Financial Services
Harriett Baldwin Excerpts(8 years, 8 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
The Chancellor has this morning announced that Andrew Bailey has been appointed as the next chief executive of the Financial Conduct Authority.
Andrew will succeed Tracey McDermott, interim CEO, and bring his extensive skills and experience of regulation to ensure that the UK financial services sector is the best regulated in the world.
The Chancellor has also announced the appointments of Bradley Fried, Baroness Hogg, Ruth Kelly and Tom Wright as non-executive directors.
These appointments are being made by HM Treasury under, and in accordance with, the Financial Services and Markets Act 2000 as amended.
[HCWS490]
Financial Ombudsman Service: Strathclyde Mining Group Pensions
Harriett Baldwin Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
Despite my Scottish grandmother, I will not be able to quote Burns quite as beautifully as the hon. Member for Motherwell and Wishaw (Marion Fellows) did tonight—[Interruption.] But I did have the haggis in the Tea Room. I congratulate the hon. Lady on securing the debate. She has expressed powerfully the issues surrounding the Strathclyde Mining Group pensions and the Financial Ombudsman Service.
As Economic Secretary, my key priority is to ensure that financial services firms are on the side of people who work hard, do the right thing and get on in life. Financial services should be there to help them achieve their aspirations at every stage of their lives, whether that is saving for their first home, taking out a mortgage, buying a car or, as in this case, saving and investing for their retirement. It is only by displaying and upholding the highest standards of behaviour that the financial services industry can regain the public trust it lost following the financial crisis.
I am therefore very sorry to hear about the problems that the hon. Lady’s constituents have been facing in this case. Understandably, given the importance we all attach to having savings to provide for our retirement, her constituents are very concerned about the issue. I would like to reassure her, and all other Members, that the Financial Ombudsman Service also takes the matter extremely seriously.
As the hon. Lady has set out, a number of Anderson Mining Group employees have raised concerns that they were not made aware in 1995 and 1996 that a transfer to a buy-out scheme could result in a loss of benefits, and that the advice provided used an assumed retirement age of 65, whereas benefits could have been taken from their occupational pension schemes at age 60. They have therefore complained to the Financial Ombudsman Service about the financial advice they received from Godwins Ltd between 1995 and 1996 to transfer their occupational pension schemes into buy-out policies. I understand that in many of these cases, but not all—she mentioned 50%— the ombudsman found in favour of the complainants.
I know that both the hon. Lady and her predecessor have been in contact with the Financial Ombudsman Service to ask it to re-examine some of the complaints that were not upheld. We all recognise that it is of the utmost importance that people are given suitable advice about their retirement savings and that, when things go wrong, they have access to a swift and low-cost means of redress. It is important to recognise that since these events occurred in the 1990s the Government have made changes to introduce a tough new financial regulator, the Financial Conduct Authority, to protect consumers and promote competition. We took that action because we were not prepared to tolerate the level of consumer detriment we have witnessed in the past.
The hon. Lady will understand that I am unable to comment on specific circumstances relating to the individual cases she has raised today, but I am able to explain the Financial Ombudsman Service model and what she can do when she is not happy with the outcome of that model. The model includes what routes there are to complain about the level of service in dealing with a complaint, as well as the further routes that may be available for seeking redress. The Financial Ombudsman Service was set up by Parliament in 2000—its duties were enshrined in law under the Financial Services and Markets Act 2000—to provide a proportionate, prompt and informal means of resolving disputes between a consumer and a financial service firm. It plays a valuable role in providing consumers with a swift and effective means of resolving disputes, and some of the hon. Lady’s constituents have benefited from that service.
Importantly, once the consumer accepts an ombudsman’s final decision, that decision becomes binding on the firm. As I have said, the Financial Ombudsman Service was specifically designed to provide a swift and relatively low-cost alternative to the courts, which is provided free of charge to consumers. There are many stages in its determination process, providing both parties the opportunities to make further representations before the complaint reaches the final stage of an ombudsman’s decision.
Adding another level of appeal would make the process costlier and lengthier, which could deter consumers from using the service and would generate additional costs for firms. However, it is possible for parties to challenge the way in which an ombudsman has reached a decision by means of judicial review. It is also possible for them to take complaints about the level of service provided to the independent assessor. When a consumer does not accept the ombudsman’s decision, that consumer's right to pursue redress through the courts remains unaffected.
The individuals who are affected in this particular case have concerns that need to be addressed. I shall be meeting the chief executive of the Financial Ombudsman Service later this week, and I will ask her to write to the hon. Lady responding to the concerns that she has rightly expressed this evening.
Let me thank the hon. Lady again for raising these issues, and stress that both the Government and the Financial Ombudsman Service understand their importance to her constituents.
Question put and agreed to.
Contingencies Fund Advance: Help to Buy ISA
Harriett Baldwin Excerpts(8 years, 8 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
The Help to Buy: ISA was announced in the March 2015 Budget. Under the scheme first time buyers purchasing a property in the UK will be able to save up to £200 per month in a Help to Buy: ISA and receive a bonus of up to £3,000 The bonus amount is calculated as 25% of the balance in the buyer’s Help to Buy: ISA, (with a minimum of £400 and capped at £3000). The bonus will be paid upon the completion of the purchase of an eligible property.
The Help to Buy: ISA has been available since 1 December 2015 and 200,000 accounts have so far been opened. The first homes to be acquired using the scheme are expected to be purchased in early February 2016.
The resources for the bonus payments will form part of HM Treasury’s supplementary estimate 2015-16, which is expected to achieve Royal Assent in the associated Supply and Appropriation Bill in mid to late March. HM Treasury will therefore be utilising the Contingencies Fund to make the initial bonus payments that become payable prior to Royal Assent.
Parliamentary approval for additional resources of £20,000,000 for this new expenditure will be sought in a supplementary estimate for HM Treasury. Pending that approval, urgent expenditure estimated at £20,000,000 will be met by repayable cash advances from the Contingencies Fund.
[HCWS487]
Domestic Politically Exposed Persons: Money Laundering Rules
Harriett Baldwin Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
I warmly congratulate my hon. Friend the Member for Broxbourne (Mr Walker) on securing the debate. His speech featured both the clarity and the oratory that regularly win him awards as a parliamentarian.
My hon. Friend has raised an issue that I know has caused a great deal of frustration and anger with our banks, particularly when not just we but our families, by association, experience the same difficulties. I am grateful to him for putting a range of examples on the record, because I regularly inform my officials and the bank representatives whom I meet that my ears are bent every time I go into the Tea Room or the Lobbies, and now they will know that I am not exaggerating. I hear Members’ frustration loud and clear, and I assure them that, along with my right hon. Friend the Minister for Small Business, Industry and Enterprise, who is present, I am keen to enhance the action that we are already taking to deal with this example of red tape. I shall return to that subject shortly, but let me begin by setting out the broader context of our anti-money laundering and counter-terrorist financing regime, of which the issue of domestic politically exposed persons is just one part.
This year will see the most comprehensive review ever of our regime to deal with illicit finance. At a global level we are taking action to improve our response to the threats of organised crime, international corruption and new and evolving forms of terrorism. As the Prime Minister set out in Singapore last year, that is exactly why he will be hosting a major anti-corruption summit in the UK this May.
The Government are also committed to securing the hard-won growth in our economy. In order to maintain this momentum, we need to create a business environment that fosters innovation and investment and that is supported, not hindered, by regulation. That is why it is so important to get the regulatory regime right, and why we are carrying out a red tape review of our current anti money laundering regime, seeking views from the private sector on areas of the regime that it finds unnecessarily burdensome. The aim of this is to help us to fine-tune our legislation so that we have an effective regime that works for our country. That review will report in the coming months, and I look forward to working with my colleague the Minister for Small Business, Industry and Enterprise and to receiving the analysis.
I turn now to the specific issue of domestic PEPs. I recognise that this is the key concern of the debate, and that it is a concern not only of my hon. Friend the Member for Broxbourne but of many others in this House and the other place. As he states, the current global rules on anti-money laundering require that, in cases of high risk, banks and regulated businesses carry out enhanced due diligence on all PEPs—that is, those individuals entrusted with a prominent public function, be it politicians, high-ranking members of the military, senior members of the judiciary or others. Indeed, I myself got caught by this when I held an account with an American firm. There is solid reasoning behind this when it comes to PEPs outside the European Union, because political corruption is something we have seen time and again across the world on a truly astonishing scale.
Let me give three examples. The first is the James Ibori case. He was a state governor in Nigeria from 1999 to 2007. In that time he stole tens of millions of pounds of public money. With an official salary of £10,000 he was somehow able to buy a £2.2 million house in Hampstead, one in Regent’s Park, a house in Dorset and a flat in St John’s Wood, and it was not just Ibori himself who was ultimately convicted and imprisoned: so was his sister, as well as other associates including his UK solicitor. That is because they conspired with Ibori to conceal the origins of his wealth through a complex web of transactions and shell companies.
Another striking example is that of the former Secretary for Transport and Public Works of Macau. He was convicted of 40 counts of corruption and 13 counts of money laundering and sentenced to 27 years’ imprisonment. Since then the UK alone has recovered over £28 million of his corrupt assets and returned them to Macau.
Another example is that of the late Frederick Chiluba. He was Zambian President between 1991 and 2001. On 4 May 2007 he was found guilty of stealing $46 million of assets in a civil case in the Royal Courts of Justice, and used UK-based solicitors to launder money. In 2008 it was reported that about $60 million had been recovered by the Zambian authorities.
There is therefore a reason that we treat foreign PEPs differently under the existing regulations, and that is why families and close associates are also looked at in more detail.
Fiona Mactaggart
All the examples the Minister has cited are of people who had some Executive power. How can Opposition legislators be regarded as having Executive power? I certainly do not feel as though I have any.
Harriett Baldwin
The right hon. Lady is right to highlight that, and I will be coming on to it. Clearly the degree of risk in terms of political engagement will vary not only by country, which is one factor that needs to be taken into account, but also with reference to the role of the individual.
We have heard how the regime works currently, but we have also heard from my hon. Friend the Member for Broxbourne that the regime will be changing in the coming year. The overarching framework is set at a global level by the Financial Action Task Force, which is a collection of 36 countries, including the US and Australia. It includes both domestic and foreign politically exposed persons in its standards. The motivation for these global standards is that in many countries domestic PEPs actually present a higher risk than foreign PEPs, and so one person’s domestic PEP is another person’s foreign PEP. The level of risk is not the same for all countries or all individuals, as has been pointed out, which is why the risk-based approach set out in the standards is crucial.
Of course the UK supports a risk-based approach across the EU to identify and deal with PEPs, especially domestic ones. That is why we were supportive of the fourth anti-money laundering directive, which enacts these global standards. We are now faced with transposing the EU directive into UK law by June 2017, and it will extend the regime so that domestic PEPs will also be subject to enhanced due diligence across the board. Despite the fact that the new regime does not come into effect until next year, I know that some banks—we have heard some examples and some names today—particularly international ones, have already chosen to implement these changes. They are very much applying a one-size-fits-all process, as we have seen in the examples we have heard this evening. I know that for some individuals affected this has caused enormous frustration.
Let me be clear: this change should not prevent any Member of this House, or any other individual in this category, from gaining or maintaining a UK bank account. We are looking at exactly how we can encourage the banks to implement these measures domestically in the most risk-based manner possible. My officials discuss this issue with their international partners on a regular basis, and we are seeking views on this as part of our public consultation on the updated money laundering regulations and how we transpose the fourth anti-money laundering directive into UK law. I am already regularly raising this issue with not only the banks but the regulator.
I have already mentioned the red tape review of our current anti-money laundering regime, and today’s debate is helpful in that context. I know this is an issue of significant concern in this House, as we have heard clearly this evening, so I will report back to hon. Members as this work develops over the coming months. My goal is to have a banking system that is hostile to illicit finance and to terrorists, but which allows ordinary law-abiding and law-making citizens to move easily from one bank to another for better rates and better service. This debate has been very valuable for getting on the record the heavy-handed way in which banks are already applying these new rules. I would like to reassure my hon. Friend, and all other colleagues, that I am on his side, and I am grateful to him for bringing this issue to the House’s attention.
Question put and agreed to.
Oral Answers to Questions
Harriett Baldwin Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Jo Stevens (Cardiff Central) (Lab)
13. What discussions he has had with the Financial Conduct Authority on its decision to end its review of banking culture.
The Economic Secretary to the Treasury (Harriett Baldwin)
The Financial Conduct Authority is an independent regulator. No Treasury Minister or official had any discussions with the FCA before it took the decision to discontinue the review.
Dr Huq
Given that the popular image of bankers right now is probably on a par with used car salesmen or MPs even, does the Minister not agree with the hon. Member for Wyre Forest (Mark Garnier) that to abort the review now, which could have looked at regulating challenger banks as well as historical mis-selling, is a missed opportunity?
Harriett Baldwin
I find it hard to take lectures from the Labour party on regulating the financial sector. In fact, since my right hon. Friend became Chancellor, we have set up the Financial Conduct Authority and moved on from the failed regulatory system under the Labour Government. We made it a criminal offence to manipulate the UK’s key benchmark, we brought in the toughest rules on bankers’ pay of any financial centre, and we are bringing in a new criminal offence so that senior managers whose reckless decisions bring down banks can face up to seven years in jail.
Jo Stevens
With the terrible impact of bad banking practices highlighted in the Tomlinson report, particularly in commercial lending to small businesses, still unresolved for one of my constituents, does the Minister agree that both the public and small businesses still have significant concerns about the behaviour of many individuals within the banking sector?
Harriett Baldwin
I completely agree with the hon. Lady that we need to see the highest levels of conduct from the banking sector. We also need to continue to take steps in terms of our long-term economic plan to secure access to funding for small businesses. That is why we have taken steps to back peer-to-peer lending and extended funding for lending for another two years. We continue to benefit from record low interest rates thanks to our prudent economic management.
Mark Garnier (Wyre Forest) (Con)
There has been speculation that the Treasury has influenced the decision by the Financial Conduct Authority. While I think that such speculation is certainly fanciful, it is important to remind the House that the FCA was set up in 2012 as an independent organisation. Does my hon. Friend agree that one way we could underpin the independence of the FCA would be to adopt a similar process to the one we have with the Office for Budget Responsibility, whereby the Treasury Committee can have power of veto over the appointment of the chief executive?
Harriett Baldwin
My hon. Friend, who is a very constructive and engaged member of the Treasury Committee, will have the opportunity to ask questions of the acting chief executive and the chair of the FCA on Wednesday. I agree that it is very useful for such a Committee to have pre-appointment hearings with any executive of the FCA.
Andrew Bridgen (North West Leicestershire) (Con)
The Symphony interbank communications software, which allows for the permanent deletion of emails, advertises itself as being able to save banks billions of pounds in fines. Will the Minister join my campaign, in conjunction with the Business Secretary, to ensure that the FCA retains the encryption codes for the Symphony software system for seven years, as happens in America?
Harriett Baldwin
My hon. Friend asks a salient question. The FCA is investigating this matter, and he will be aware that new rules—the markets in financial instruments directive II—will require firms to keep information for a considerable period, but this is the subject of ongoing discussions.
Tom Brake (Carshalton and Wallington) (LD)
23. Will the Minister agree that one of the biggest problems with the banking culture is that banks are too big to fail, and will she consider the issue of diversity in the sector, including, for instance, new lending platforms and market disruptors? In particular, will she consider new primary duties on the FCA to consider the issue of diversity?
Harriett Baldwin
I am sure the right hon. Gentleman will welcome the announcement we are expecting on Wednesday from the Bank of England, the FCA and the Prudential Regulation Authority about their working together to back innovation in the financial sector. A key part of our long-term economic plan is to back competition in the banking sector, which is why I am pleased there were eight new entrants to the banking sector in the last Parliament. In this Parliament, we are aiming for 15.
Richard Burgon (Leeds East) (Lab)
Mr Speaker,
“interventions by HM Treasury and other bodies have raised questions…regarding the board’s independence”—
not my words but those of an FCA-commissioned external report on the FCA board published last week. How will the Chancellor demonstrate that the appointment of the new chief executive will not be yet another example of an overreaching Chancellor trying to get his own way?
Harriett Baldwin
It was good of the hon. Gentleman to turn up for Treasury questions this time—I guess there was not a Stop the War march or a picket line to join today. I can assure him that the Treasury has the power to appoint both the board and the chief executive and to set its remit, but from then on it has operational independence.
James Heappey (Wells) (Con)
3. What comparative assessment he has made of the trends in the levels of wage growth and inflation.
Alison Thewliss (Glasgow Central) (SNP)
6. How many staff in his Department earn less than £7.85 per hour.
Alison Thewliss
I thank the Minister for that answer, but does she not agree that it is important to pay the real living wage, which is £9.40 an hour in London and £8.25 in the rest of the United Kingdom? It is paid by the Scottish Government and by more than 400 employers in Scotland, so it is fair to all employees, particularly those under 25.
Harriett Baldwin
I am glad the hon. Lady welcomes the fact that, from April this year, all employees in the United Kingdom who are over 25 will receive a significant pay rise. That is thanks to the strength of employment throughout the United Kingdom, which in turn is thanks to our long-term economic plan.
Rishi Sunak (Richmond (Yorks)) (Con)
According to my calculations, someone who earns £7.85 an hour today will benefit from rises in the personal tax allowance and the national living wage, and, by the end of this Parliament, will be more than £1,500 better off. Does my hon. Friend agree that that proves that this Government are committed to making work pay?
Harriett Baldwin
My hon. Friend makes an excellent point. In fact, it has been stated that not only will 2.5 million people benefit directly from the change in the national living wage in April, but up to 6 million whose salaries are very close to that hourly rate will benefit as well.
Mr Jim Cunningham (Coventry South) (Lab)
When will the Chancellor, and in particular the Minister, give public sector workers a decent pay rise that reflects some of the jobs that they do for us?
Harriett Baldwin
We believe that every worker in the country will benefit from the change in the national living wage, which is an important part of the long-term economic plan, but, as the hon. Gentleman will know, this year public sector workers received pay rises that were above inflation.
Mr Ranil Jayawardena (North East Hampshire) (Con)
The Minister has made important comments about the principle of making work pay. Will she give further consideration to extending the married couples’ tax allowance, so that more families can keep more of what they earn?
Mr Alan Mak (Havant) (Con)
7. What fiscal steps he is taking to support businesses.
Nick Smith (Blaenau Gwent) (Lab)
14. What his plans are for future funding of illegal money lending teams.
The Economic Secretary to the Treasury (Harriett Baldwin)
The Government are exploring options to ensure that the England and Wales illegal money lending teams have the funding they need to ensure that consumers continue to be protected from illegal loan sharks, and are confident of transitional arrangements being agreed.
Nick Smith
Too many of my constituents are victims of loan sharks. The illegal money lending team has helped nearly 24,000 victims across the country, yet the Government have treated the service with disdain. Will the cuts to this vital team and to local employment standards not make the poorest more vulnerable?
Harriett Baldwin
Far from agreeing with the hon. Gentleman, I must say that the Government are finding ways to put the team on a sustainable basis to continue the valuable work it does to protect people from illegal money lending.
Gareth Johnson (Dartford) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Economic Secretary to the Treasury (Harriett Baldwin)
I am delighted to tell my constituency neighbour that at the end of last year we announced that all the major banks are now able to offer a basic bank account to customers who require one.
Margaret Greenwood (Wirral West) (Lab)
T6. Many of my constituents who watch “Coronation Street” will be following the story of Tyrone Dobbs’ struggle with debt with keen interest. Unsecured lending reached a record high last year, with more than 3 million people in problem debt. The Government promised a review of what breathing space creditors should give to people who are engaged with a debt charity or agency, so that their debts do not continue to spiral out of control while they are working to resolve them. The review was due by the end of 2015. When do the Government now plan to announce it?
Harriett Baldwin
In answer to earlier questions I referred to the importance that we place on the team that will tackle illegal money lending. We have continued to support funding for debt advice, including through excellent organisations such as Christians Against Poverty, StepChange and Citizens Advice, to help individuals such as those mentioned by the hon. Lady.
James Berry (Kingston and Surbiton) (Con)
On Friday I visited Barclays bank in Kingston to hear about the fantastic Barclays life skills course, which teaches young people financial literacy, among other things. I can see some candidates for the course here today. Does the Minister agree that by making financial education more accessible, we can ensure that the financial sector itself supports young people and people throughout every stage of their lives?
Harriett Baldwin
I am delighted that my hon. Friend found his visit to Barclays in his constituency to be so helpful. I know that he, too, will welcome the fact that since 2014 financial education has been part of the national curriculum.
Barbara Keeley (Worsley and Eccles South) (Lab)
T7. The Conservative leader of Essex county council has told the Prime Minister that the 2% social care precept will cover only half the council’s increased costs. He has suggested bringing better care funding forward to 2017 and asked for a fairer redistribution of funds. Even Conservative councils cannot wait till 2019 for the funding that the Chancellor has allocated, so will he act now to avoid a further crisis in social care?
Mr Robin Walker (Worcester) (Con)
Credit unions can play a vital role in improving financial inclusion and creating a stronger savings culture. As I know from my work with the all-party credit unions group, they have support in all parts of this House. With the opportunity of the World Council of Credit Unions coming to the UK—to Northern Ireland—later this year, will the Chancellor commit to making sure that we continue to build on the work of the credit union expansion programme and back this vital group?
Harriett Baldwin
My other constituency neighbour is a fine advocate for the excellent credit unions industry. As he will know, we have backed the industry with £38 million of investment through the credit union expansion project, and we will continue to seek ways to back credit unions.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
Given that manufacturing remains at 6.1% below pre-crisis levels, with worrying trends in the manufacture of plant and machinery and of pharmaceuticals, will the Chancellor accept that his domestic policy agenda has just as much impact on our performance as the global factors that he is so very keen to blame, and that if the march of the makers is now going backwards, he must bear a measure of responsibility and come forward with proposals to halt the decline?
Alison McGovern (Wirral South) (Lab)
May I return the City Minister to the issue of the cancelled FCA inquiry into banking culture? The Parliamentary Commission on Banking Standards chaired by the right hon. Member for Chichester (Mr Tyrie) pointed to the “Murder on the Orient Express” excuse where everyone was partly responsible but no one was really to blame. The Minister said before that Ministers had no role in the cancellation of that inquiry. Will she say, yes or no, whether any civil servants did?
Several hon. Members rose—
Connaught Income Fund
Harriett Baldwin Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
I congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this debate, chairing the all-party group and raising the serious issues concerning the Connaught Income Fund. His constituents and, clearly, those of many other colleagues have been seriously affected by this event and have written to me many times.
Many investors have lost substantial sums and, indeed, sometimes their life savings as a result of the events involving the Connaught funds. I am very much aware that that has caused real hardship for people across the country. It is important that the FCA and the all-party group get to the bottom of this matter and try to secure the best outcome for investors in these funds. Those who are responsible should face justice for their actions. It is equally important that steps are taken to ensure that this situation does not arise again in the future.
I reassure my hon. Friend and all other Members that the Financial Conduct Authority takes this matter extremely seriously.
Harriett Baldwin
Given the lack of time, I will make a bit of progress. If I have time, I will come back to the hon. Lady.
The FCA also knows that what happened with the Connaught funds has caused serious distress to many investors and continues to work closely on this case to secure the best possible outcome. As my hon. Friend the Member for Aberconwy said, the Connaught funds comprised three separate funds, income series 1, series 2 and series 3. In total, approximately £147 million was invested in the funds, which, as we know, were unregulated collective investment schemes. By definition, such schemes are not subject to direct regulation by the FCA or, previously, by the Financial Services Authority.
In the case of Connaught investment funds, many of the usual protections and safeguards that protect investors in regulated funds were absent, owing to the unregulated nature of some of the entities involved. On this point, I want to touch on two main issues. The first concerns the actions taken by the FCA to try to protect consumers, despite most of the entities involved being unregulated. That includes the ongoing work to secure a fair and proper outcome for investors. The second involves the steps that can be taken to ensure that this sort of situation does not happen again.
First, despite the schemes being unregulated, the FCA has taken a number of significant steps to try to protect customers right from when the first problems arose. In May 2011, the FCA, which was at the time the FSA, altered Tiuta’s permissions on issuing new regulated mortgage lending. Shortly thereafter, it wrote to investors who might have been mis-sold the fund and all financial advisers who sold the fund, asking them to review the sales and to contact customers where there may have been the risk of unsuitable advice. The FCA has continued to provide updates on the situation via its website. Once the funds were suspended and steps were taken to wind them down, the FCA announced on 16 July 2014 that it would support a negotiated settlement to address investor losses.
As hon. Members may know, the FCA initially supported the negotiations between the parties involved, as it believed that doing so was in the best interests of investors. However, having extended the negotiations more than once, in March 2015 the FCA announced its decision to withdraw from them. The FCA decided that a further extension to the negotiation period was not in the best interests of investors. I am sure my hon. Friend will understand that as the negotiations were voluntary and confidential, the FCA cannot provide specific details on what happened during the negotiations.
Harriett Baldwin
I have so little time.
The FCA is now conducting formal investigations into the activities of the two operators of the fund, Capita Financial Managers Ltd and Blue Gate Capital Ltd. My hon. Friend questions the length of time that the FCA is likely to take in order to conduct and conclude its investigations. Although it is too early to give a reliable estimate of the likely time frame for their conclusion, the FCA has assured me that it intends to progress the investigations efficiently and effectively. The length of time it will take to complete the investigations is affected by, among other things, the level of co-operation received from those under investigation and any related third parties.
As the FCA is in the process of carrying out its investigations it is, of course, not possible to comment on their likely outcome. The FCA is unable to provide any comment on what the level or form of compensation to investors may be if it is found that the operators have contravened any regulatory principles or rules.
Harriett Baldwin
I have so little time, but I will try to make progress and then give way.
The FCA is an independent, non-governmental body, so I am sure my hon. Friend the Member for Aberconwy will agree that for me to interfere in its investigations in any way would not be appropriate.
My hon. Friend raised the question of whether the Financial Ombudsman Service has indicated a pre-determination to find against independent financial advisers, regardless of the allegations of fraudulent behaviour within the fund. It is important to note that like the FCA, the Financial Ombudsman Service is an independent, non-governmental body. It provides an independent dispute resolution service for consumers with individual complaints against financial services companies. In view of this independence, it would not be appropriate for the Government to comment or intervene in the Financial Ombudsman Service’s work on complaints against advisers who sold the Connaught Income Fund.
However, although I cannot provide comment on these details of these investigations, I am assured that the FCA has put considerable resources, time and effort into trying to achieve a good outcome for the investors affected by the failure of the fund, and that it continues to act in the best interests of the investors.
Harriett Baldwin
I shall give way to the hon. Member for East Renfrewshire (Kirsten Oswald) first.
Kirsten Oswald
I am grateful to the hon. Lady for giving way. In response to a written question I was referred to the record of ministerial meetings to find out when a Treasury Minister last met representatives of the FCA. Does the Minister understand my astonishment at finding not a single bilateral meeting between the Treasury at ministerial level and the FCA in the two years from October 2013 to September 2015? Does she appreciate that her Government seem to be asleep at the wheel as the FCA fails to clean up the financial services sector?
Harriett Baldwin
The hon. Lady has been assiduous in tabling a number of parliamentary questions. I think I am right in saying that they have been put on the record in the Library. I encourage other hon. Members to have a look and see the record that she has managed to get from the FCA in writing.
I am sure that other hon. Members who have constituents who have suffered losses in the Connaught Income Fund will welcome the reassurance that the FCA is doing its utmost to secure the best possible outcome for investors, and that they will support the FCA in its current investigations.
Mr Nuttall
I appreciate that the Minister does not want to comment, but given the strength of feeling this evening, will she please pick up the phone in the morning to Tracey McDermott, the interim head of the FCA, and make it absolutely clear that we want some action on behalf of our constituents and we want this matter sorted out now?
Harriett Baldwin
I am sure my hon. Friend would not want me to interfere in a number of different FCA matters, but I am quite sure that the FCA will have seen the strength of feeling in the Chamber this evening.
I have one minute left so I will take a quick intervention.
Mary Robinson
I am grateful to my hon. Friend. Does she agree that at the heart of this are many elderly people who have done the right thing all their lives, saved for their retirement and gone, like my constituents, to an IFA, and now it is time for the FCA to do the right thing for them?
Harriett Baldwin
There clearly is a lot to investigate in this case. As I said, the FCA is doing its utmost to secure the best possible outcome for investors.
I would like to reassure hon. Members about the steps that have been taken to ensure that this situation does not occur again. The FCA has brought in new rules banning the promotion of unregulated collective investment schemes to ordinary retail investors. Independent financial advisers should not be selling unregulated investment schemes to retail investors. The circumstances in which unregulated schemes can be promoted to consumers are generally restricted to certain types of qualifying investors, such as those who have a high level of understanding about investments, or high net worth individuals, for whom those products are likely to be more suitable. That is an important step to take in ensuring that such a situation does not occur in the future.
I thank my hon. Friend the Member for Aberconwy once again for raising these important issues. His all-party group plays an incredibly important role in the parliamentary scrutiny of what the FCA is investigating, and I hope we can move forward and secure redress for his constituents and others.
Question put and agreed to.
Banking Act 2009 Reporting
Harriett Baldwin Excerpts(8 years, 9 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
The Treasury has laid before the House of Commons a report required under section 231 of the Banking Act 2009 covering the period from 1 April 2015 to 30 September 2015. Copies of the document are available in the Vote Office and the Printed Paper Office.
[HCWS433]
Financial Services
Harriett Baldwin Excerpts(8 years, 9 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
The Government have today published their response to the consultation on creating a secondary annuity market (CM 9046, March 2015). The response confirms that from 6 April 2017 tax restrictions for people looking to sell their annuity will be removed, giving the 5 million people with an existing annuity, and anyone who purchases an annuity in the future, the freedom to sell their right to future income streams for an upfront cash sum. This will extend the pension freedoms already introduced in April 2015 for those reaching retirement with a pension pot. The consultation sets out further details around how the market will work, including the comprehensive consumer protection regime.
The document has been placed in the Libraries of both Houses.
[HCWS396]
Draft Payment Accounts Regulations 2015
Harriett Baldwin Excerpts(8 years, 9 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
I beg to move,
That the Committee has considered the draft Payment Accounts Regulations 2015.
It is a great pleasure to serve under your chairmanship, Mr McCabe. I am pleased to introduce these draft regulations, which aim to ensure the UK’s compliance with the EU payment accounts directive. The directive sets common standards across member states that payment service providers—in this context, principally banks and building societies—must meet.
First, for the accounts that we use for day-to-day transactions—in most cases, a current account—the directive aims to make fees and charges clearer and more comparable. Secondly, the directive seeks to make it easier to switch to another provider of such an account, in order to facilitate competition. Thirdly, the directive creates a right of access to a payment account with basic features—more commonly known as “basic bank accounts” in the UK—for all consumers legally resident within the EU.
The Government supported the directive and have already taken action in many of those areas. Agreements with industry already aim to improve transparency of fees and charges, and we have established the seven-day current account switch service. For more than 10 years, our largest banks have offered basic bank accounts, and they have recently committed to improve that offering even further. The regulations comply with the directive where necessary but minimise negative impacts on industry and customers and preserve structures that are already working well in the UK.
I will start with a few words on the scope of the directive—namely, the definition of the term “payment account”. For the avoidance of doubt, when I refer to a payment account today, I do so in line with the definition used in the draft regulations. The definition of that term in the directive could capture very simple types of payment account, well beyond the types of account used for day-to-day transactions that were discussed in open negotiations. However, the detailed recitals to the directive make it clear that the following should, in principle, be excluded: savings accounts; credit card accounts, into which funds are usually paid for the sole purpose of repaying a credit card debt; current account mortgages; and e-money accounts. The exception to that is where such accounts are used for day-to-day payment transactions.
Accordingly, the Government have defined “payment account” in the draft regulations in a way that describes and clarifies the accounts that will be in scope. It is the Government’s view that the definition should be sufficient to limit the application of the draft regulations to current accounts or accounts that have functionalities directly comparable to those of current accounts in the UK.
The Government have given as much clarification as the text for the directive allows. To go further and entirely exclude some types of account would be to risk a failure to comply with the directive. It will be for firms themselves to determine whether each of their products falls within the scope of the regulations and whether the regulations therefore apply to them. The Financial Conduct Authority will supervise and enforce most of the requirements set out in the draft regulations.
Where firms offer a payment account in line with the draft regulations, they will need to make new documents available to customers: first, a fee information document setting out the fees that may be charged before the consumer decides to enter into a contract; secondly, an annual statement of fees provided each year to explain the fees that have been charged; and thirdly, a glossary to explain the main terms used in the documents and their definitions. Some of the terminology used in those documents and in related contractual, commercial and marketing information will be standardised at European level. The process for carrying out that standardisation is already under way.
As required by the directive, the Financial Conduct Authority has established a provisional national list of the most representative services that are linked to current accounts in the UK and subject to a fee. Each member state has submitted its list to the European Commission and the European Banking Authority, so that they may develop EU standardised terminology for the services that appear on a majority of member states’ national lists.
After the European Commission adopts the EU standardised terminology, the FCA will integrate standardised terminology into its provisional national list, where necessary, and publish the final list for UK payment service providers to use. In addition, the Money Advice Service will operate a comparison website allowing customers to compare at least the fees that appear on the final list.
The directive will also require action on packaged accounts, which are payment accounts that offer an additional service or services such as insurance or car breakdown cover. Customers will now need to be informed whether the account is available without the additional services and, if any of the additional services may be purchased separately from the same firm, how much each of those additional services would cost. Taken together, the measures should help customers understand and compare how much they are charged.
I will now set out the approach to account switching. As I have mentioned, the UK already has a world-leading current account switch service, which has been recognised by the European Commission. It is managed and operated by BACS, a not-for-profit organisation. Not all EU member states are in our happy position, however, so the directive sets out some rules that all EU payment service providers must abide by when customers wish to switch to another payment account in their member state.
Where a UK payment service provider is not a member of the current account switch service and it offers a current account-type product, it must at least follow the EU rules. However, for the vast majority of the current account market, the draft regulations allow our current account switch service to continue to work as it does today.
Compared with the switching rules set out in the directive, our current account switch service must meet three simple criteria: it must continue to be in the interest of the consumer; it must present no additional burden to the consumer; and it must be at least as fast. As the directive makes clear, we may maintain existing services where they meet those three criteria.
There is no requirement to mirror the switching rules set out in the directive exactly. The Government’s clear view is that our existing current account switch service exceeds the three criteria. However, the UK’s compliance with the directive should be beyond question, which is why the independent Payment Systems Regulator will be responsible for confirming that the current account switch service meets and continues to deliver against the three criteria.
We have agreed a proportionate set of powers for the Payment Systems Regulator, as a competent authority, to use should they ever become necessary in its limited role. The Payment Systems Regulator will provide further information on the designation and monitoring process in due course.
I will move on to the provisions on basic bank accounts. Such accounts help to ensure that everyone can access essential banking services. They should be fee free and not offer an overdraft or cheque book. The draft regulations on basic bank accounts reflect the UK’s existing basic bank account policy, in particular where that is more advantageous to customers, but they bring the UK into line with the requirements in the directive where necessary.
In December last year, the Government reached a new agreement on basic bank accounts with the nine largest providers of current accounts. That agreement clarifies who should be eligible for a basic bank account and brings to an end the widespread practice of charging basic bank account customers for a failed payment, such as a failed direct debit or standing order.
We have taken action in the draft regulations to ensure that we do not move backwards as a result of implementing the directive. For example, the directive would allow us to establish arrangements less advantageous to UK basic bank account customers by allowing banks to charge fees. However, the Government believe that a basic bank account and its standard services should continue to be provided free of charge, as long as the services are provided in pounds sterling. Nor should basic bank account customers be charged for failed payments or for over-running, given that a key principle underpinning basic accounts in the UK is that they should not be offered with an overdraft.
The directive will allow us to restrict accounts to only the unbanked, but we are clear that basic bank accounts are also necessary for access to banking for those who may already be banked but unable to use their existing account owing to financial difficulty. That is why the eligibility criteria in the draft regulations establish that consumers should be offered at least a basic bank account if they are unbanked or if they do not meet the bank’s stated eligibility criteria for standard current accounts.
We do not want to move backwards, but we have had to ensure that the UK can demonstrate its compliance with the directive. For example, we had to legislate to establish a clear legal right of access to a basic bank account and a right to challenge banks’ decisions before a court. A voluntary agreement could not establish those rights with sufficient legal certainty.
We have also had to limit and make more specific the reasons why a bank may refuse an application for a basic bank account or close one. However—I recognise the concern from the industry on that—no bank is required to open an account or continue to operate one where it would otherwise be unlawful to do so. I hope my words have assured the Committee that the regulations meet the UK’s obligation in implementing the directive in a sensible and pragmatic way and that, therefore, it will support the motion to approve them.
Harriett Baldwin
I welcome the support of Her Majesty’s Opposition, who have acknowledged that the draft regulations simply recognise that we are in the fortunate position, across the whole UK banking sector, of already having in place most of the component parts of the architecture required by the measure. The questions asked by the hon. Member for Leeds East are really more general questions about banking, competition and switching between bank accounts. I am happy to answer those questions but I will first answer the question of my right hon. Friend the Member for Cities of London and Westminster about the requirement for a basic bank account to be provided for any citizen of the EU who comes here and chooses to open one. I reassure him that exactly the same high standards of anti-money-laundering regulations would still apply in those situations so the banks should certainly satisfy themselves that the person whose basic bank account they are being asked to open can legally open one in the UK. Of course, that has come into particularly sharp focus as a result of the terrorist act in Paris recently. We must ensure that rigorous checks are in place.
My right hon. Friend asked whether the banks have enough time. As this is largely already in place in the United Kingdom, I have not had concerns expressed to me about timing. If he has representations that he would like to pass on or if he has specific concerns, I would be interested in hearing them. Our understanding is that, because a basic bank account has been available in the UK for many years, the industry is not concerned about implementing the regulations.
The hon. Member for Leeds East asked about a range of things related to the recent CMA report about bank account competition. That report has had its first publication and is open for consultation and feedback. I encourage him to write in to that. Clearly, we do not think that the directive will prevent us, in any way, from making the changes that we might want to make in the UK as a result of the CMA recommendations. The draft regulations will not prevent the UK from moving ahead on domestic initiatives. They are still being consulted on and they will be published next spring.
The hon. Gentleman is absolutely right to highlight the fact that people in the UK are much more likely to get divorced that to move bank accounts. That is not a very happy statistic. Nevertheless, since the current account switch service came in, we have certainly had a big increase in the number of people using it, because it makes it so much easier for consumers to move all their direct debits and payments across. In fact, 2.25 million people have used the service since it started and it seems only a few months ago that we were celebrating the 2 millionth. Clearly, many people are using it and, importantly, the fact that we have put such an emphasis on banking competition in this country means that consumers have more choice of who they might move to.
A lot of new challenger banks are opening in the UK. In the five years up to 2010, only one new bank opened in the UK. In the previous Parliament, eight new banks opened in the UK, and in this Parliament, we hope that 15 new banks will open in the UK. Of course, the opening of new banks gives consumers more choice and makes for a more competitive marketplace. The rate of change in switching is going up, but we welcome the initial report from the CMA, which is consulting on ways in which we might make it easier for consumers to get a better deal from their bank account.
The hon. Gentleman also asked about the timetable for the Money Advice Service. I can confirm that the Money Advice Service is funded through a levy. We work closely with it and with the FCA on its overall budget but that will clearly form part of its work stream. As for the timetable for that, as I mentioned in my opening remarks, we need to get the final list published by the FCA of the applicable terms to which it would expect the Money Advice Service to link. Once that happens, we expect the FCA to publish that list during the first half of 2017. Obviously, the Money Advice Service may choose to set up its website sooner, but there is no obligation for it to do so until six months after the FCA publishes its final linked services list.
If there are no further questions, I hope that the Committee will now support the draft regulations.
Question put and agreed to.
Financial Services
Harriett Baldwin Excerpts(8 years, 10 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (Harriett Baldwin)
Further to the statement provided to the House on 2 June 2015 [HCWS10], the Chancellor has announced that the trading plan to sell part of the Government’s shares in Lloyds Banking Group will be extended. We will stop the plan before the launch of the Government’s retail sale of Lloyds shares.
The extension of the plan is a further step in returning Lloyds to the private sector and reducing our national debt. A statement will be laid before Parliament with further details at the end of the plan.
[HCWS358]