Environmental, Social and Governance Developments

Jim Shannon Excerpts

Monday 23rd October 2023 Commons Chamber

[Alexander Stafford (Rother Valley) (Con)]

As the founding chairman of the all-party parliamentary group on environmental, social and governance, I am delighted to have secured the first ever debate on environmental, social and governance developments in the UK in this place. I refer the House to my entry in the Register of Members’ Financial Interests and to the all-party group’s interests as well.

ESG is a set of characteristics that can be used to assess the non-financial elements of an investment or business decision. In its simplest form, ESG is a way to take into account potential risks and rewards that might not be obvious from a balance sheet. Everyone, in their own way, incorporates ESG criteria into each and every economic decision, even if unknowingly.

For instance, the property developer does not buy land next to a crumbling cliff; a family might choose not to go to a particular shop because they have heard that it treats its employees badly; or a woman might change jobs to work for a firm that is fighting the gender pay gap. ESG is simply the use of non-financial criteria in decision making—a way for investors, companies and individuals to get a bigger picture of the impact of their investments, which will help them better understand the risks and, more importantly, the rewards.

Recently, there has been much debate about ESG, as it has risen in prominence. The number of ESG assets under management has grown by more than 150% since 2015, with global ESG assets expected to exceed £41 trillion or about four times the value of all the assets held in the UK. They will also account for a third of all assets under management by 2025. This scale-up has been met with some concern about ESG perhaps having some underlying political current. This is wrong. In its true form, ESG is simply an investment strategy—one that, like all investment strategies, aspires to low risk and high return. ESG is not a political stance, a way of life or a mantra for investors, although of course in some situations it is unfortunately used wrongly to pursue certain political agendas. In others, it is seen as shorthand for ethical or impact investing. However, it is neither.

In this debate, I will be sticking to our definition of ESG as an investment strategy and hoping to make the case to Government for why we should be encouraging it, what problems we have to overcome and how best to claim the crown, and the associated benefits, as the world leaders of ESG investing.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for securing this debate. Does he agree that if we create a science-based and world-beating taxonomy, businesses that can show alignment with the UK green taxonomy will automatically be in alignment with international taxonomies, which should ensure that there is no divergence, which should subsequently enhance our capacity? Does he further agree that Government and the Minister have a role to play in assisting businesses to achieve that potential, so that all of us in the United Kingdom of Great Britain and Northern Ireland can gain and everybody can be a winner?

[Alexander Stafford]

I thank the hon. Member for intervening; it is always a pleasure when he joins such debates. He mentioned the Minister, who I know has a good, keen, personal interest in ESG, having worked in the field prior to coming to this place. The hon. Member is completely right about the green taxonomy. We need a robust taxonomy—I will come to that later—but it is a shame that we are behind where we should be with the green taxonomy. We need to be careful to ensure that our green taxonomy is robust and world leading. One of the many benefits of leaving the European Union is that we can define what we want and how we want it ourselves. By having a UK green taxonomy, we can ensure that we are world leaders in the UK, including in Northern Ireland especially, which I know has a high level of financial services.

Let me go back to the meat of my speech. It is not the case that those investing along ESG lines do not want to see good done for planet and people—they do. For example, we know that ESG investors are sometimes willing to pay higher fees and to see lower returns than their more returns-focused peers. The Wall Street Journal reported earlier this year that ESG funds could charge up to three times more. I do not exclude those types of companies and investors from this discussion. Rather, in holding the first ever debate on ESG in the House, I hope that more discourse will lead to more action.

It is clear that using non-financial metrics, and thereby factoring in all the data available to make the most rational, informed investment decision possible, will lead to financial returns. For example, more ESG-aligned employers will be able to hire better candidates for less—something known as taking a green cut, which is the attitude that up to 48% of younger people were recently reported as taking. Equally, improving environmental ratings through technology can lead to huge efficiency savings for companies. For example, some studies have shown that using low-energy lighting has a payback of less than 12 months, which is a win for the company’s bottom line and its sustainability standards. This reflexive impact of ESG is known as “double materiality”, which is how a business is affected by changing conditions—be they climate, social, or governance—and what that company is doing to contribute to or militate against those changes. That is becoming more and more important for investors to factor in.

There are also huge financial benefits to be gained from embracing ESG for the whole country, including Northern Ireland. The UK is already home to the oldest and most trusted conventional financial centre. That is coupled with the City of London’s commitment to sustainability, topping the Global Green Finance Index. Therefore, with a little extra effect, we will secure a home for ESG investors inside our border.

ESG’s recent rise in popularity has caused some growing pains. Primarily, the lack of universal frameworks and metrics mean that trust in ESG is at an all-time low, as we have seen in anti-ESG proposals approved by boards globally. In ESG investing, as in all business, trust is paramount. Just as an investor must be sure that their investment is sound, and that they will not suddenly find themselves out of pocket, an ESG investor needs to be sure that any claims to sustainability are true.

We have a rich history of accounting for financial accuracy in this country, with the Domesday Book perhaps being the earliest example—in that case, the new, or relatively new, King William checking that his investment was as profitable as he had thought. That invasion of 1066 did not come cheap. It took 800 years, and a parliamentary Select Committee to develop something closer to modern accountancy practices, but the UK is now an oasis of bookkeeping and verifiable investing. Fraudulent financial claims can be easily spotted and shut down. Why then, is the same not the case for fraudulent ESG claims?

One of the main causes of the problem is that much of what ESG seeks to account for is intangible and therefore incalculable with our current frameworks. How, for example, might a company begin to calculate its effect on biodiversity? What metric can an investor look for to see an investment’s diversity score? This problem is not insurmountable. Twenty years ago, as major economies were waking up to the true effects of increasing carbon emissions and climate change, the issue of how to count carbon seemed similarly difficult. Today, after much trial and error and leadership from the UK, we can quickly and easily calculate the carbon footprint of any business, person, or product.

Developing frameworks to help business understand, quantify and account for non-financial factors is difficult but very important. Proper frameworks are the first lines of defence against a full breakdown in trust in ESG reporting and investing. They will also help to stop so-called greenwashing, where a product or investment is marketed as being more sustainable than it is. Despite the name, this applies across all three ESG objectives. Such distrust is made worse by some ESG advisers and ratings agencies, whose business plans seem to depend on being able to sell five-star ESG ratings to the highest bidder, without giving any proof of them whatever—a veritable wild west of the ESG world. Of course, many of these businesses are doing comprehensive evaluations of the products, but given the difficulty that an investor would have in distinguishing the good ratings from the bad, it is hardly the confidence-inspiring boost that they need.

I know that the Treasury is well aware of the concerns, and I am pleased that there was a consultation held earlier this year on how best to introduce regulation on ESG ratings. This is a good and necessary step, but we are in danger of winning the battle but losing the war if we delay any further. I urge the Minister to speed up this regulation as much as possible.

We can go further than regulation, however, and set up the frameworks we need to allow any investor or company to understand quickly and easily the ESG impacts of their investments. A taxonomy—essentially a classification of what is and what is not allowed—would do just that, and the Treasury’s plan to develop a UK green taxonomy is exactly the right step. This taxonomy, as well as its social and governance cousins, would clearly outline investments that are sustainable—and therefore could be marketed as such—and those that are not. Given that the EU’s version of a green taxonomy is dead in the water—it is a bureaucratic nightmare that is no longer fit for purpose—we can make our own decisions here.

We are lucky that, thanks to Brexit, we have been given the chance to design our own robust taxonomy, one that could and should lead the world and entrench the UK as the true home of sustainable finance. Sadly, we have seen our taxonomy delayed and delayed and delayed. I was pleased to see the UK green taxonomy mentioned in this year’s green finance strategy update, but on the original timeline we should already be halfway through the legislative process by now.

Business Banking: Undesignated Client Accounts

Jim Shannon Excerpts

Wednesday 18th October 2023 Westminster Hall

[Kelly Tolhurst (Rochester and Strood) (Con)]

It is a pleasure to speak under your chairmanship, Mrs Cummins, on an issue that is affecting many businesses across a number of sectors. It is an issue that is extremely important to the businesses that are affected, and one that could have a significant impact on many businesses and their customers in future. I want to raise the situation faced by a number of small businesses with ongoing struggles to get access to the bank accounts that they need to carry out day-to-day functions and protect their clients’ customer funds.

Over the past couple of years, I have heard horror stories from a number of reputable and long-established companies that have been driven to the brink of closure as a result of how anti-money laundering regulations, particularly the Joint Money Laundering Steering Group guidelines, are being understood and implemented by UK banks. Many small businesses that deal with large quantities of client money use pooled client accounts, also known as undesignated client accounts.

I have a background in the marine industry, so I have a good understanding of, knowledge of and relationship with the industry. That is why, when the Association of Brokers and Yacht Agents reached out to me to highlight its concerns, I understood that it was a real issue and that I needed to work with the association, along with the Treasury and other relevant parties such as UK Finance and the Financial Conduct Authority, to try to resolve it. Yacht brokers are a very resilient bunch and are a key part of the UK’s marine industry, so when I hear that they are facing challenges that threaten their businesses, it is something of great concern that we must take seriously.

Although I initially raised this issue on behalf of the yacht broking industry, I have since learned that it is an issue that affects a number of other industries and sectors, including letting agents, estate agents, jewellers, care homes and even solicitors. I suspect it affects many more. I have had recent engagement with Propertymark, the professional body for property agents, which represents over 12,500 member branches in the UK, some of whom are being affected in the same way.

I will briefly explain why the yacht broking industry has come to use those types of accounts, and where we are up to with getting this resolved. In the early 2000s, the yacht broking industry faced a severe crisis when yacht broker and new boat dealer BA Peters went into liquidation. This created shockwaves throughout the industry, as BA Peters did not have a pooled client account in place. As a result, clients’ money was not protected when the company collapsed. Numerous individuals lost their deposits and the proceeds of sales, with some receiving only 23p for every £1 they were owed. It also resulted in a massive bill for the Insolvency Service to conduct a thorough investigation to try to identify client funds and into which of the many accounts they had been paid. This devastating experience exposed the vulnerability of client funds and the need for urgent safeguards.

[Jim Shannon (Strangford) (DUP)]

I congratulate the right hon. Lady on bringing forward this debate. We spoke beforehand. Does she agree that some banks are being accused of using the legislation she referred to as a way of closing accounts that are not profitable? I have several examples from back home in Strangford—I could read out two pages of them—of businesses being given no other reason for closure than this legislation. Does the right hon. Lady agree that the loophole must be closed?

[Kelly Tolhurst]

I thank the hon. Gentleman for his questions. Something is going on, and it is worrying. Banks are there to help us with our personal finances, but they are also a key part of how all businesses operate within the UK. I would be very disappointed if they were taking a cynical approach to potentially reduce costs of applications. However, having heard that some organisations are now being requested to implement a number of individual accounts, maybe there is a business case for them to want to administer 1,000 bank charges rather than just one.

In the aftermath of this, the yacht broking industry came together to ensure that such a calamity could never occur again. It was unanimously agreed that all yacht brokers should establish pooled client accounts as a standard practice. The PCAs were designed to protect client funds and enhance transparency in financial transactions. That became industry standard practice and is a prerequisite for any business joining an association such as ABYA. It is now a requirement by many professional indemnity insurance providers to hold client funds in these accounts. To formalise those efforts, brokers that set up PCAs with banks obtained letters confirming that funds held in those accounts were exclusively client funds and not part of the broker’s trading capital. Thus, they could not be used to offset business loans or overdrafts with that bank. That strengthened the protection of clients’ interests and returned confidence to the marine sector.

In 2009, it was made compulsory for anyone acting as an introducer for marine finance or settling marine finance to be registered with the Office of Fair Trading. That was a significant step towards regulating the industry and ensuring that financial transactions adhered to established standards.

In 2015, the Financial Conduct Authority was formed. The FCA introduced the FCA Handbook, taking over regulatory oversight. In 2016, the FCA confirmed that yacht brokers did not fall within the scope of the FCA handbook for holding PCAs, but did need to be registered for acting as an introducer for finance and insurance.

In 2020, significant changes occurred to the anti-money laundering regulations. That was when I first heard of the struggles that the industry were coming up against. Anti-money laundering legislation was introduced in 2017, as were updated Joint Money Laundering Steering Group guidelines, but notably they did not mention yacht brokers being excluded from FCA registration, or that their PCAs could be assessed using a simplified due diligence approach. That led to confusion and concern within the industry. As a result, major UK banks such as Lloyds, HSBC, Barclays and NatWest started to refuse to open PCAs for yacht brokers and threatened a number of businesses with the closure of their accounts.

Over the following months, I heard numerous stories from businesses within the industry that were fearful that, should they have their accounts closed, they would be unable to trade. Reputable businesses that had been trading for decades were suddenly faced with that terrifying prospect. Many of those yacht brokers are small independent family-run businesses. Contrary to what often comes to mind when yachts are mentioned, they are not large businesses trading in multimillion-pound superyachts and they do not have thousands of pounds in capital behind them; they tend to be long-established reputable small businesses operating in our coastal communities, where the marine industry may be a key part of the local economy, selling smaller boats for UK leisure.

Some of those family-run businesses—registered UK companies—operate across borders to support UK clients to buy, sell or hire their boats. Many of their clients are repeat customers because of the great experience they have encountered and the reassurance and confidence that their funds are safe.

All ABYA-member brokers are required to abide by strict professional standards to minimise fraud and money laundering. Yacht brokers are required to complete “know your customer” checks to verify clients’ official documentation such as driving licences, passports and utility bills, to ensure that the documents are valid and that the person is not on the anti-money laundering or politically exposed persons lists.

Purchasers receive a legally signed sale and purchase agreement, and all transactions are done by bank transfer, so there is a full audit trail of the money. ABYA yacht brokers do not accept any form of cash payment. As I mentioned, brokers undertake their own checks and specific sale and purchase agreements for every transaction, and they rely on UK and EU banks to transmit funds to the PCA from their own bona fide and validated clients.

Despite the checks that brokers carry out and the detailed recording of transactions, the fact that UK banks now consider yacht broking to be a high-risk business might imply that UK banks are failing their customers’ AML and politically exposed person checks before opening their client accounts.

In January 2022, ABYA and I held a crucial meeting with the Chief Secretary to the Treasury, who was then the Economic Secretary to the Treasury, and UK Finance. Following that meeting, he agreed to issue guidance allowing banks to simplify due diligence for opening and maintaining PCAs. That decision was made to try to temporarily ease the conflict between banks and account holders, and to encourage banks to keep accounts open while a comprehensive review of the anti-money laundering regulations was undertaken. This review was expected in December 2022 but, to the disappointment of both me and the industry, it was pushed back a year until December 2023. I am grateful to the Chief Secretary for the action and the interim guidance he provided in his previous role, but unfortunately that did not go far enough to prevent many banks from closing some of those accounts, which had a devastating impact on some of our small businesses.

In May 2020, we witnessed Barclays close the first pooled client account of a yacht broker because it was not registered with the FCA and part of its business involved cross-border transactions. Members will be unsurprised to learn that cross-border transactions are a fairly normal part of yacht sales, given the nature of boats. The stress that caused the company, including its potential collapse, and the impact on clients resulted in the director of that small UK-registered company suffering a mental illness for which, 18 months on, he is still receiving medical treatment and support.

That move set a worrying precedent. In May 2023, Barclays blocked the accounts of another company without appropriate notice, preventing the company from accessing its funds for three weeks. Not only that, but the bank transferred the funds from a European pooled client account into pounds sterling and placed the funds into the company’s account, without the authority of the clients whose funds were in the pooled client account. I understand that ABYA has asked the FCA to investigate that case, as it believes that Barclays had breached the provisions of the FCA handbook. As an aside, I have been made aware of another case in which such action by a UK bank has affected personal bank accounts, so I am concerned about how widespread that type of action is among some UK banks.

The FCA has acknowledged ABYA’s concern but has refused to conduct a full investigation and take appropriate action against Barclays, which I believe sets a dangerous precedent by endorsing Barclays’s actions and destabilising the security of PCAs for all industries. The FCA has advised ABYA that its members should report the incident to the financial ombudsman, which they have done, but they have been advised that it could take up to 18 months for it to report back.

To enable their business to continue trading, the directors of the affected company had to personally fund their clients’ sales and purchases, while Barclays sat on its client funds. That has also had a significant impact on the mental health of the directors of those businesses. Only last week, HSBC approached yacht brokers to ask them to stop using their pooled client accounts. I have recently been made aware that marine insurance companies, which have thousands of clients, are also being asked to cease using pooled client accounts.

The consequences of those developments extend beyond the yacht broking industry. They are a concerning precedent, which indicates that funds held in PCAs for clients may not be as secure as was previously believed. The situation has implications not only for the yacht industry but for lawyers, estate agents and care homes, as I have mentioned. Only last week, Propertymark members reported that Lloyds had threatened one of their members with account closure if they continued to use PCAs. That forced the property agent to open and hold individual client accounts for the rents and deposits of every landlord they worked for, and this particular agent was working with over 100 landlords.

ABYA has been at the forefront of the efforts to address the issue. It has tried to push various individuals who have influence over the matter to work together and with the industry to find short and long-term solutions. The Treasury has met and been in communication with ABYA’s chairman, Peter Norris, and has agreed to meet him again. For that, I am grateful. I am also grateful for the continued engagement I have received from the Treasury and its Ministers over the last 18 months. ABYA has worked to strengthen its code of practice and engage with banks consistently over the past couple of years. ABYA has candidly and consistently said that it will put in place whatever measures and changes to its code of conduct are necessary to ensure that banks have confidence to offer these services to ABYA members.

Since the FCA’s confirmation that yacht brokers do not need to register to hold PCAs, one bank has asked its customers to register as a high-value dealer with His Majesty’s Revenue and Customs for anti-money laundering purposes. ABYA is currently in consultation with HMRC to see whether it is possible to register as a high-value dealer, as such registrations normally apply only to businesses that deal in cash transactions of over £10,000 or €10,000. I understand that HMRC is questioning whether that is a necessary registration.

It has been a particularly tiring and frustrating few years for the industry, and ABYA and other industry representatives can only do so much. They have shown their willingness to find solutions, but we need the same willingness and drive to find a solution. As I have mentioned, these are often long-established small businesses or sole traders. Like any businesses, these companies are lifelines for their owners, employees and local economies, and they rarely have significant capital reserves to keep them afloat while seeking a resolution with the banks. It has been heartbreaking to hear the panic and distress that some of the businesses have been put through. Some business owners have been driven to the point of illness or, in some cases, have wanted to take their own life because of the stress of the potential loss of their business. As someone who ran a business prior to becoming an MP, I can totally empathise and understand how those business owners may be feeling.

Can the Minister confirm that there will be no more delay in bringing forward the consultation on the review of the anti-money laundering regulations? Can the Minister also assure me and those listening that he and the Treasury are engaging with the banking sector to represent the views of these small businesses, which are struggling to survive as a result of the actions that have been taken? Will he commit to urgently finding a short-term solution for this very real issue, which is having a devastating impact on people’s businesses and livelihoods?

Local Bank Branch Closures

Jim Shannon Excerpts

Tuesday 5th September 2023 Commons Chamber

[Amy Callaghan (East Dunbartonshire) (SNP)]

For being the party of the bank and the bankers, the Tories have a shocking record of keeping banks on our local high streets. It speaks to a pattern of this Government prioritising profit over people. This being my first Adjournment debate, I am proud to hold it on a topic important to my constituents, given the state of local bank branch closures in East Dunbartonshire, but I am frustrated and disappointed that this issue is on all our minds.

Despite the severity of the topic, I am very much looking forward to an intervention from the hon. Member for Strangford (Jim Shannon), the highlight of every Adjournment debate, as you will be only too familiar with, Mr Deputy Speaker.

[Jim Shannon (Strangford) (DUP)]

First of all, I commend the hon. Lady for bringing this subject forward. The Scottish National party has been at the fore in headlining the issue of bank closures, and I wish to add my support.

It is an increasing problem back home—Northern Ireland has lost 27% of bank branches in the last three years, according to statistics from the Consumer Council. One of those was a Barclays bank branch in Newtownards, where I have my office. For rural constituents, it means they have to drive up to 40 minutes to the nearest Barclays in the neighbouring constituency, or take a taxi or a bus. Does the hon. Lady agree that bank branches are crucial to the economy, especially the rural economy, and that the frequent closures of local branches are doing more harm than good for customers? The hon. Lady is to be congratulated on bringing this issue forward.

[Amy Callaghan]

I could not agree more. I welcome the hon. Member’s intervention—I kicked him into gear, didn’t I? It was much appreciated.

Local bank branches are closing right across Scotland, and at a higher rate than in the rest of the UK.

--- Later in debate ---

[Andrew Griffith]

This Government take responsibility, and I was just about to explain how, for the first time, we have taken the statutory right to protect the use of cash. That has been on the statute book for a number of weeks after the House passed the Financial Services and Markets Act 2023. It is also why we support the very rigorous guidance given by the Financial Conduct Authority in cases where bank branches are closing.

[Jim Shannon]

Will the Minister give way?

[Andrew Griffith]

I will take an intervention. We are on the Adjournment and should be mindful of time.

[Jim Shannon]

Rural communities are probably the larger part of my constituency, and I have lost 12 or 13 rural banks. Every one of them was a focal point for customers, which hits on the important point made by the hon. Member for Argyll and Bute (Brendan O’Hara). At the same time, every one of those banks has made extra profit and extra fees, which just does not add up. Why not keep them open and share some of that dividend with all the customers who need the banks?

[Andrew Griffith]

The hon. Gentleman is working his way towards one of the potential answers. Colleagues have mentioned the banking hubs. When a bank seeks to close a branch, the FCA process normally includes consultation with the local Member of Parliament. The financial sector now has a consumer duty to think about putting customers’ needs first, which is one of their weighty duties. As we deal with this significant change, a number of alternatives are in place. One is the local post office, and I believe there are still nine post offices in East Dunbartonshire. As the banks’ business traffic coalesces, they can help to support the economics of a post office in a particular area. That is one opportunity. Some 99% of personal banking customers can transact in their local post office, and there are over 11,000 post offices across the United Kingdom.

Oral Answers to Questions

Jim Shannon Excerpts

Tuesday 5th September 2023 Commons Chamber

[Andrew Griffith]

My hon. Friend represents the views of his constituents in this place clearly. He is quite right; although they are private entities, banks benefit from a privileged place in society and they should focus on doing their core functions brilliantly, treating customers fairly and making a sustainable return for shareholders, rather than taking sides on politically contentious matters.

[Jim Shannon (Strangford) (DUP)]

Today it is because some people may have a different political view; tomorrow it could be the fact that someone has a different religious viewpoint. I am a Christian, and as chair of the all-party parliamentary group for international freedom of religion or belief, I stand up for those with Christian beliefs, those with other beliefs and those with no beliefs, because I believe sincerely that they have a right to have that belief. If ever the day came when banks censured anybody because they had a different religious belief, I would stand up against that. Does the Minister agree?

[Andrew Griffith]

Let me be clear: yes, the Government agree with that. No one should be debarred from access to banking facilities in our society because of a lawfully expressed view. If he and other hon. Members wish to make representations, the Financial Conduct Authority is currently conducting a review of this matter.

Covid-19 Pandemic: Fiscal Policies

Jim Shannon Excerpts

Monday 17th July 2023 Commons Chamber

[Mary Kelly Foy (City of Durham) (Lab)]

The austerity programme has been one of the most damaging policies our country has seen in decades, and one statistic demonstrates its complete failure: there were more than 300,000 excess deaths between 2012 and 2019. More than 300,000 people died as a result of austerity—they were human beings, with families and friends. Like us, they had aspirations and dreams, but now they are gone, perhaps because of decisions made in Departments and in this House. That is an injustice; after all, the first duty of the British Government is to keep their citizens safe and the country secure. Were those 300,000 people kept safe? Evidently, they were not. That is the sort of statistic that future generations will read and wonder how on earth we could have allowed it to happen.

The subject of my debate is fiscal policies and the covid-19 pandemic, but what I want to get at is the extent to which austerity left us unprepared for the pandemic. I started with that statistic to present the situation in Britain prior to the outbreak of the virus. My speech will discuss healthcare, and the Minister may think, “What’s this got to do with the Treasury?”. I hope that I can convince him on that by saying that our health services require money from his Department, because what matters about cuts is their effects.

It is clear that the austerity programme hollowed out our welfare state, including the NHS. To be ready for a pandemic, we need a strong healthcare system, but we just did not have that in 2020. I was outraged by former Prime Minister David Cameron and former Chancellor George Osborne at the covid inquiry. They denied that their austerity programme had any impact on the pandemic, and it was especially chilling watching George Osborne. Their justification for austerity is at odds with scientific evidence and opinion, which I shall outline.

In their expert evidence to the covid-19 inquiry last month, Professor Clare Bambra and Professor Sir Michael Marmot stated that austerity policies post-2010 had an adverse effect on health inequalities; that health inequalities narrowed in the period of higher public expenditure, from about 2000 to 2010, but widened again post 2010—

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Lady for securing this debate. She is right to say that covid has affected health, but it has also affected finance. Does she agree that covid-19 will have rippling effects upon finances for years to come, and that many people are now grappling with the reality of prices increasing at a greater rate than wages? Does she also agree that the Government must take hold of the financial market once again with a firm grasp and with a strategy to help families in my constituency and hers, and indeed across this great United Kingdom of Great Britain and Northern Ireland?

[Mary Kelly Foy]

I thank the hon. Gentleman for that intervention, and I will come on to that issue in my speech. He is completely right that there will be an ongoing impact on future generations not only from covid, but from the impact on the public purse.

The scientific research also found that between 2000 and 2010, geographical inequalities such as infant mortality rates and life expectancy were reduced, but they then increased after 2010. Why did that happen? It was about money. By 2019-20, after a series of austerity Budgets, health spending was about £50 billion below what it should have been had it matched previous Government commitments. This far surpasses the much-vaunted cash injection of £20 billion between 2019 and 2024 as part of the NHS long-term plan. That level was too little, too late for what was to come.

The results of austerity are not hard to find right across the NHS, with one of the more tangible measures being bed capacity. Between 2010-11 and 2019-20, the average daily total of available beds contracted by 8.3%—nearly 13,000 beds. Britain had less than half the number of critical care beds relative to its population than the average in OECD European Union nations.

Austerity also meant years of pay caps and pay freezes. In other words, there were pay cuts, in real terms, for NHS workers. They were earning thousands of pounds less in real terms in 2019 than in 2010.

Financial Markets and Monetary Policy

Jim Shannon Excerpts

Wednesday 5th July 2023 Commons Chamber

[Sir Robert Syms (Poole) (Con)]

It is a pleasure to be here and to see the Treasury Minister on the Front Bench for the debate. I appreciate that many of these matters are dealt with by the Bank of England, but that is part of the reason why I will raise a number of points.

I voted against quite a lot of lockdown, with one of the strong reasons being that if 7 to 9 million people were sitting at home and, at the same time, the Bank of England was printing substantial sums of money, there might well be consequences. We can see in inflation, the strikes and a number of other things the pernicious effect of money printing and inflation in the British economy.

During lockdown, the Government took on a substantial amount of debt. Many people who were sitting at home were paid reduced salaries, but they could not spend the money, so they built up substantial savings. There are debates among economists about the amount of those savings. Some think it is 4% of GDP; others 8%. The Office for Budget Responsibility puts the figure at around £228 billion. That has been powering the economy over the past several months. The OBR initially predicted that we would have a recession, but the economy has shrugged that off. It is highly likely that this year we will not have a reversal. We may have a cost of living crisis in pay and inflation, but there is still a substantial amount of money flowing through the British economy.

The amount of money printed and the fact that people were not producing anything have created a problem. As we saw from headlines last week, one of the reasons that inflation is sticky is that money is still flowing through the economy. Headlines last week reported that package holidays were more expensive because they were not being discounted. Second-hand cars are going for quite a high rate. Although hospitality has had problems with high energy bills, it is difficult in many areas to book a restaurant or a hotel. The discounting that we would normally see at certain times of year is not happening, which is why inflation has not fallen as much as we expected. Nevertheless, supermarkets suggested today that food prices are starting to fall, and energy prices are falling. I think it highly likely that inflation will fall, although it will be a little delayed.

There is a lot of money swishing around in the British economy. The Bank has been pushed into raising interest rates. The thing about interest rates is that, unlike 20 years ago when most people had variable rates, a lot of people are now on fixed-rate mortgages, especially those with larger mortgages. Therefore, there will be a lag, as there always is when interest rates are put up, but this time it will be substantial. My concern is that most of the impact of raising interest rates on the economy has not yet been felt. Every now and again, the Bank will feel pressured to keep raising rates, particularly at a time when financial markets test the Bank and we have a 24-hour news cycle. That will be a problem for the British economy because raising rates will not make much difference to the next financial year, but will have a big effect in 2025.

A number of people have expressed concern that we may have overkill in raising rates. Andrew Haldane, the Bank of England’s chief economist a while back—a very good economist with a good finger on the pulse of the British economy—is worried that the Bank will overdo it. David Smith wrote a good article in The Times today, in which he said “a little patience” needs to be shown. We will have a testing time over the next 12 to 18 months, because raising rates will not show up much in reduced spending in the shops, and there will be various pressures on the Bank to act.

What we actually need is masterful inactivity and a lack of action, to let things continue. We will have a fall in inflation. We will probably go to real interest rates, which we do not have at the moment. The Bank needs to keep calm, have patience and allow inflation to fall, and that will do the job that needs to be done, but it will take a particular while. There is pressure in the markets. Today, two-year gilts were sold at 5.668%, which is the highest for 20 years. The markets will keep on testing the Bank.

That is my first concern. I know that the Chancellor of the Exchequer rightly has regular meetings with the Governor of the Bank, although I am not sure they have cocoa or a glass of claret. The message from the Treasury and from Parliament has been, “Be patient. Do not get yourself pushed into raising rates and causing a major reversal in 18 months or two years’ time.” In the short term, there will be an effect on the economy in terms of housebuilding and the construction industry, but I suspect it will not have much of an impact on budgets until that time passes.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for raising this complex matter. He is outlining the issues for the banks and talking about ensuring patience and balance. My constituents tell me that they are worried about mortgage increases, as I am sure are his constituents and everyone here tonight. They worry about all the things he refers to, as well as increasing prices. What would he say to those worried constituents who might not have such patience and do not know whether they will have possession of their house in a year’s time?

[Sir Robert Syms]

Interest rates are a very blunt instrument and I am sure many people are worried. I hope that if inflation picks up trajectory and goes down, we will start to see interest rates top off and that some with fixed mortgages—many have quite long fixed mortgages—will feel much more relaxed. To pay tribute to the Chancellor, he has, with the lenders and in a very competent way, produced a very good package of forbearance for those who may have problems with mortgages. The Government have, in many respects, set a very stable environment for the economy, but there are worries. My principal worry about the Bank, independent as it is, is that it may overdo interest rate rises.

My second point concerns quantitative easing and quantitative tightening. Clearly, we did more QE than was probably needed, but we are where we are and it needs to be reversed. If you are going to try to eat an elephant, you have to do it one bite at a time. It will take us 20 to 25 years to reduce the stock of bonds that the Bank of England holds, and what I do not understand is why the Government are not having a more active discussion with the Bank about when it will sell the bonds. We have a situation where the Bank has put up interest rates, that leads to a fall in bonds and at the same time the Bank sells bonds, creating a loss that it passes on to the Treasury. Whereas if it waits three or four months, inflation is likely to fall and some pressure may come off bonds, and that may mean that it is able to sell bonds for a slightly higher amount.

Now, whether there is a sort of hair-shirted virility symbol in doing that, I think selling bonds into a market where you will lose more than you would otherwise do is not really very good husbandry. Ultimately, although the Bank holds the debt, as the Government are the underwriter of the debt, it is a little bit like saying to your estate agent, “Go and sell the house, I don’t care what the price is.” The Government should have a view so that when we discuss things with the Bank, we ought to try to do our best to minimise the losses on quantitative easing as we reverse the process. Some projections say that over the next 20 years the loss could be £100 billion. Well, if we are very careful in how we get rid of the bonds and it is a £90 billion loss, then that is a win.

Mrs Thatcher always had a problem that when she was trying to control broad money there were no instruments apart from higher interest rates, but if we have this stock of bonds over the next 20 years, it might well be that it could form a part of policy that we either speed up or slow down to reduce broad money. It might be something that can be used in policy terms. My view is that the Debt Management Office—which has an interest because it has to sell Government debt, and the Bank of England selling it at the same time does not help—the Governor of the Bank of England and the Chancellor really ought to sit down a couple of times a year and agree a joint letter that sets out the parameters for how they will unscramble quantitative easing with a quantitative tightening programme, which I think the markets would understand. I do not think anybody would think we were infringing on the independence of the Bank of England if we were actually trying to ensure that the taxpayer gets best value.

On almost anything, any budget or taxation, the Treasury is very careful in approving things. This could be a big budget item each year for the next several years, so I do not know why we are taking a relatively benign attitude of saying to the Bank, “Just sell it and we’ll pay the bills.” I should say that I was a Lord Commissioner for a while and I signed some of the documents that indemnified the Bank. [Interruption.] There is probably another Lord Commissioner laughing, but we ought to pay quite careful attention to how we unscramble this. Those who read the column by my right hon. Friend the Member for Wokingham (John Redwood) will know that he has raised this matter a number of times. It is worth raising, because we are at the early point of unscrambling quantitative easing, and slightly more interaction between the Government and the Bank of England is necessary.

My final point is about money supply. During the pandemic, we were printing money at 20%. Then the money supply dropped a little, to about 15%, and now it has dropped very substantially. M2 is nearly into negative territory, and according to the last Bank of England estimate, M3X and M4X are growing by between 1% and 2%. Too much money in the economy is a bad thing because it creates inflation, but too little money in the economy is a bad thing because it can cause a credit crunch. In his book on the Wall Street crash, John Kenneth Galbraith pointed out that the principal reason for the major worldwide depression was the fact that money in the United States economy declined by a third. That is what pushed the economy over the edge, because the banking system essentially collapsed.

We have gone from an over-exuberant money supply situation to one in which money supply is barely growing. This is not unique to Britain; it is a feature in the eurozone and in the United States, and we know that the eurozone will have further problems. Those countries still have differentials in productivity and trade imbalances, and there is money swishing through their system as well. There was even some discussion about the Bundesbank having to be bailed out because of bonds it has bought—and, unlike the Bank of England, it cannot print money because it does not have a currency.

There is a worldwide problem. Money supply is falling in the United States, in Europe and in the United Kingdom. If we assume the normal 18 months to two years, that takes us into 2025. My principal point is that if we raise interest rates, which has an impact after a long lag that will hit at the end of 2024 and the beginning of 2025, and if we have a reduction in monetary growth and credit which has an impact at the end of 2024 and the beginning of 2025, there will be two interactions that could cause growth to hit a brick wall.

The economy has changed substantially over the years. We now have internet banking, money flows very freely, and we have digital currencies. I think we ought to be looking much more carefully at what is going on in the British economy, and, indeed, at how money supply affects real output. However, I think we also need a monetary policy; I do not think we should withdraw completely and allow the Bank of England to determine these matters, and that may require us to look at levers to ensure that credit and monetary growth go up.

What I really want to do this evening is to put it on the record for those at the Treasury that if they read Twitter, they will find that many monetarist economists are beginning to think that the decline in money will cause severe economic dislocation. The rule of thumb is that there should be a smooth transition of money, not sharp falls or sharp rises, and I fear that we are not getting a smooth transition of money. As I have said, that is a feature of all the various zones, and it is something that the Government need to pay attention to and not ignore.

The Government do not mention money supply very much. The Bank of England has started to talk about it again, but I suspect that we have to learn what Mrs Thatcher would have told us some years ago: that money is very important, and it is a very important part of economic policy. We cannot totally vacate it and leave it to central bankers. One reason I always opposed the euro was that I did not think the problems of the world could be solved by unelected central bankers, and I think some of that goes for our own unelected central bankers.

The next time the Minister sees the Chancellor, I hope he will ask him to read the report of this debate and reflect on the fact that there is a problem with money supply. We may be going into a new era, although I do not know whether the supply will continue to be negative or whether it will pick up, and the Chancellor needs to have discussions with other actors in this area. If we are not careful, the combination of the lag on interest rates and the current credit squeeze could give an incoming Conservative Government a real nightmare in due course, in terms of the way in which they manage the economy. So let us give these matters a little thought.

I look forward to the Minister’s reply. Probably, in accordance with the normal Treasury line at the moment, he will reply by not saying very much, but I am sure he has listened.

Mortgage and Rental Costs

Jim Shannon Excerpts

Tuesday 27th June 2023 Commons Chamber

[Rachel Reeves]

I very much thank my hon. Friend for that intervention. She is absolutely right: the people being hit are those who are having to re-mortgage; those who are on floating rates and are just seeing their payments automatically go up; first-time buyers who want to be on the housing ladder but, because of this bombshell, are not able to get on it; and renters, who are paying the higher mortgage payments of their landlords. She is right to say that we need Labour’s renters charter, in order to do a number of things, including ending no-fault evictions.

Families facing the increasing squeeze from their rising mortgages are now having to confront that stress and anxiety day in, day out. For many, this will mean that their family holidays are cancelled this year; they will watch hard-earned savings drain away; and they will decide that they can no longer afford to spend money on days out with friends and family. For others, it could be much worse, with them not moving up the housing ladder, but slipping down it, through no fault of their own. The scale of the impact of all of this is devastating.

[Jim Shannon (Strangford) (DUP)]

I commend the right hon. Lady and the Labour party for bringing this debate forward. Every one of us, including my constituents, is dealing with the same problems. Some people contacted me last week to say that their mortgage rates are going up from £400 to £800, while others have said that theirs are going up from £600 to £1,200. It is just impossible to find that amount of money. Does she think that perhaps the Government—I look to them when I say this—should be looking at mortgage tax relief? That is one direct method of helping people to retain their houses and their dream of home ownership, and to survive this crisis.

[Rachel Reeves]

The hon. Gentleman speaks powerfully and I recognise those stories of people seeing their mortgages double because of what is happening. I will come on to the solutions proposed by the Labour party, but it is important that money is not injected into the economy at this time. If that happened, interest rates would go up even more, crippling the hopes and opportunities of exactly those we want to help. I will come on to the solutions that we propose shortly.

Over the next few years, 7.5 million families will be hit by the Tory mortgage bombshell, month after month after month. That is why it is essential that greater mortgage flexibility and support from lenders must be mandatory, not voluntary as the Government have put forward.

Consumer champion Martin Lewis warned the Government about mortgage market issues last year, and he now says “the timebomb has exploded”, yet under the Government’s scheme, 1 million households are missing out. What is the Government’s response to them? Tough? It is up to the discretion and the goodwill of their lender? That is not good enough.

Although it is welcome, as I said, that many lenders are stepping up and doing the right thing, the scheme cannot be voluntary. That is why, when Labour set out our mortgage package last week, we made sure that that would be compulsory, across the board, and required of lenders. That is right: required of lenders. Without that clarity and confidence, families are rightly anxious about what comes next and how it will affect them.

Mortgage Charter

Jim Shannon Excerpts

Monday 26th June 2023 Commons Chamber

[Jeremy Hunt]

The hon. Gentleman is right to draw attention to that issue, and I simply say that the biggest measure in the spring Budget was the childcare measure that will mean families with young children can get up to £6,500 of help with their childcare costs to help them go back to work. That will help those families and help to tackle inflation.

[Jim Shannon (Strangford) (DUP)]

I thank the Chancellor for his statement and for the clear help he is trying to provide. I very much welcome the move to ensure that, in the extreme situation of a repossession, there will be a minimum of 12 months from the first missed payment. Can he confirm whether it will be 12 months from any first missed payment or 12 months from a specific time? Some people may have missed a payment, say, five months ago and missed none since. If they lose their job or become ill, will this extension and compassion be shown if more than one payment is missed within a year? How will the Chancellor ensure that his goal of giving people time in exceptional circumstances is not circumvented by the banks and others?

[Jeremy Hunt]

The hon. Gentleman is right to raise this issue. I reassure him that banks are required by the FCA to offer a tailored solution to people who get into arrears, specific to their circumstances, to make sure that precisely the kind of thing he worries about does not happen.

Oral Answers to Questions

Jim Shannon Excerpts

Tuesday 20th June 2023 Commons Chamber

The Chancellor of the Exchequer was asked—

[Jim Shannon (Strangford) (DUP)]

1. Whether he has held discussions with banks on the costs of implementation of Financial Ombudsman Service decisions.

[The Economic Secretary to the Treasury (Andrew Griffith)]

The Financial Ombudsman Service offers a proportionate and informal resolution of disputes that is cost-free for consumers. Where it upholds a complaint against a firm, it can award redress for that concern to that consumer. I work very closely with my officials and with the Financial Ombudsman Service to make sure consumers have the justice they require.

[Jim Shannon]

I thank the Minister for that that response. This has been an ongoing issue in the House for some time, and I spoke to some of the Minister’s colleagues beforehand. The Chancellor and the Minister will know that the parliamentary ombudsman found that 1 million Equitable Life savers lost money as a direct result of Government decisions. Why, then, are the Government holding themselves to a different standard and ignoring the wishes of the parliamentary ombudsman, having paid victims of the Equitable Life scandal only 22% of the money they lost from their pension funds? I say that with great respect, but I do think we need an answer.

[Andrew Griffith]

I respect the hon. Member for raising this issue. It has however, been raised many times before in this House, and answered from this Dispatch Box as well.

--- Later in debate ---

[Mr Speaker]

I call Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

I do not have a question.

[Mr Speaker]

Right, let us move on.

Bank Closures: Stoke-on-Trent North

Jim Shannon Excerpts

Wednesday 14th June 2023 Westminster Hall

[Jonathan Gullis (Stoke-on-Trent North) (Con)]

I beg to move,

That this House has considered bank closures in Stoke-on-Trent North constituency.

It is a pleasure to serve under your chairmanship, Ms Nokes. I am grateful to Mr Speaker for permitting the debate, and I thank right hon. and hon. Friends, including the Minister, for attending. There is one Member who would like to be here—my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell), whose constituency is also suffering a closure—and he is hoping to join us later, and I place on the record my thanks for my hon. Friend’s support.

Banks are at the very heart of local communities, and they provide the most vulnerable people in society with vital services and support with their money. Banks have been at the centre of high streets up and down this great country for generations, drawing people to the local area, which has the added benefit of increasing footfall for local businesses. In Stoke-on-Trent North, Kidsgrove and Talke, we have a Lloyds in Tunstall and a Barclays in Kidsgrove, but constituents tell me that they feel there is already a significant lack of access to in-person banking services, which impacts the most vulnerable in our communities—the elderly and the disabled—disproportionately.

According to Which?, 86% of banks have closed in Stoke-on-Trent North, Kidsgrove and Talke since 2015, which in my opinion justifies my constituents’ concerns. At the national level too, there has been a significant number of closures: between June 2015 and January 2023, 5,391 bank branches closed in the United Kingdom, which is a shocking 54 per month. This year, regrettably, the pace of closure has not relented, with 114 HSBC, 95 Barclays, 52 NatWest and 23 Lloyds branches closing their doors, leaving gaping holes in local high streets and local communities.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for bringing this matter forward. My constituency has had 11 banks close, which is similar to the experience in Stoke. When it comes to closing banks and the effect that has, does he agree that there never seems to be any consideration given to elderly people who depend on the old system of using cash and cheque books, face-to-face interviews and talking with bank staff?

[Jonathan Gullis]

The hon. Gentleman is absolutely right not only about the elderly, but about people who do not have online access, or have no desire to have it, or who do not understand the modern technology about which we have the benefit of learning in this day and age. Such people have a natural mistrust of online banking because they are fearful of scammers and the online hoaxes that have sadly become all too apparent in our criminal justice system. If the Barclays closure goes ahead, Stoke-on-Trent North, Kidsgrove and Talke will be left with just one high street bank, which is simply not good enough.

I am pleased to have secured the debate given the terrible news that Barclays has announced its intention to close the Kidsgrove branch on 11 August. That decision will leave that great town without a single bank and leave the community isolated from vital in-person banking services, which provide local people with reassurance and confidence with respect to their money, particularly during a cost of living crisis.

It is right to point out that digitalisation has transformed the way that families and businesses deposit, withdraw and save their money, and in Stoke-on-Trent we have been rolling out brand-new 5G broadband, which is increasing our connectivity, and which will undoubtedly make online banking more effective. The digital revolution means that banks are innovating, and Barclays points out in its argument for closing the branch that

“the way people bank today is unrecognisable from 50 years ago”.

However, it is of paramount importance that we do not let digitalisation exclude people in our community from banking services.

The services that bank branches provide are most important for vulnerable members of society, and closures impact them the most. One of my constituents, Dawn from Kidsgrove, told me that her father, who is an elderly customer, would find it “impossible” to travel to Crewe or to Hanley to visit a Barclays branch, that his deafness means he cannot use telephone banking, and that he is not confident enough to use internet banking.

As the Chief Secretary to the Treasury pointed out in the 2020 access to cash call for evidence:

“exclusion from banking services can have a detrimental impact on people’s lives. Whilst card payments and other payments services are becoming increasingly popular, the evidence shows that a significant proportion of the UK population continues to rely on cash in their day to day lives.”

The Financial Conduct Authority states that banks are expected to carefully consider the impact of planned branch closures on the everyday banking and cash access needs of their customers, and to take particular care for their most vulnerable customers.

I have launched a petition to save Barclays branch from closure, and it has nearly 450 signatures already. That shows the strength of local feeling that Barclays is not upholding its responsibility to look after its most vulnerable customers.