Financial Services and Markets Bill

Ian Paisley Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Bim Afolami]

Lest anybody should think I have any particular specialist knowledge, I stress that this is entirely my own view, but I could imagine a scenario in which the Government, supported by this House, intended certain changes to a regulation such as MiFID II. A strategy document might say that the intention is for a, b and c to occur, but when the regulations were drafted, that intention might not appear to come through. In that instance, it would be very legitimate for the House or the Government to say, “No, what we intend is the following, and we will change the detailed regulation in order to achieve the aim—the democratic aim, supported by the Government and the House—that we seek to achieve.”

There are a couple of other areas in which I think the Government could have gone further in the Bill, and which I hope we will consider in the coming weeks and months. The first is the bank levy. I know that this is not always a popular thing to say, but in politics it is sometimes important to say unpopular as well as popular things. When we have an internationally competitive sector, if the tax burdens of jurisdictions with which we are competing for people, for capital, for institutions or for new investment reach a point at which they are significantly, or even a little bit, less than ours—and people may find those jurisdictions attractive for other reasons—we should consider finding ways of reducing our own tax burden, which has risen in recent years. The bank levy was one of those, but it came during the aftermath of the financial crisis, which happened quite a long time ago. I think we should consider getting rid of it, in order to emphasise as much as we possibly can that Britain is still the leading centre of financial services for the world.

I am not saying that this is a panacea; far from it. The Bill contains 300-odd pages because we have a great deal to do. However, the bank levy is a tax, and if we impose high taxes on internationally mobile capital or institutions, there may well be a penalty for this country in terms of attracting those institutions. I ask the House, and in particular those on the Treasury Bench, to reflect on that point.

My second point concerns ringfencing, which the former Chancellor mentioned. When I was at HSBC—I probably should have declared at the beginning that I worked at HSBC before I came to the House, and indeed in other institutions in the City—I had the good fortune to work for quite a long time on the internal restructuring of the bank as part of a strategy of which ringfencing was a huge element. HSBC and Barclays were the two big British banks that had big consumer retail bits and big investment banking bits.

Even at that time, it was obvious to many of us that the most critical part of what we were doing in ensuring the safety of those institutions—and indeed, because they were so big, helping to ensure the safety of the whole financial services sector—was the recovery and resolution power, and not just the ringfencing aspect. While I think the review that has been carried out is very capable and very thorough, I urge the Treasury to look a bit further, and to ask whether we still need ringfencing even under the terms of the way in which it has been reviewed. Can we look again at the thresholds? Can we make this less onerous for big institutions?

Why should we do that? I return to what I said about competitiveness. If there are ways in which we can improve our competitiveness without compromising on safety, I think we should consider them.

[Ian Paisley (North Antrim) (DUP)]

Let me take the hon. Gentleman back to his earlier point about competitiveness, and the possibility of certain institutions being turned off from investing or establishing themselves, or removing themselves from the United Kingdom. Where does he think the single largest threat comes from, if there is a turn-off?

[Bim Afolami]

I would posit two particular jurisdictions. First, I think of the London stock exchange. The House may not fully appreciate the amount of capital that it has, through capital raising by means of initial public offerings and various other measures. However, we have seen a dramatic fall-off since even five years ago, let alone 10 years ago. Meanwhile, Amsterdam’s stock exchange is doing very well. I think that, although Amsterdam as a jurisdiction will never rival London or, I should say, the UK, because we have huge advantages and huge strengths, we need to consider the threat to the London stock exchange from that source.

Secondly, there is the middle east, where various jurisdictions, including some quite surprising ones—particularly Dubai—are trying hard to make themselves attractive to, in particular, capital from America and Asia, and to make themselves into a hub for some of this work. Again, they cannot rival us, but it is not necessary to match us fully to damage our competitiveness, and I think it important to bear that in mind.

[Ian Paisley]

Does the hon. Member think that that when it comes to those locations, especially the middle east, there may be an opportunity for, let us just say, funds to arrive at those destinations without being scrutinised to the same extent as they would be here in the United Kingdom? Is that a potential threat to the banking sector?

[Bim Afolami]

I do not want to cast aspersions on any other jurisdiction. It is clear that we should be proud of our own high standards. I know we will probably get to discussing illicit money from Russia later this year, as we did earlier in this Session. In this country we take action and we pride ourselves on our higher standards—that is not always the case everywhere—but that aspect of competitiveness is not a race to the bottom. This is a really important point. We can be competitive and have high standards. We should not say that the drive for competitiveness means that we drop our standards and end up with corruption, money-laundering and all the rest of it. That is not necessarily true. In this country we are proud of our institutions, proud of our sector and proud of our ecosystem, but that does not mean that nothing needs to improve, and this Bill contains a huge panoply of measures that can help to strengthen our financial services sector.

My last point is about mutual recognition agreements. These are quite dry technical things but ultimately they allow for the easing of doing business between one jurisdiction and another—for example, between the UK and Switzerland, with whom we have built a very good relationship. We should do much more of that, but we should work with the International Trade Department to ensure that our trade deals include much more in terms of services provision and not just mutual recognition agreements that are separate from that. Services trade will benefit this country more than pretty much any other country in the entire world, and we need to work with our International Trade Department, with the Foreign Office and with our international ambassadors to achieve that aim.