just weak! Labour’s policies are so weak and vague that even its righteous moral compass cannot find a direction. However, there are a few glimmers of what a Labour Government might look like—what five years of hard labour might look like. For example, we know that under Labour’s embattled deputy leader and the trade unions, 70 new regulations will hamper the ability of businesses to hire, stifle their ability to grow, reduce job opportunities, and unleash waves of low-threshold, zero-warning strikes on hard-working British people. Labour calls it a new deal, but let us face it: it is a raw deal for business and workers across the country.

I have not even mentioned the things that the Labour party is doing today where it is in charge, so let us just quickly go through those: 20 mph zones, limited rates relief and longer NHS waiting lists, all in Labour-run Wales; a bankrupt council, adult social care budgets cut and council tax up by 21%, all in Labour-run Birmingham; and knife crime up, relentless National Union of Rail, Maritime and Transport Workers strikes and a cruel ultra low emission zone tax on motorists, all in Labour-run London. The House will forgive me if I will not take lectures from the Labour party.

To conclude, we are delivering a Finance Bill that will see us move forward with the Government’s plan to support long-term growth, encouraging people into work, boosting investment and ensuring that hard-working taxpayers keep as much of their money as possible. We on the Government Benches choose aspiration over envy and ambition over declinism. For those reasons and more, I commend this Bill to the House.

Question put, That the amendment be made.

Oil and Gas Decommissioning Relief Deeds

Gareth Davies Excerpts

Thursday 21st March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

At Budget 2013, the Government announced that they would begin signing decommissioning relief deeds.

Since October 2013, the Government have entered into 108 decommissioning relief deeds. Offshore Energies UK estimates that these deeds have so far unlocked approximately £11.8 billion of capital, which can now be invested elsewhere.

The Government committed to reporting to Parliament annually on progress with the decommissioning relief deeds. The report for the financial year 2022-23 is provided below.

Number of decommissioning relief agreements entered into: the Government entered into four decommissioning relief agreements in 2022-23.

Total number of decommissioning relief agreements in force at the end of that year: 105 decommissioning relief agreements were in force at the end of the year.

Number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: three payments were made under a decommissioning relief agreement in 2022-23, for £16.2 million in total. These were made in relation to the provisions recognised by HM Treasury from 2015 onwards as a result of companies defaulting on its decommissioning obligations.

Total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: 16 payments have been made under any decommissioning relief agreement as at the end of the 2022-23 financial year, totalling around £260 million.

Estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2023-24 accounts will recognise a provision currently estimated to be £254 million in respect of decommissioning expenditure incurred as a result of companies defaulting on their decommissioning obligations¹. The majority of this is currently expected to be realised over the next several years.

¹ This figure, which is an estimate at the last interim reporting period, is unaudited and takes into account payments made subsequent to the financial year covered by this written ministerial statement. The estimate is under review ahead of the year end reporting period and may be updated to reflect newer information.

[HCWS365]

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 19th March 2024 Commons Chamber

[Kim Johnson (Liverpool, Riverside) (Lab)]

15. What recent fiscal steps he has taken to help reduce the level of economic inequality between the north and south of England.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The Government continue to tackle regional economic inequalities and level up the United Kingdom. The Government are empowering local leaders through a range of devolution deals, regenerating places across the country and investing in vital infrastructure.

[Afzal Khan]

In response to this month’s Budget, the director of the Institute for Public Policy Research North has said that

“This Budget is the government’s admission that it has given up on levelling up this parliament, despite there being much left to do.”

Delivering on the Government’s levelling-up commitments would mean that my constituents would benefit from reduced social welfare dependency, increased earnings potential, and improved health and wellbeing. Does the Minister not think that my constituents and all citizens outside London and the south-east deserve the benefits that come with economic prosperity?

[Gareth Davies]

We are committed to levelling up, and are delivering on it across the country. Median pay growth has been higher in every region outside London and the south-east under this Government, and the hon. Gentleman’s constituency is receiving £19 million from round 1 of the levelling-up fund and £20 million from round 3. We have announced a Greater Manchester trailblazer devolution deal and a Greater Manchester investment zone, which will bring more jobs and prosperity for all of his constituents.

[Kim Johnson]

I have heard what Ministers have said this morning, and I must be living in an alternative universe. Liverpool has some of the most deprived wards in the country, which have experienced poverty and destitution over the past 14 years as a result of austerity. Some 300,000 people have accessed the household support fund, and while we are a resilient city and will continue to support those households, can the Minister explain what safety net will be put in place to support those in poverty and destitution when the household support fund ends in six months’ time?

[Gareth Davies]

The hon. Lady is right to highlight the fact that we have extended the household support fund for the most vulnerable. That is on the back of £96 billion of support during the energy crisis and nearly £400 billion of support through the global pandemic. I would just point out to the hon. Lady that the fundamental difference between Conservative Members and Labour Members is that we believe the best route out of poverty is through work, and our party is increasing employment.

[Derek Thomas (St Ives) (Con)]

Across Cornwall and the Isles of Scilly, most jobs are supplied by very small businesses, many of which fall below the VAT threshold. Given the economic inequalities around the region, the increase of the VAT threshold to £90,000 is very welcome, but the threshold being that low and the cliff-edge effect of going from zero to 20% have a chilling impact on growing small businesses and providing all-year-round jobs. Will the Minister consider introducing some sort of taper for that £90,000 threshold, and increasing the VAT threshold further—maybe in the region of £120,000?

[Gareth Davies]

My hon. Friend is right: we increased the VAT threshold for small businesses, which will benefit 28,000 businesses across the country. We feel that the £90,000 threshold strikes the right balance between managing public finances sustainably and supporting businesses, but as my hon. Friend knows, we keep these things under review.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

The port of Milford Haven in my constituency has been right out in front, taking a lead in investing in decarbonisation and showing how it can boost the economy of Wales and reduce inequality. Yesterday, it was told that its bid to the Government’s floating offshore wind manufacturing investment scheme—its port funding scheme—had been rejected out of hand. Will my hon. Friend ask his good friend the Chancellor of the Exchequer to meet me to talk about the important work being done at the UK’s leading oil and gas port, and about how the UK Government can support those efforts financially?

[Gareth Davies]

FLOWMIS is an incredibly important scheme in improving and enhancing our ability to expand floating offshore wind. We are a huge supporter of my right hon. Friend’s constituents and of the whole of Wales. If the Chancellor cannot meet him, I would be very happy to do so.

[Karl MᶜCartney (Lincoln) (Con)]

7. What assessment he has made of the impact of raising the high-income child benefit charge threshold on household incomes.

--- Later in debate ---

[Simon Baynes (Clwyd South) (Con)]

8. What fiscal steps his Department is taking to help increase the level of business investment.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

At the autumn statement in 2023, the Chancellor set out ambitious growth packages designed to boost business investment, including making full expensing permanent and a tax cut to companies of over £10 billion a year to ensure we have one of the most generous capital allowances in the world. With further growth-enhancing measures set out in spring Budget 2024, the Office for Budget Responsibility estimates that Government policy announced at the past three fiscal events is expected to increase the size of the economy by 0.7% by 2028-29.

[Simon Baynes]

Like my hon. Friend the Member for St Ives (Derek Thomas), I was delighted to see the increase in the VAT threshold from £85,000 to £90,000 in the Budget. That will help small businesses invest for the future, such as the Two Doves café and gift shop in Overton, which is popular with people from both Clwyd South and North Shropshire. However, given the vital importance to small businesses, will my hon. Friend prioritise increasing the VAT threshold again in the next fiscal intervention?

[Gareth Davies]

My hon. Friend comes to this House with significant business experience, so when he talks, we certainly listen, and I am delighted to hear that he was pleased with the VAT threshold increase. I can tell him that, in addition to what I said to my hon. Friend the Member for St Ives (Derek Thomas) about the £90,000 threshold, this level is higher than that of any EU member state and is the joint highest in the OECD. Many of his businesses will be among the 28,000 that will benefit from the increase, so we have no plans at this stage to change it.

[Andrew Gwynne (Denton and Reddish) (Lab)]

But the actual record of this Government over the past 14 years is abysmal. It is a fact that business investment has been consistently among the lowest in both the OECD and the G7, and now the Office for Budget Responsibility is forecasting a further 5% fall this year. Why?

[Gareth Davies]

Announcements in each of our last three fiscal events have enhanced our business investment environment for international investors: we have the second highest foreign direct investment stock in the world; we have some of the best universities in the world, which are attracting businesses; we have announced full expensing, which is a £10 billion-a-year tax cut; we have the lowest corporation tax in the G7; and we are reforming our energy grid, bringing investment into our net zero ambitions. We are reforming our systems, reducing our taxes, and encouraging investment.

--- Later in debate ---

[Mrs Flick Drummond (Meon Valley) (Con)]

18. What fiscal steps his Department is taking to support small businesses.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Small businesses drive our economy and we support them to thrive using levers across Government, whether that is through our small business rate relief, by increasing the VAT registration threshold, by providing reliefs such as the annual investment allowance or through various programmes offered by the British Business Bank.

[Dr James Davies]

The Welsh Government are increasing the burden on small businesses by reducing retail, hospitality and leisure business rates relief from 75% to just 40%, despite the UK Government rightly extending that relief in England in the Budget. That means that businesses in my constituency, such as the Little Cheesemonger, Now to Bed, Presents with a Difference and Tu Mundo, are all facing unsustainable business rates bills. One business has to find an extra £35,000 a year for business rates alone. What advice does the Minister have for small businesses in north Wales facing these onerous bills?

[Gareth Davies]

My hon. Friend is right that at the autumn statement, this Government extended the retail, hospitality and leisure relief in England—a tax cut worth £2.5 billion for small businesses. The Barnett formula applies to allow the Welsh Labour Government to offer similar relief if they want to. It is disappointing, if not surprising, that when given the opportunity, Labour decides not to cut taxes for working people.

[Paul Holmes]

Does my hon. Friend agree that one of the best steps that the Government can take to support small businesses in Eastleigh, Hedge End and Botley is through a package of business rate reductions? Will he outline to the House the progress the Government have made in this regard, which was desperately needed?

[Gareth Davies]

My hon. Friend is right. Business rate relief is a great way to support small businesses in Eastleigh and across the country. Our small business rate relief means that one third of all properties in England already pay no business rates at all. We have frozen the small business multiplier, protecting more than 1 million properties from a multiplier increase. As I was just saying, we are supporting high streets with our retail, hospitality and leisure relief.

[Mrs Drummond]

Just after the Budget, I met some of the small businesses in my constituency at the Flower Pots in Cheriton. While they were pleased with some of the Budget, they talked about improving productivity and growth by raising the VAT threshold far beyond £90,000, and possibly to £250,000. They felt that that would incentivise sole traders and small businesses to expand and work longer hours. They feel at present that growth is restricted because of the level of the VAT threshold. Has the Chancellor given any thought to increasing the threshold to improve productivity?

[Gareth Davies]

My hon. Friend is right to engage in the way that she is with her small businesses. We believe that the £90,000 threshold, which has just been increased, strikes the right balance between managing the public finances and supporting small businesses. I encourage her to look at the wider package of support that the Government are providing for small businesses, not least the business rate relief that I was just talking about.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Will the Minister have discussions with his counterparts in the devolved institutions to ensure that the likes of sole traders and small businesses see a reduction in bureaucracy to make them more profitable, offering more business opportunities to more people across the United Kingdom?

[Gareth Davies]

I can assure the hon. Gentleman that the Government engage frequently with our counterparts in the Northern Ireland Administration, and that will continue to be the case.

[Mike Amesbury (Weaver Vale) (Lab)]

According to the Federation of Small Businesses, two in three small businesses are suffering from late payments. We are now 14 years into a Tory Government. Why do the Government not follow Labour’s lead and strengthen the law on this?

[Gareth Davies]

We are acutely aware of this issue, and I have had meetings with the FSB. That is why the Chancellor has announced plans to improve the situation for small businesses. I am happy to outline that in writing to the hon. Gentleman.

[Alison Thewliss (Glasgow Central) (SNP)]

One of the requests from female-led businesses in my constituency, including Cùrlach and Rock’n Rollers, was for a VAT cut for hairdressing businesses. Can the Minister tell me why that was not considered in the Budget? These businesses are an important part of our high streets and they are often led by women, who have missed out significantly in the Chancellor’s Budget.

[Gareth Davies]

We of course support hairdressers, our high streets and women-run businesses, which is why we have extended the retail, hospitality and leisure relief to 75%. Cutting taxes for hard-working people is what the Conservative Government do.

[Helen Morgan (North Shropshire) (LD)]

14. What recent assessment he has made of the impact of his income tax policies on pensioners.

--- Later in debate ---

[Wendy Chamberlain (North East Fife) (LD)]

T2. The Fife whisky festival took place in Cupar earlier this month, and was a great success. The industry welcomes the freeze in alcohol duty, but notes that it is only for six months. When will the Government provide the longer term consistency that the industry needs?

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Our support for the Scotch Whisky Association is long-standing, and it was a pleasure to meet its representatives recently. We have frozen or cut duty for Scottish whisky in fiscal events going back many years. We are representing the Scotch Whisky Association in trade agreements, and that support will endure long into the future.

[Jill Mortimer (Hartlepool) (Con)]

T5. In response to the spring Budget, I have heard from constituents who feel that they may have been forgotten. Under the Conservatives, the number of pensioners living in absolute poverty has been slashed by 200,000 across the country, and we have protected the triple lock, but could my right hon. Friend please remind me of all the steps that his Department is taking to support Hartlepool’s pensioners, so that I can tell them on the doorsteps this weekend?

--- Later in debate ---

[Will Quince (Colchester) (Con)]

The proposed changes to wine duty will add huge costs and complexity to business. Further to my Westminster Hall debate, will my hon. Friend meet me and representatives of wine businesses to hear their concerns, and make permanent the easement that is due to end on 1 February next year?

[Gareth Davies]

My hon. Friend is talking about the largest and most significant reform of our alcohol duty system in 140 years. We are making it more simple by saying: the stronger the alcohol by volume, the more duty paid. We introduced the wine easement to give the wine industry two years to prepare for the changes. I continue to engage with the industry, and I will continue to engage with him.

[Sarah Owen (Luton North) (Lab)]

T8. Two years ago, P&O Ferries sacked 786 workers and replaced them with agency staff paid less than the minimum wage. After that fiasco, the Government promised to review all contracts with the company. Why is it that, since then, the Government have spent £900,000 directly with P&O Ferries? Why are the Conservatives so comfortable spending taxpayers’ money on rewarding the appalling treatment of working people?

Pillar Two: Addition of an Anti-abuse Rule

Gareth Davies Excerpts

Thursday 14th March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

On 15 December 2023, the UK, and over 135 members of the OECD/G20 inclusive framework on base erosion and profit shifting, agreed the third set of administrative guidance on the global anti-base erosion model rules (pillar two), which was published on 18 December.

This guidance includes a technical reform to close off certain transaction-based tax avoidance mechanisms.

These avoidance transactions are being marketed to taxpayers internationally with the aim of allowing them to exploit the transitional country-by-country reporting safe harbour, which is a temporary simplification contained in the model rules. The guidance confirms that a constituent entity cannot qualify for the transitional CBC safe harbour as a result of entering into such transactions.

In particular, section 2 of the guidance inserts paragraphs 74.1 to 74.31 into the safe harbours and penalty relief OECD guidance document—published in December 2022—to provide further guidance on the application and operation of the CBC safe harbour, and makes certain other changes, including amendments to paragraph 22 of that document.

As with any such agreement, it is for the Government to choose whether and how to legislate for these provisions.

The Government intend to apply these provisions from 14 March 2024 to prevent a loss of UK tax and will legislate in a future Finance Bill. The Government will consult with interested stakeholders on how the provisions are legislated, with a view to ensuring the legislation operates as envisaged without any unintended outcomes.

The OECD guidance on this rule was published at https://www.oecd.org/tax/beps/administrative-guidance-global-anti-base-erosion-rules-pillar-two-december-2023.pdf on pages 18 to 21.

[HCWS340]

National Insurance Contributions (Reduction in Rates) (No.2) Bill

Gareth Davies Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[The Exchequer Secretary to the Treasury (Gareth Davies)]

I beg to move, That the Bill be now read a Second time.

For the second time this year, we are cutting taxes for 29 million working people across the country—something that is particularly remarkable in the aftermath of the worst pandemic in 100 years, the worst war in mainland Europe since 1945, and the highest energy spike since the 1970s. The Government have had to take difficult decisions to restore the public finances, and those decisions are starting to pay off. Our economy is growing, and debt is forecast to reduce. Inflation is down significantly, unemployment is at near-record lows, and wages are rising. As the outlook improves, our priority is to return money to working taxpayers while keeping the public finances on track.

We believe that the tax system should be fair and simple, and should reward hard work, yet the way we tax people’s income is particularly unfair. People who get their income from having a job pay two types of tax: national insurance contributions and income tax. People who get it from other sources pay only one. The result is a complicated system that does not support work as best it could. For that reason, the Bill will build on the changes to national insurance contributions in the autumn statement.

The Bill contains two measures: a reduction in the NICs employee class 1 main rate, and a reduction in the NICs class 4 main rate. Both measures are important. Allowing working families to keep as much of their hard-earned money as possible is a priority for the Government. The Chancellor has always been clear that when we can cut taxes, we will.

[Mr Louie French (Old Bexley and Sidcup) (Con)]

My hon. Friend is making a great speech, and I fully support the Government’s efforts to reduce the taxes of working people, alongside the pledge to increase the money going to pensioners through the triple lock. Does he agree that it is disgraceful that, while the Conservatives are working hard to cut taxes and help working people, Labour is increasing the share of council tax for all Londoners, and hitting drivers with charges of up to £12.50 per day thanks to the ultra low emission zone?

[Gareth Davies]

My hon. Friend is consistent in holding the administration in London to account. He is right: as we are still not out of the woods when it comes to the cost of living crisis, the Conservative party has made it clear that we disagree with the Mayor of London’s approach of making motorists poorer.

As I said, building on the changes in the autumn statement, we will once again be supporting working families by reducing the main rate of employee class 1 NICs by two percentage points to 8% on earnings between £12,570 and £50,270 from 6 April 2024. That will cut taxes for over 27 million employees. The average worker on £35,400 a year will save £450 a year, and the majority will see the benefit in their payslips at the start of the new tax year. Taken together with the cuts to NICs in the autumn statement, this tax cut is worth some £900 a year to the average worker.

In addition, we are implementing a further reduction in the main rate of class 4 NICs for the self-employed. The Chancellor announced in the autumn statement that the main rate of class 4 will be reduced from 9% to 8% from 6 April. Today, we are cutting the rate by an additional two percentage points from 8% to 6% from April 2024. That is a total cut of three percentage points in just six months. Combined with the abolition of the requirement to pay class 2, which was announced in the autumn statement, that will save an average self-employed person £650 a year, and benefit over 2 million people across the country.

Together with the autumn statement cuts, this is an overall tax cut worth some £20 billion per year—the largest-ever cut to employee and self-employed national insurance. Because of the action that we have taken, the average earner in the UK now has the lowest effective personal tax rate since 1975. The Government are committed to tax cuts that reward and incentivise work and that grow our economy sustainably and boost productivity. The Office for Budget Responsibility has said that the national insurance cuts announced in the spring Budget will increase the total hours worked by the equivalent of almost 100,000 full-time workers by 2028-29. Because of the cuts, just over 30,000 people will move into work. These reductions in tax will drive more people to seek employment. This is our plan for a simpler, fairer tax system that makes work pay.

[Alexander Stafford (Rother Valley) (Con)]

My hon. Friend is making a powerful Conservative speech about the importance of not just cutting tax but getting more people into work. Has the Department estimated how much more tax revenue will come in as a result of more people working because of these changes, so that we can show that lower taxes actually increase tax revenues for the Exchequer?

[Gareth Davies]

My hon. Friend is right to point that out. A fundamental benefit of reducing tax is that it improves growth in our economy, because more people will be in work and working longer hours. That obviously generates more productivity for our economy, and ultimately more tax revenues for the Exchequer. It is a fundamental Conservative principle that we want lower taxes, and we are delivering that today because it is fiscally responsible to do so, and we are able to do so.

[Anna Firth (Southend West) (Con)]

I am grateful to my hon. Friend for making such a powerful case for cutting taxes, a fundamental Conservative principle. The Bill will put £960 back into the pocket of the average worker in Southend, who earns £36,400, and will put £1,920 back into the pockets of a family in Southend with two people on the average wage. Does he agree that that is a considerable and welcome tax cut for hard-working people in Southend?

[Gareth Davies]

My hon. Friend is right to point that out. I would add to those figures: since 2010, we have lifted millions of people across the country, including in Southend West, out of paying any tax at all by doubling the point at which people start paying tax in our country. People can now earn £1,000 a month without paying any tax, and that is a great achievement of a Conservative Government.

Although I welcome the fact that Labour Members will apparently vote for our tax cuts today, I hope that they will forgive me for sounding slightly sceptical about their sudden conversion to the cause of lower taxes for working people. While they do not oppose the measures, they also did not propose them. In fact, Labour has consistently voted against successive Conservative-led tax cuts between 2010 and 2021, which delivered a doubling of the personal allowance, as I mentioned to my hon. Friend the Member for Southend West (Anna Firth). On the one hand, they bemoan the level of taxation, but cannot tell us a single tax that they propose to cut, or what the level of taxation would be under Labour. On the other hand, the shadow Chief Secretary to the Treasury, the hon. Member for Bristol North West (Darren Jones), described our ambitions to remove unfairness in the tax system as “morally abhorrent”. Labour Members still cannot tell us how they will pay for their many spending commitments. They are completely all over the place. It is only the Conservatives who truly believe in reducing taxes on working people.

[Richard Fuller (North East Bedfordshire) (Con)]

The Minister is giving a clear explanation of why the Conservatives want to cut tax, and the economic benefits of cutting taxes for working people. He will know that the origins of national insurance were basically a form of social insurance: having paid national insurance, it would look after us later in life. The Labour party took the insurance out and put the socialism in, which is why we have ended up with a system that is essentially the same as income tax. As we think beyond today’s welcome cuts to what is in the Opposition new clause, has the Minister thought about using any further cuts to go into the compulsory savings of individuals introduced under the coalition Government after 2010—essentially building, in place of a dependency state, a savings state built on Conservative principles?

[Gareth Davies]

Yet again my hon. Friend makes a valuable contribution. I commit to taking his idea away to consider, as we look at reducing the unfairness in the tax system in future and reducing national insurance contributions when it is prudent and responsible to do so.

The Labour party is completely all over the place on this. As a Conservative Government, we have delivered a clear message to the British people, and it is based on the delivery of the lowest personal taxation level since 1975. We have almost doubled the personal allowance, bringing the lowest earners out of paying any tax at all, and we have delivered a thriving jobs market, which is ultimately the best way to ensure that people are brought out of poverty.

[Clive Lewis (Norwich South) (Lab)]

I hope to speak a bit later on this. I may have a slight difference of opinion with the Minister on tax cutting, but I want to deal with the facts as I see them. He is making a great amount of noise about the tax-cutting vim and vigour that his party has had over the past 10, 20 or 30 years, or even longer than that—it is meant to be something that goes to the heart of the Conservative party—but according to the OECD, for every £1 generated in the UK, the Government collect 35.3p of it as tax. That figure is projected to keep on increasing to 37.7p by 2029, despite this 2% tax cut. Can the Minister explain how, if the Conservatives are the party of tax cuts, actual tax levels will in fact be going up, according to the OECD? How do the Government square that circle?

[Gareth Davies]

I am grateful for the opportunity to clarify that, because there has been a lot of noise from the Labour Benches, too. It is true that we have had to make some difficult decisions about overall taxation on the back of the pandemic, but today we are cutting taxes on work, because that is the way to grow our economy. As I said, we now have the lowest personal taxation level since 1975. Some taxes have gone up, absolutely—supported by the Labour party—as we have increased tobacco duty and other items, for example, but we are focused on ensuring that if people are in work and have a job, their tax level will be reduced. Today, that work of reducing tax on work continues. We are cutting taxes for millions of people across this country. That is why I commend the Bill to the House.

Wine Duty

Gareth Davies Excerpts

Tuesday 5th March 2024 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to see you in the Chair, as always, Mr Henderson.

I congratulate my good friend, my hon. Friend the Member for Colchester (Will Quince), on securing the debate and on the attendance that he has achieved. I recognise the strength of feeling on this across the House and in particular in this Chamber today. I completely share his support for our broader alcohol sector. Not only is it a significant contributor to our gross national product, but I would suggest that it pays a little towards our gross national happiness. It is part of our heritage. From Shakespeare’s plays to our modern British sparkling wines, we have long recognised how life’s triumphs and trials—weddings, wet weather and the working day—can be soothed or celebrated with a glass of our favourite tipple. I recognise that.

In the past few weeks alone, therefore, I have for example met the head of the all-party parliamentary group on wine and spirits, my right hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady), and the highly active Wine and Spirit Trade Association to discuss how this remarkable industry’s potential can be truly uncorked. My officials have engaged with businesses and representatives of the UK industry up and down this country as part of budgetary processes that one might expect, from the more well-aged players such as Majestic Wine to the younger vintages such as Ambriel Sparkling.

On behalf of the Government, I am proud to represent our alcohol duty reform package and to present it to the House. We have introduced the biggest reform of alcohol duties for more than 140 years. We introduced a new, simplified alcohol duty system based on the common-sense principle of taxing alcohol by strength to modernise the existing duties, to support businesses and to meet our public health objectives. This is the first time that public health objectives have been inserted into the alcohol duty system.

That reflects four key principles, which it might be helpful for me to set out: the duty system should be fair to the producers that make and grow the drinks we enjoy; it should recognise the importance of jobs, and of pubs and their role in our national life; it should tackle the problem of harmful high-strength products being sold too cheaply; and it should support innovation and modern drinking trends, in particular today’s trend of moving towards lower-alcohol products. Our reforms do just that.

As part of the changes, which came into effect in August last year, we have supported our wine sector. Let me set out how we have done so. First, we removed the sparkling wine premium. My hon. Friend the Member for Meon Valley (Mrs Drummond) rightly spoke about our domestic growers, a really important part of our wine industry. I recently met the chief executive officer of WineGB. I can tell her that we have removed the English sparkling wine premium. Since 1 August 2023, sparkling wines attract less duty than they did under the previous duty system. That is one of the points that I want to make today.

In such a reform some duty has gone up for some sectors in the alcohol industry and some has gone down. For our domestic growers of English sparkling wine it has gone down significantly, even with the retail price index increase that we saw last year. That is the right thing to do for our domestic growers. It will ensure consistency in our system and build success for British wines, which my hon. Friend and I want to see.

Secondly, as has been extensively discussed today—I will come on to this in more detail and address some of the points that have been made—we introduced a wine easement for 18 months until February 2025. As a result, all wine between 11.5% and 14.5% alcohol by volume will be subject to duty as if it were 12.5% ABV. That means we have effectively given the wine industry time to adapt to the new system and allow wine producers to adapt their systems. I recognise completely that a shake-up of a system that has existed for more than 140 years will raise some eyebrows and cause change for a number of businesses, but we should be confident that the bureaucratic burden under the new system is manageable.

Every other product is already subject to duty based on our strength-based system. We have included, as my hon. Friend the Member for Colchester rightly pointed out, the weather impact of wine, and included cider, which is also subject to seasonal variability challenges. We are mindful of unintended consequences, as several right hon. and hon. Members have outlined, but to make the wine easement permanent, as my right hon. Friend the Member for Stevenage (Stephen McPartland) has called for, would go against the principle of the alcohol reform to move to a strength-based system that brings in the public health element. As I have already said, although the impact on wine is clearly being felt, we have provided an easement over a period of time that was decided in consultation with the wine industry in four rounds of consultation before the reform comes into being.

I can commit to my hon. Friend the Member for Colchester that we will monitor the reforms and their impact. We have outlined that three years after they come into effect, which is enough time for us to be able to assess them, we will conduct an impact assessment, which will allow His Majesty’s Revenue and Customs to gather the relevant information to understand any long-term impacts in the alcohol market. That commitment complements the broader fiscal approach, because at the last autumn statement we announced tax cuts that supported the alcohol and hospitality industry.

We froze alcohol duty for six months until 1 August 2024. We also announced a package of business rate changes and tax cuts worth £4.3 billion over the next five years. My hon. Friend the Member for Tewkesbury (Mr Robertson) was right to highlight the difficult time that our hospitality industry has gone through in recent times. That is why we extended the retail, hospitality and leisure relief scheme—a 75% relief—up to a cash amount of £110,000 per business between 2024 and 2025. In addition to the work being led by my colleagues at the Department for Environment, Food and Rural Affairs on their package of wine reforms, which will increase flexibility and innovation, the Government have announced a freeze to the small business multiplier for the fourth consecutive year, for 2024-25, protecting over 1 million ratepayers from a multiplier increase. That builds on the unprecedented support that we should never forget we offered the industry during the pandemic—some £16 billion of business rate support. We have also held the tax rate steady over the last three years, which has protected businesses from inflationary pressures at a cost of £14.5 billion to the Exchequer.

This Government have never given the sector reason to doubt our commitment to it, because it has received many cuts or freezes to duty over the last decade. I can tell my hon. Friend the Member for Colchester that the wine industry has benefited from cuts or freezes to wine duty at five of the last 11 fiscal events. Compared with 2015, wine duty is some 12% lower in real terms. That is something we can all raise a glass to.

Finally, I will address the comments by my right hon. Friend the Member for Witham (Priti Patel), who, rightly, has consistently raised the issue of red tape for businesses in the House. She specifically mentioned labelling. Overall, these reforms to our alcohol system simplify our tax duty. That is a Brexit freedom. Under the last slight change to our alcohol duty system in 1996, we had to take duty from the European Union, which was incredibly complicated, completely inconsistent, and did not include any provision for public health. Our easement gives businesses time to adapt to the new system and put in place measures to be able to administer it. Wine can still be labelled to 0.5% ABV. DEFRA has introduced guidance and an option to label to 0.1%, but I want to be really clear that that is optional.

I thank my hon. Friend the Member for Colchester for raising this important sector and this important issue. It is right that the Government’s fiscal approach continues to be scrutinised in this way. I am confident that this policy is the right one, not just for the wine industry, but for the whole of the United Kingdom.

Question put and agreed to.

Advanced Manufacturing

Gareth Davies Excerpts

Monday 4th March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

Today the Government have announced over £360 million of joint Government and industry investment in 16 UK advanced manufacturing projects, securing highly skilled jobs, building a stronger economy and cementing the UK as a global leader in industries of the future.

This involves a combined industry and Government investment of almost £73 million in projects to accelerate the development of zero-emission vehicle technology in the UK, almost £200 million in projects to develop energy efficient and zero-carbon aircraft technology, and almost £92 million in life science manufacturing projects. The funding awarded is targeted to support the sectors where the UK is or could be world-leading and is designed to unlock investment from the private sector to help grow our economy.

The Chancellor is also announcing an up to £120 million increase to the green industries growth accelerator (GIGA) to support clean energy manufacturing. Around £390 million has been earmarked to expand UK-based supply chains for electricity networks and offshore wind sectors, and around £390 million for the carbon capture, utilisation and storage and hydrogen sectors. This is alongside the £300 million previously announced for UK production of the fuel required to power high-tech new nuclear reactors, known as HALEU.

The GIGA funding will enable the UK to seize growth opportunities through the transition to net zero, building on our world-leading decarbonisation track record. It forms part of the Government’s priority to grow the economy focusing on making the right long-term decisions for a brighter future by creating better-paid jobs and opportunity right across the country.

This follows £4.5 billion announced in the 2023 autumn statement to increase investment in strategic manufacturing sectors—auto, aero, life sciences and clean energy—across the UK for five years from 2025. This autumn statement announcement included £975 million in funding for the aerospace sector, and the Government have confirmed that this will be allocated to the Aerospace Technology Institute programme.

Alongside this, the Government are setting out further details of the £50 million apprenticeship growth sector pilot announced in the 2023 autumn statement. The pilot will boost funding for eligible providers delivering 13 high-value advanced manufacturing and engineering, green and life sciences apprenticeships standards, and will explore ways to stimulate training and break down barriers to delivery of high-quality training, with a particular focus on up-front capital investment costs.

[HCWS307]

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 6th February 2024 Commons Chamber

[Daniel Zeichner (Cambridge) (Lab)]

16. What recent fiscal steps he has taken to help tackle regional economic inequalities.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

This Government are committed to supporting all parts of the United Kingdom. In October we announced the £1.1 billion long-term plan for towns, which gives 55 towns up to £20 million of endowment-style funding. We are delivering an ambitious programme of investment zones and devolution deals, we ae continuing to support local growth through the UK shared prosperity fund and we are investing billions to improve local transport connections in our regions outside London.

[Daniel Zeichner]

By their own measures, the Government are failing on almost half of their levelling-up missions in the east of England. Meanwhile, the Cambridge sub-region, which is a net contributor to the Exchequer, has vital transport projects on hold or awaiting finance. When will the Treasury stop stalling growth and give power back to the regions, which know best what needs to be done in their area?

[Gareth Davies]

This Government are committed to levelling up by boosting growth, raising living standards and spreading opportunity throughout the country in several different ways. The hon. Gentleman talks about giving more power to local areas, and he will know that the Cambridgeshire and Peterborough Combined Authority is getting a £97 million devolution deal. He will also know that Cambridge received some £14 million as part of the shared prosperity fund to spend on local projects. I reject his assertion; the people of Cambridge are benefiting from this Government.

[Danny Kruger (Devizes) (Con)]

The way to reduce regional inequality is to ensure that growth happens everywhere across the country. One way to do that is to support small and medium-sized enterprises and community enterprises, which are particularly located in under-served regions. I commend the Government for the recovery loan scheme, which has been a lifeline to many small businesses and community enterprises. Can the Minister tell us whether that scheme is likely to be renewed? Hundreds of millions of pounds of private investment is waiting on the Government to make a decision.

[Gareth Davies]

My hon. Friend has a long history as a great champion for community organisations. I will write to him on his specific question.

[Dr Luke Evans (Bosworth) (Con)]

17. What recent progress he has made on raising the level of the national living wage.

--- Later in debate ---

[Kenny MacAskill (East Lothian) (Alba)]

T5. With winter still upon us and fuel bills still rising, Ofgem is advising that the level of domestic energy debt is approaching £3 billion. When people cannot meet their current bills, how can they possibly be expected to meet that level of arrears? Is it not time to fund a debt write-off scheme, as proposed by National Energy Action and other fuel poverty campaigners, before hypothermia and misery worsen?

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The Government continue to work with Ofgem. In fact, I met the chief executive officer very recently. Ofgem continues to monitor the levels of energy debt to ensure that consumers are protected. The hon. Gentleman will know that, last year, the Chancellor announced measures to ensure that households with prepayment meters paid no more than those with standard meters, and that is on the back of the energy price guarantee, which effectively paid 50% of people’s household energy bills.

[Sir Sajid Javid (Bromsgrove) (Con)]

The Chancellor will be aware of a proposal from the World War Muslim Memorial Trust to establish a memorial at the National Memorial Arboretum, honouring an estimated 750,000 Muslims who have fought for the British armed forces, with tens of thousands of them paying the ultimate sacrifice. Previous Budgets have supported memorials that honour those who have given us the freedoms that we enjoy. May I ask the Chancellor to personally consider this proposal and help make it a reality?

--- Later in debate ---

[David Duguid (Banff and Buchan) (Con)]

Last June the Exchequer Secretary announced the energy security investment mechanism, and I welcomed the announcement in last November’s autumn statement that the floor price would rise with inflation from April. How and when will that be legislated for, and will he look at alternative ways of setting that floor price, other than the 20-year reference period that is already used?

[Gareth Davies]

The energy security investment mechanism was designed, as my hon. Friend points out, to give more certainty not only to the oil and gas sector, but to investors, ensuring that the energy profits levy is disapplied when prices return to historically normal levels. To provide additional certainty, on the back of urging from him and the industry, we have agreed to legislate for ESIM and will be announcing that shortly.

[Imran Hussain (Bradford East) (Lab)]

Regardless of what the Chancellor tells us, the reality remains that people in Bradford are worse off after 14 years of this Government. Healthcare, GPs and dentists are less accessible, homes are more expensive, colder and riddled with mould, jobs are less secure and badly paid, with stagnating wages, and household savings have been wiped out by rising food, water, energy and fuel bills. Ahead of the last Budget he will deliver before the general election, will the Chancellor apologise for 14 years of disaster that have devastated our communities?

[Peter Gibson (Darlington) (Con)]

Can my hon. Friend tell me how many staff are now employed across the eight Departments based at the Darlington Economic Campus? What progress is being made on naming the new building “William McMullen House”?

[Gareth Davies]

I can tell my hon. Friend that 750 staff are employed across all Departments at the Darlington Economic Campus. The Treasury’s aim is to reach 355 full-time staff by March 2025, and we are on track to meet that target. The official name of the campus will be decided closer to the 2025-26 delivery date and will be consulted on by the Government Property Agency, but we have heard very clearly his suggestion of William McMullen House, and we will consider that in due course.

[Dame Diana Johnson (Kingston upon Hull North) (Lab)]

The Chancellor knows jolly well that in April 2023 Sir Brian Langstaff made his final recommendations on compensation for those infected and affected by the contaminated blood scandal. The Chancellor also gave evidence in July to Sir Brian and said that work was under way. In December, this House voted for a compensation body to be set up. I would like the Chancellor to answer my question, please, not a junior Minister, and explain exactly what is going on in the Treasury, what work is being undertaken and whether there will be an announcement in the Budget.

Future of UK Capital Markets

Gareth Davies Excerpts

Tuesday 30th January 2024 Westminster Hall

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a pleasure to serve under your chairmanship, Ms Nokes. I congratulate my right hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on securing the debate, and I thank him for his remarks about our capital market system, which I will address in some detail.

I am grateful for the opportunity to set out the key role that capital markets play not just in our UK economy, but in wider society, which I have long spoken about not just in this House, but in my career in financial services before coming into politics. No matter the size of the company or how many countries it operates in, behind every major listed company are thousands or even millions of investors who own a stake in that company, and own a stake in a country. A FTSE 100 or S&P 500 stock will be owned by teachers, nurses, firefighters and lots of other regular people who, by owning stocks through their pensions, have a stake in the success of the company and the wider economy, and a means to benefit when both those things do well. It is an extension of what Noel Skelton, a former Member of Parliament for Perth, said in the 1920s when he talked about a property-owning democracy. It is the idea that if people have a stake in our economy, they become more engaged with the economic outcomes of the country, which in turn become more equitable, because they engage and affect normal people in more prescient ways. In that way, strong capital markets that people can easily access, interpret and utilise can be an incredible tool for broad-based engagement with our economic systems.

As my right hon. Friend alluded to, capital markets also have a more immediate impact through the allocation of capital, facilitating investment, which drives growth and jobs, and creating investor returns. That helps to build a market that is buzzing with opportunity and optimism and attracts the best and the brightest, bringing new energy and ideas to our economy, all of which drives economic activity in every part of the country. It is worth pointing out that of the about 1 million people employed in the financial services industry, two thirds are outside our capital city. That is not always appreciated.

However, London is an international powerhouse in its own right, with a foreign exchange market three times the size and a derivatives market about 50% bigger than those of the United States, making the UK a genuine global hub for investment. In 2021, more than £17 billion of capital was raised for firms in the UK—a 15-year high. Over 120 deals were completed in that year alone. Of course, we have not been immune to the limited IPO activity caused by market turbulence across 2022 and 2023, yet in 2023 the London Stock Exchange raised more capital than Frankfurt and Amsterdam—the two largest exchanges in the European Union—combined.

More importantly, this Government recognise that there is always more we can do to improve our markets and make them even more open and competitive. My right hon. Friend mentioned that the first step on our reform journey was, as the Economic Secretary to the Treasury stated in a speech last week at Bloomberg, to diagnose the problem—to acknowledge that there was a problem and then seek a way to fix it. That started with Lord Hill’s 2020 UK listings review, alluded to by my right hon. Friend the Member for Vale of Glamorgan, which builds consensus on how to boost IPOs and capital raising on UK capital markets. He will be aware that in 2021, at Mansion House, we launched the wholesale markets review to consider how we could use our new-found regulatory freedoms to make UK markets more competitive.

Next came our solutions to the problems that we had diagnosed. I am happy to say that reform has progressed across all those areas, not only in our legislation and our regulatory regimes, but in the culture and mindset of the Government and of regulators, which is not to be underestimated. The Financial Services and Markets Act 2023 delivered the wholesale market review’s most urgent changes. As a result, firms can now trade in the most liquid market and get the best price for investors. We have also set statutory growth and competitiveness objectives for our regulators and introduced new accountability mechanisms to ensure delivery against those objectives. Following the passage of FSMA 2023, we are taking forward a host of new initiatives, such as the digital securities sandbox, which will test the use of distributed ledger technology in trading and settlement. That is just one of a huge range of reforms coming in the near future.

The result of those reforms is that after three and a half years, we are now within sight of making the UK’s public markets match fit again, which my right hon. Friend and I both seek. But he is right that we must go further and use this as an inflection point to ensure that we are delivering on the promise and opportunity presented by our capital markets. That is why we are taking further steps now and supporting companies through every stage of their investment lifecycle.

First, we will ensure that companies can scale up effectively so that they are primed and ready for listing. To do that, as my right hon. Friend alluded to, we are establishing a world first—a new class of exchange. The private intermittent securities and capital exchange system—catchily named Pisces for short, thankfully—will be established by the end of this year. He asked for assurance, and I can assure him on that timing. The Pisces platform will give private companies better access to capital markets and break down the artificial regulatory cliff edge between public and private markets. This development will allow investors to take advantage of the structural shift to private markets, rather than suffer from it.

Secondly, we want to ensure that, when companies choose to list, the process is as easy and frictionless as possible. A fortnight ago, the Economic Secretary took the UK’s new prospectus legislation through Parliament, paving the way for the FCA to complete its entire rewrite of the prospectus regime’s rulebook to deliver on the recommendations of the Hill and Mark Austin reviews, which my right hon. Friend the Member for Vale of Glamorgan referred to. That will boost the operating environment for our capital markets in two important ways: it will increase the pool of investors participating in capital raises, and it will enable firms to raise larger sums of capital more quickly.

Finally, we want to ensure that, once listed, companies are matched with the best investors for their offering. We welcome the FCA’s commitment to consult on the changes to the unbundling rules this spring. That was a recommendation of Rachel Kent’s investment research review. Subject to the outcomes of that consultation, the FCA will make relevant rules in the first half of this year. We aim to revive the research market by delivering more efficient and accurate pricing, in particular for small and medium-sized enterprises.

In the autumn statement, the Chancellor announced his plans to explore options for a NatWest retail share offer this year, and a wider ambition to get the public buying more shares. My right hon. Friend the Member for Vale of Glamorgan rightly said that we should get Sid investing again. For those who do not know, that is a reference to an advertising campaign that only Members of a certain vintage will appreciate—it is entirely lost on my private office.

I will move on quickly to some of the wider issues. My right hon. Friend talked about Charlie Geffen’s accelerated settlement taskforce, which will upgrade our back-office operations for the 21st century.

This year will mark substantial progress in all three of the investment cycle stages that I have set out. Alongside the regulatory reforms, the Government are looking to reverse the trend of British investors—both institutional and individual—shifting away from investing in UK equities. As my right hon. Friend points out, the statistics are pretty stark. They have been on a downward trend for many years, and that is particularly evident in our pension funds. As he rightly said, at Mansion House the Chancellor began the process of announcing the Mansion House compact, which will see 11 major defined-contribution pension schemes allocate at least 5% of their default funds to unlisted equities, unlocking capital investment in high-growth companies. With the pension reforms now in train, we expect the pension pot of a typical DC saver to increase by as much as £16,000 over the course of an average career.

This agenda is underpinned by a commitment to openness, competitiveness, growth, dynamism and innovation in financial services, as first set out by the then Chancellor, now Prime Minister, in 2021. When those principles are properly applied, they have an impact far beyond financial markets. They can be a way to open the doors of our boardrooms to a far wider range of people, democratising our capital markets and inspiring individuals throughout the country to take an active interest in our markets, while making sure that more people have experience and an understanding of the risks and rewards that are such a vital component of our capital markets.

Our capital markets in this country are a source of great pride, including to me, having worked in them. It is right that we all feel pride in the UK capital market structure, but I want more people to speak with pride about our stocks—the stocks that they own today or may own in the future. Our capital markets have helped shape the country that we live in. They have helped us make this country more prosperous, they have created more jobs and they have made us more competitive overseas. The Government are working to ensure that that remains the case for many years to come by making our markets more attractive, competitive and, crucially, accessible. I am proud to be taking forward that important work with colleagues from across the House, and to have been able to speak about it today under your chairmanship, Ms Nokes.

Question put and agreed to.