Autumn Statement

John Baron Excerpts

Wednesday 22nd November 2023 Commons Chamber

[Jeremy Hunt]

We are obviously monitoring the situation extremely carefully, but it is our priority to support the oil and gas and refinery industries. We have made some big changes to do that, and we would welcome support from both sides of the House in doing so.

[Mr John Baron (Basildon and Billericay) (Con)]

I commend the Chancellor for the compassion and enterprise incentives that shine through his statement. I thank him for the UK retail disclosure framework, although I have not seen the detail, and for the promise of a statutory instrument to resolve the legislative issues with cost disclosure for investment companies. Can he assure me that that will correct the over-zealous regulation that is making investment companies look unduly expensive and thereby restricting investment?

[Jeremy Hunt]

I have had many discussions with my hon. Friend on this issue and he is absolutely right. There is a danger with over-zealous regulation that people are focused more on cost than on performance. Like him, I want to resolve the issue.

Oral Answers to Questions

John Baron Excerpts

Tuesday 14th November 2023 Commons Chamber

[Jeremy Hunt]

With the Work and Pensions Secretary I continue to keep under review all the things that have an impact on poverty rates. We are proud to have made progress in reducing the number of people living in absolute poverty after housing costs by 1.7 million since 2010. When it comes to homelessness, we are investing £2 billion over the next three years. Rough sleeping is down 35% since its peak.

[Mr John Baron (Basildon and Billericay) (Con)]

I refer Members to my entry in the Register of Member’s Financial Interests. The Chancellor has acknowledged that investment trusts, which make up one third of all FTSE 250 companies, are being plagued by misguided cost disclosure legislation, which is making them appear unduly expensive. That is restricting investment and does not happen in any other country. In addition to the positive dialogue between us and with the Financial Conduct Authority, will he consider supporting the First Reading of Baroness Altman’s private Member’s Bill in the other place next week, which helps to address this issue? Will he also address it in his autumn statement?

[Jeremy Hunt]

I welcome my hon. Friend’s expertise in this area, which is of great benefit to the House and to me as I consider fiscal measures. As we are so close to the autumn statement, I would say that the way that we treat costs in our investment and pension funds industries is not optimal, and we need to reform it.

Financial Services Reforms

John Baron Excerpts

Tuesday 11th July 2023 Commons Chamber

[Andrew Griffith]

I thank the right hon. Gentleman for his contributions on how we can deliver the best pensions for long-term savers. There are no estimates for the share of the UK. We are mobilising an additional £50 billion of assets over time. That is evolution, not revolution. We would expect—and it is the job of this Government—to present that investment capital with a wave of attractive options across some of the fastest-growing sectors, as the Prime Minister and Chancellor have laid out, and to remove frictions and obstacles as people seek to invest in the UK, creating a conducive environment for that investment but falling short of mandating it, in the knowledge that the allocation to international investments for some of our actively managed schemes already exceeds that of other comparable companies. On the charge cap, we are this morning publishing a consultation on the new value for money framework. Clearly, we want to continue ensuring that pensioners benefit from fair charges, but also that that does not come at the expense of the underlying performance that they receive.

[Mr John Baron (Basildon and Billericay) (Con)]

I welcome this set of measures, particularly the ending of the packaged retail and insurance-based investment products regime and the introduction of the Mansion House compact, on which some of us have lobbied the Government. I will share two key concerns with the Minister. On fintech and early-stage businesses, we have a problem in this country because the pension fund industry has divested itself of UK equities, to the detriment of the London stock exchange and, ultimately, of financial services generally. It troubles me that that 5% is not focused on early-stage start-ups in the UK, unlike many other domestic pension funds, which do support their own. More generally, a bigger piece of the jigsaw is missing in my view. Pension funds have generally divested themselves of UK equities to such a great extent—some estimates suggest a 90% reduction since 2000—that we need to see more encouragement by Government to get the pension funds to use their wealth by putting it into UK equities for the betterment of the UK economy. After all, they do benefit from tax breaks.

[Andrew Griffith]

I thank my hon. Friend for his, as ever, apposite points. That encouragement is exactly what the proposals are all about: working voluntarily with the sector and encouraging it to lean in. I want people to see 5% as a potential floor, not a ceiling. Many will seek to go much further forward. The broad objective of the Government is to provide good access to capital at every stage of a Government’s life, whether it is our support for the seed enterprise investment scheme, the enterprise investment scheme or the venture capital trust; the expansion of the pool of individual investors who are able to invest directly in the stock market; and some of the opportunities that he talked about, all the way through to ensuring that our listed and private capital markets work extremely well. That is the objective of the reforms.

Oral Answers to Questions

John Baron Excerpts

Tuesday 20th June 2023 Commons Chamber

[Victoria Atkins]

Let me again gently remind the hon. Gentleman to look at what is happening in the rest of the EU. For example, the eurozone is suffering from the effects of mild recession. All this is due to the global headwinds that we are all facing. However, I know that the hon. Gentleman will be delighted by the recent growth upgrades from the Office for Budget Responsibility, the Bank of England and the OECD. We do face challenges, and of course we have to work with our global counterparts to try to deal with those global headwinds, but we are focusing very much on the Prime Minister’s priority of halving inflation, because that is what will make a real difference to our constituents.

[Mr John Baron (Basildon and Billericay) (Con)]

Does the Minister agree that, despite “Project Fear” forecasts, we have record employment, very low unemployment, good inward investment and trade deals in abundance? Perhaps the Scottish National party should focus on its poor record on the economy and, indeed, on financial transparency, and get over the fact that we have left the EU.

[Victoria Atkins]

May I take this opportunity to congratulate my hon. Friend on his recent honour, which is extremely well deserved? He has made his point very succinctly. We have an exciting future ahead of us—we are already signing trade deals with non-EU countries, and we have a fantastic deal with the EU—and it is now up to us to make a real success of it.

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[John Glen]

We continue to have constructive dialogue with industry and different sectors. I met supermarket representatives a few weeks ago, and the Chancellor and others in the Treasury will continue to have these conversations. I think most people recognise that we face common global challenges and that different economies will respond in different ways.

[Mr John Baron (Basildon and Billericay) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Jeremy Hunt)]

We will not hesitate in our resolve to support the Bank of England as it seeks to strangle inflation in the economy, and the best policy is to stick to our plan to halve inflation. I also want to make sure that we do everything possible to help families paying higher mortgage rates in ways that do not themselves feed inflation, so later this week I will be meeting the principal mortgage lenders to ask what help they can give to people who are struggling to pay more expensive mortgages and what flexibilities might be possible for families in arrears.

[Mr Baron]

Despite being the gateway to most financial services in the City, I suggest that the London stock exchange is ailing, with CRH and Arm being the latest canaries in the coalmine. While welcoming the Edinburgh reforms, what further consideration has the Chancellor given to my suggestion that tax incentives be introduced to encourage our British pension funds—the big beasts—to invest more in UK equities, given that, since the financial crisis of 2008-09, they have reduced their exposure to equities by 90%, unlike in most other developed economies?

[Jeremy Hunt]

My hon. Friend always speaks extremely wisely on financial matters, and he is absolutely on the money when he talks about the opportunity that would present itself by unlocking £3 trillion of pension fund assets, many of which would get a better return for pensioners if they were invested more in our high-growth businesses, as well as that being a good outcome for the London stock market. All I will say is: watch this space.

Financial Services and Markets Bill

John Baron Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

Let me turn to another matter, which is as important to me as I know it is to many colleagues across the House: financial inclusion and consumer protection. The Government are committed to financial inclusion, and want to ensure that people, regardless of background or income, have access to useful and affordable financial products and services. While I respect the intention behind the amendments tabled by the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy), who has been a consistent voice on this important matter, the FCA gave evidence that it does not consider that a new requirement for it to have regard to financial inclusion would add to its ability to act in this area.

[Mr John Baron (Basildon and Billericay) (Con)]

On the FCA and financial inclusion, it is very wise that we ensure that good financial advice is imparted by the powers-to-be. In referring Members to my entry in the Register of Members’ Financial Interests, may I say that when it comes to things such as investment trusts, we are still trying to throw off the yoke of well-intentioned but misguided EU regulation when it comes to information that could lead to a misunderstanding about risk? The FCA seems somewhat reluctant to carry that forward. Will the Government ensure that the regulators, including the FCA, are doing their job?

[Andrew Griffith]

My hon. Friend makes a very fair point. To be clear, the purpose of good financial regulation cannot be to extinguish risk, but is to give people choice and indeed allow them to reap the rewards of taking risk in an appropriate and informed fashion, so I completely agree with him.

On the theme of reporting, I assure the hon. Member for Blaenau Gwent (Nick Smith) and my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) that the consumer panel, like all other statutory panels, already produces an annual report with the panel’s opinion on matters that it has engaged with the FCA on; however, following new clause 10 being tabled, I recognise the need to ensure that reports are brought to the attention of the House. I have engaged with the FCA, which has agreed with me that in future it will notify the Treasury Committee, as the relevant Committee of this House, on publication of the consumer panel’s report, to ensure that Members of this House are aware of and can fully engage with it. I hope that that goes some way to giving the hon. Members the satisfaction that they seek.

Before I speak about the financial advice guidance boundary, raised in new clause 11 in the name of my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, let me congratulate her on her relatively recent election to that role—although I hope that we have worked well together even during her short time in it.

--- Later in debate ---

[Tulip Siddiq]

I support much of what the hon. Member says, and I will come on to that a little later in my speech, but the call-in power is very different from what he is describing. Time and again, we warned Ministers that this would be detrimental to our regulatory independence, and they did not listen. However, if the hon. Member listens carefully, he will hear, when I come on to the next page of my speech, that I will address the valid points he is making.

In Committee, when I pushed the current Minister on why this dangerous intervention power was necessary, he told me that voices in the industry had told him we needed an “agile and flexible system”, which he claimed could only be brought about by this intervention power. After all of this from the three Economic Secretaries I have shadowed in 10 months, who kept pushing this dangerous intervention power, strangely enough the Government then dropped the policy: I just received an opaque letter, which did not really offer any proper explanation for why this Government have had a change of heart. If you do not mind my saying so, Mr Deputy Speaker, I thought about when I got a text from my crush in the sixth form telling me there would be no second date, without his actually telling me face to face why he did not want to see me again. I do wonder why, but I say to the Minister that I am grateful that he listened to the Labour party and has dropped the dangerous intervention power. I only wish he had done it sooner, so we could have saved some unnecessary damage to our global reputation.

While the intervention power was wholly inappropriate, we recognise that the Bill facilitates an unprecedented transfer of responsibilities from retained EU law to the regulators, and this does require democratic accountability. That is why I am glad the Government have listened to the concerns raised by me and others in Committee and have introduced new clause 17, which will allow regulators to be held to account against key metrics.

I hope the Minister will be able to commit to supporting new clause 10, tabled by my hon. Friend the Member for Blaenau Gwent (Nick Smith), to further strengthen the democratic accountability of regulators.

I was absolutely delighted that the hon. Member for West Worcestershire (Harriett Baldwin) was following my speeches at the Labour party conference so closely, where again and again I made the case for a new form of regulated personalised guidance. She has tabled new clause 11, which would create the space to do that, and I hope the Government will support her new clause.

[Mr Baron]

I hope the hon. Lady’s ex-crush realises what he has missed, but may I briefly pick up the point about democratic accountability when it comes to supervision of the regulators? I suggest that those regulators need to heed the advice of the professional bodies working in the sector. I raise again the issue of investment trusts. We have the Association of Investment Companies and many others saying that key information documents—a well-intentioned but misguided legacy of misguided EU regulation—are actually assessing risk incorrectly, to the detriment of investors. They are saying that now, and the FCA has control, yet we do not seem to be doing much about it. We are not making much progress on this issue, and meanwhile investors are being misled. Would she agree that we need to listen to the trade bodies as well?

[Tulip Siddiq]

I always want to listen to experts such as the trade bodies. The hon. Member has a wealth of knowledge in this area, and I accept what he is saying. Overall, the Labour party agrees with a lot of the policies in this Bill, which is why we have given it our wholehearted support. There are some missed opportunities that we feel could have been taken, and I think we could have strengthened our attractiveness for investments, as he is saying—I will come on to that later in my speech. I take his point, which is well made, and I hope the Minister will listen and will respond to it in his summing up.

Turning to my own amendments, I am worried about the lack of ambition in the Bill on strengthening fraud prevention. My new clause 1 would introduce the first national fraud strategy and data sharing arrangement for a decade. The National Audit Office, in its recent report, said that the Government simply do not understand the full scale of the fraud epidemic, despite the NAO calling for rapid action over five years ago. That is a damning statement. UK Finance has found that the Government’s failure to act on the fraud strategy and data sharing has seen the amount of money stolen from hard-working families’ and businesses’ bank accounts through fraud and scams hit a record high of £1.3 billion.

Despite that, in Committee, the Minister urged me to withdraw my new clause on the matter. He told me to be patient, and he told me that there would be a fraud strategy before Christmas. Now he is saying there will be one early next year, but how can we trust him not to kick the can further down the road? So I will be holding the Minister to account. There are only 24 days left until the end of the year, and people whose lives have been ruined by fraudsters cannot afford to be patient any longer.

Following our debate in Committee, leaders from across the financial services sector told me that the Government’s approach of placing data sharing responsibilities on the banks alone was stuck in the last century and allows tech-savvy criminals to get rich at the public’s expense. My new clause would put in place a data sharing arrangement that extends beyond just the banks to include social media companies, crypto-asset firms, payment system operators and other platforms that are exploited by criminals. If the Minister does not listen to the Labour party, I hope he will listen to the National Audit Office, businesses and victims of fraud, and finally give enforcement agencies the powers they need to crack down on criminals by voting for our new clause today. I also hope the Government will support my new clauses 2 and 3 and new clause 7, tabled by my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh); because we have spent a substantial amount of time speaking about free access to cash I will not elaborate too much on that, but she has our full support.

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[Anthony Browne]

As I have made clear in previous iterations of this legislation, I am very broadly supportive of the aims of this Bill and on the Treasury Committee we have scrutinised it in detail, so I will limit my comments to just some of the huge number of amendments. I love this exercise in democracy where different MPs with different interests come forward with their amendments; I have actually worked with many of them in my life and have direct experience with them.

I absolutely support new clause 27 on freedom of expression, which my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) mentioned. UsforThem, which was founded by someone in my constituency, has done some great work campaigning on schools, but was utterly traumatised by the sudden loss of access to PayPal, and we need due process around that.

On new clause 28 relating to buy now, pay later, which the hon. Member for Walthamstow (Stella Creasy) mentioned, I was involved with the regulation of payday loans, something else that fell between the gaps and needed to be sorted—it was outrageous. I am convinced by her arguments that buy now, pay later is another gap that is not addressed. I am sure the FCA has powers to deal with that already, but I hear her frustration that the Government keep saying that they will deal with it but have not done so, so I urge the Minister to put that on his list of things to take up and deal with.

The same applies to new clause 11, which the Chair of the Treasury Committee, my hon. Friend the Member for West Worcestershire (Harriett Baldwin), talked about convincingly. It is an absolute scandal that huge swathes of the population cannot get access to financial advice and are impoverished as a result because of a failure of regulation, or excessive regulation—we can blame the EU. I was on an FCA taskforce some time ago to try to sort out this problem—I was trying to remember where it went, but it clearly ran into the sand. We absolutely need to deal with this urgently. Again, I take reassurance from the Minister’s comments that he will deal with it as a matter of urgency. I will hold him to that, as, I am sure, will the Chair of the Treasury Committee.

Access to in-person banking is really important. In fact, I negotiated the deal with the Post Office on behalf of the banks to open up post offices to offering banking services. There are actually more post office branches than all the bank branches in the country combined. A lot of people complained to me about the lack of access to certain banking facilities, and I would always point out that they can do those things at their local post office, which they did not know—we need to raise the profile of that.

Opposition Members need to define clearly what they mean by “in-person banking”. There are lots of different things. Do they mean going to ask for a mortgage or just paying a bill, for example? We do lots of different things in different places. The deal with the Post Office is being renegotiated, and I think the main thing there will be to ensure that whatever services we want are put into the negotiations.

Finally, I want to talk about access to free cash. I said in an intervention earlier that I massively support access to cash. Cash use is dwindling—clearly, more people are using cards and other payment types—but we need to make sure that people who do not want to use other means have access to cash and, indeed, access to free cash. I should say—I do not think anyone has remarked on it—that paid ATMs have been dying a death over the last 15 years. There is about half the number now than there was 15 years ago. People pay for only 5% of ATM withdrawals—I never do because I find it offensive to pay to take out my own money. I fully support the sentiment.

However, on new clause 7, there is already a power in the Bill for the FCA to ensure access to cash, and that could include pricing so that the FCA can ensure access to free cash. I have two things to say about the drafting of the new clause. First, it does not stipulate whether it applies to personal or business customers. Traditionally and historically, a lot of business customers have paid for cash-handling services. Is the new clause saying that they should no longer pay for them? It is not quite clear. If they are no longer required to pay, are non-cash businesses cross-subsidising them? Secondly, the new clause does not stipulate whether it applies just to sterling cash and not to foreign exchange. If I was a bureau de change dealer, I would be rather worried about having to offer my services for free.

With those comments, I basically urge the Minister to stand by the various commitments he has made this afternoon. I support the Bill.

[Mr Baron]

I very much welcome the Bill and congratulate my hon. Friend the Minister on listening to and engaging with the points raised by many of us on the Back Benches.

I support new clause 11 in particular—I was heartened to hear what the Minister had to say about it—but may I perhaps reinforce a very simple message about the urgency required on financial advice? We in this country have been blessed with the City of London and many other world-leading financial institutions around the UK. I think I can say with some confidence that London is the financial capital of Europe, if not the world. The world comes here to do business on a variety of fronts. Yet we have very little good access to advice. In fact, if anything, we have a widening advice gap.

On the one hand, we have wealth managers raising their minimums, banks withdrawing from the high street and withdrawing fully from providing investment advice; we also have the retail distribution review, which I supported because it was ending the backhand commission for unit trusts—that was bad for the consumer—but it has resulted in independent financial advisers having to charge more and few of them being used. On the other hand, with all that advice in retreat, we have the Government and all parties saying that we must take greater control of our finances, there are greater pension freedoms and there is a great demand for good advice.

A lot of people of modest means who have no access to good advice fall into that void. They may be tempted, for example, to leave cash in the bank earning a pitiful rate of interest while inflation erodes its value. This is where the law of unintended consequences comes in, because all that regulation that had to be met before one could offer full-blown advice is fine when we are talking about full-blown advice, but there is a middle ground that needs to be covered. I offer a basic statistic that might interest or help those willing to take a particularly long-term view to their financial planning: instead of leaving money in cash, if they invest in equities over the long term—25 years, for example—they stand a very small chance of losing money. There will be volatility, but because they are investing, hopefully, in growing businesses, they will do well, and 97 times out of 100, that will beat cash deposits. That is the sort of advice that banks, building societies and many others could give, without getting too complex about financial planning. It would offer consumers a choice, rather than just letting their cash sit in banks and get eroded. Will the Minister therefore give impetus to the assurance he has given on new clause 11 and really get the Treasury looking at this issue, because there is a halfway house, and we must not stop regulation being the enemy of the good? That is what we are asking for.

I will add one other thing quickly in the minute I have left. Please make sure that our regulators listen to the various trade bodies when it comes to regulation, because we are inheriting—I very much welcome this Bill—a lot of powers from the EU. We are in control of our own destiny, but I take issue with the FCA on a number of points. One of them is that when it comes to investment trusts, there are such things as key information documents. They are an invention of the EU and are misleading about risk and putting consumers at risk of losing money—it is as simple as that. The Association of Investment Companies has said that. By the way, it has also said, in relation to those key information documents, “burn before reading”. Despite that, there has been no meaningful action from the FCA on that issue, and that is wrong. I ask the Minister to make sure that our regulators do not rest on their laurels, realise the greater freedoms they have got and rise to the occasion.

[Andrew Griffith]

I thank Members from all parts of the House who have spoken today for their valued and often very informative and sometimes passionate contributions. I sense a tone of disappointment in the hon. Member for Hampstead and Kilburn (Tulip Siddiq), my shadow on the Opposition Front Bench. I will try to endeavour not to disappoint her in return for her party’s support for this important and landmark Bill. I spoke at length in my opening remarks. I hope I was generous in taking interventions, and perhaps colleagues will indulge me if I try to get through this as quickly as possible.

We heard from my right hon. Friend the Member for Chelmsford (Vicky Ford), my predecessor, who contributed so much to this Bill. We also heard from my hon. Friend the Member for North East Bedfordshire (Richard Fuller) and from my hon. Friend the Member for North Warwickshire (Craig Tracey), who served on the Bill Committee. They all spoke to a greater or lesser degree in support of new clause 17 and about how we can make that better and better hold the regulators to account.

We heard about the specific metrics suggested in new clauses 12, 13, 14 and 15—my hon. and right hon. Friends are very productive. I can say that I will consider things very carefully. In those amendments, they gave specific examples of how we could potentially deploy the powers in new clause 17, and I undertake to consider carefully whether those are the right way forward. We heard from my right hon. Friend the Member for Chelmsford about that sense of urgency, and we got that again in new clause 11. Again, it is potentially a good way forward that I would like to consider.

We all understand that it comes down to financial inclusion, for which the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) rightly never fails to agitate. If, however, the consequences of our financial regulation exclude, as I think we heard, 92% of people from getting basic guidance on the sorts of products that are right for them, that is a problem for inclusion and for the industry. It is something that I was asked to take away with due urgency, and I commit that once we have the Bill on the statute book that is absolutely what I will do. Technology can be our friend there as well. We heard that from my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee.

Oral Answers to Questions

John Baron Excerpts

Tuesday 11th October 2022 Commons Chamber

The Chancellor of the Exchequer was asked—

[Mr John Baron (Basildon and Billericay) (Con)]

1. What fiscal steps he is taking to support small and medium-sized enterprises.

[Ian Levy (Blyth Valley) (Con)]

2. What fiscal steps he is taking to support small and medium-sized enterprises.

[The Chancellor of the Exchequer (Kwasi Kwarteng)]

My hon. Friend will know that the growth plan really was a very strong package for business and for small and medium-sized enterprises, and I am sure that many of his constituents will appreciate the strong measures that we introduced.

[Mr Baron]

I refer Members to my entry in the Register of Members’ Financial Interests.

I welcome the Government’s growth agenda, notwithstanding the lack of reassurance to the markets, but will the Chancellor seriously consider lowering taxation on smaller businesses, despite the package that has already been announced? They are the engine room of the economy and employ most people in the private sector, and if cost savings are necessary, High Speed 2 and the streamlining of myriad quangos could be the first option.

[Kwasi Kwarteng]

I am very pleased to tell my hon. Friend that we are going to introduce the medium-term fiscal plan in three weeks’ time, but let us consider the measures that we have already introduced. National insurance hikes have been reversed, the corporation tax rise has been scrapped and the annual investment allowance remains at £1 million. These are measures that small businesses up and down the land have been very appreciative of.

Economy Update

John Baron Excerpts

Thursday 26th May 2022 Commons Chamber

[Rishi Sunak]

As I have said, it will be a difficult time, given the degree of shock that we are seeing to energy prices. We know that energy bills will, on average, will increase by about £1,200 this year. Roughly, most of the 8 million most vulnerable households should receive support worth around £1,200.

[Mr John Baron (Basildon and Billericay) (Con)]

The Chancellor and the Government are absolutely right to recognise that more needs to be done, but I suggest to him that generally, lower taxes bring forward greater prosperity over the medium to longer term. As high inflation will be less transitory than many believed—banks were saying only a few months ago that it would be transitory—will he consider raising the minimum wage above inflation to help the lowest paid, given that unemployment is at a record low, and scrapping the corporation tax increases to help industry pay for that?

[Rishi Sunak]

I am proud that the minimum wage has gone up significantly this year, which puts £1,000 extra into people’s paycheques. Actually, we have a long-term target to increase it to two thirds of median earnings, which will ensure that it tends to rise faster than inflation in normal times, but I am happy to work with my hon. Friend on making that happen.

Customs (Amendment) (EU Exit) Regulations 2022

John Baron Excerpts

Monday 14th March 2022 General Committees

[The Financial Secretary to the Treasury (Lucy Frazer)]

I beg to move,

That the Committee has considered the Customs (Amendment) (EU Exit) Regulations 2022 (S.I. 2022, No. 109).

It is a pleasure to serve under your chairmanship, Mr Sharma.

The regulations consist of two measures that are being introduced following a review of customs enforcement rules. The measures make minor changes to legislation that will not have significant implications for traders or place additional burdens on them. None the less, the regulations will help to ensure that trade between Northern Ireland and Great Britain can continue smoothly and that traders in GB have appropriate safeguards where customs enforcement rules are applied by Her Majesty’s Revenue and Customs.

The first measure makes a number of changes relating to vehicles and goods travelling between Great Britain and Northern Ireland. First, it will ensure that HMRC can collect information about goods—for example, alcohol or tobacco—that are imported to the UK on Royal Navy ships from Northern Ireland. That rule already applies to vessels more broadly. The measure makes no change to the way in which the Royal Navy supplies that information to HMRC.

Secondly, that measure will give HMRC new powers to prevent fraudsters from exploiting the rules, for example, by putting goods shipped into Great Britain via Northern Ireland into the British market without paying the right duty. Thirdly, the measure will remove an unused and outdated requirement for information about goods being transported by ship from Great Britain to Northern Ireland. Again, let me stress that those are all minor changes that will place no extra burden on traders.

The second measure is also made up of several parts. The first relates to HMRC’s right to request a security as a condition of releasing imported goods from customs control. That might happen where a customs declaration form cannot be verified immediately, for example, in cases of suspected undervaluation fraud. Our customs officials rightly take a rigorous approach to their work. That means that, in some circumstances, the verification process might take a significant amount of time which, in turn, might mean that goods become commercially worthless to traders and cause storage problems for HMRC. As a result, it is in both parties’ interest to allow the goods to be released from customs control, as long as a trader can provide a security to cover any additional duty owed.

When the UK was in the European Union, traders who disagreed with HMRC’s decision to require a financial security could request a review or appeal to an independent tribunal. Those rights were also supported in domestic legislation. Since the end of the transition period, HMRC has the right to continue to require financial security from importers under the Customs and Excise Management Act 1979. That legislation, however, is not currently linked to statutory rights to request a review or to appeal to an independent tribunal. The regulations will therefore reinstate those rights and give businesses the same right of appeal as under EU legislation.

The final parts of the measure update the 1979 Act so that it reflects terminology used elsewhere in domestic customs legislation. The measure also omits previous amendments to the Act that have not yet come into force and that would have removed HMRC’s ability to require traders to provide a security.

[Mr John Baron (Basildon and Billericay) (Con)]

I would like my right hon. and learned Friend’s assessment of whether the arrangements are proceeding as per the spirit of the EU protocol, given that when the trade arrangements were being negotiated, the feeling was that if there were no disruption to trade elsewhere in the EU, there would be a light-touch approach to the trading relationship between Northern Ireland and the mainland. In effect, however, that has not taken place. What is her assessment of that?

[Lucy Frazer]

My hon. Friend and many Members of the House—on both the Government and Opposition Benches—are very concerned about the implications of the Northern Ireland protocol. For that reason, through the Foreign Secretary, who is leading the negotiations, we are trying to change the arrangements for Northern Ireland. It is important that we do so, because they are having an effect on trade and on societal difficulties in Northern Ireland. As my hon. Friend knows, we have a number of easements on Northern Ireland that ease the requirements that were first put into the protocol. We support them, because they ease trade.

Let me be clear that the regulations do not in any way make it harder for traders to trade between Northern Ireland and the rest of the UK. In fact, they take away redundant provisions, tidy up the legislation and provide an easier and simpler route by way of the provision of a security. I understand the overall concern of my hon. Friend the Member for Basildon and Billericay and I share the concern that we need to get the right approach in Northern Ireland, but I do not think that the statutory instrument should aggravate or concern him unduly as regards Northern Ireland.

--- Later in debate ---

[Mr Baron]

Having served in Northern Ireland in the 1980s, one still has friends and contacts there, if not through the Army then through the civilian population. I reinforce the concern expressed so far about the sense of unease in the Province, particularly in the Unionist community. I think the Minister understands that, but perhaps she needs to go to the Province more frequently and to talk to the Unionists, because passions are running very high.

The spirit of the Northern Ireland protocol—I hope that both sides entered the negotiations in this manner—was that provided it did not distort trade between Northern Ireland and the mainland and did not distort trade in any part of the EU, a light touch could be applied. However, that is not what has transpired. Despite no evidence whatsoever of trade being distorted within the EU in any other market, a hard touch has now been applied to the protocol. I recently heard an example of a Christmas card sent between Northern Ireland and the mainland that attracted a £3 custom charge—that is farcical. If we are not careful, that situation threatens not just trade between Northern Ireland and the mainland, but the Act of Union itself.

I hear loose talk that by invoking article 16 we are somehow reneging on an international treaty, but that is not true, because article 16 is part of the arrangements of the Northern Ireland protocol. It did not stop the EU, as highlighted previously, threatening article 16 when it came to the vaccination programme. I gently suggest to the SNP spokesperson that had we been a member of the EU, we would not have vaccinated as quickly as we did, because it was courtesy of us not being in the European Medicines Agency and under the directive that we were able to roll vaccines out much faster, and a lot of citizens benefited from that. I cite that as one example of the benefits of Brexit, but there are many others, including many more trade deals than the sceptics thought.

Putting that to one side, let me address my comments to the Minister about the SI. It worries me that we seem to be substituting “Great Britain” for “United Kingdom” in the terminology, confusing the issue. That again goes back to the core Act of Union many centuries ago, so I am not happy with the SI. I worry about its implications, about how it will be read in the Province, in particular by the Unionist community, and about the effect it will have on real trade between Northern Ireland, the Province, and the rest of the UK.

I look forward to hearing what the Minister has to say, because I know that that concern runs deep in Government. I have spoken to the Northern Ireland Secretary and the Foreign Secretary. I have shared my concerns and given what insight and reflections I can. Feelings are running raw in the Province, and it comes down to this approach to the Northern Ireland protocol at a time when there is no evidence whatever that a light-touch approach could not be reinstated.

DRAFT MONEY LAUNDERING AND TERRORIST FINANCING (AMENDMENT) REGULATIONS 2022

John Baron Excerpts

Monday 7th February 2022 General Committees

[The Economic Secretary to the Treasury (John Glen)]

I beg to move,

That the Committee has considered the draft Money Laundering and Terrorist Financing (Amendment) Regulations 2022.

It is a pleasure to serve under your chairship, Mr Robertson. The Government recognise the threat that economic crime poses to the UK, and are committed to combating money laundering and terrorist financing. Illicit finance not only risks damaging our reputation as a fair and open economy, but poses a threat to our national security by undermining the integrity and stability of our financial markets and institutions. Illicit finance also has significant social and economic costs through its links to serious and organised crime, and can reduce opportunities for legitimate business in the United Kingdom. That is why the Government are focused on making the UK a hostile environment for illicit finance.

We have taken significant action to tackle money laundering and terrorist financing and to strengthen the response of the whole financial system to economic crime. Front and centre to those efforts are the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017—the money laundering regulations—which are a key part of our legislative framework, and set out a number of measures with which businesses and trusts must comply to make the UK an inhospitable place for money laundering and terrorist financing. Those measures include the requirement for trusts to register with Her Majesty’s Revenue and Customs’ trust registration service. Trusts are an integral feature of the UK’s legal system and are used for a wide range of legitimate purposes. However, they can also be used to conceal the true beneficial ownership of assets, and therefore to impede law enforcement as it investigates money laundering and terrorist financing.

The trust registration service addresses that risk by providing law enforcement with a key source of up-to-date information on the beneficial ownership of assets held in trusts. As a result of changes introduced in 2020, the trust registration service has been expanded so that most types of UK express trusts are now required to register. In addition, overseas trusts with certain connections to the UK, including the acquisition of land or property in the UK, are now for the first time required to register. Today’s statutory instrument amends the money laundering regulations to ensure that the trust registration service operates as effectively as possible as an anti-money laundering tool, striking the right balance between the public interest of tackling money laundering and the right to privacy of those who use trusts for legitimate purposes.

First, to ensure that trustees have sufficient time to gather the necessary information and complete the registration process, the instrument extends the registration deadline for those types of trusts newly required to register until 1 September 2022. Secondly, the instrument extends the time limits for reporting changes to the information held on the register. Trustees are required to update the register within certain time limits, if the information held on the register relating to the individuals involved in the trust changes. In recognition of the fact that such changes are often triggered by traumatic life events—for example, bereavements—the instrument extends the time limit so that trustees will have 90 days to report such changes to HMRC. Lastly, the instrument makes changes to the categories of trusts that are excluded from registration. Certain types of trusts that pose an inherently low risk of money laundering are excluded from registration.

[Mr John Baron (Basildon and Billericay) (Con)]

The Government are right to clamp down on money laundering and to ensure, courtesy of the draft regulations, that the rules are not too onerous, but will the Minister, when he has two minutes, look at some of the questionnaires being sent out by banks seeking additional financial information, and apparently citing the Government’s introduction of onerous regulations as the source of the problem? Constituents have reported to me that some of the questionnaires ask for quite a lot of detail regarding their financial affairs.

[John Glen]

I thank my hon. Friend for that intervention. I am aware of the tension regarding the application of rules designed to keep our banking system both clean and accessible. It has come to my attention in a number of ways over recent weeks and months, and in particular the issue of accounts being difficult to set up for charities and small community organisations. I intend to convene a roundtable with the banks to examine the issue and ensure that the interpretation of these legitimate restraints against abuse does not impede access to banking for our constituents.

This instrument just makes some small changes to the existing categories of excluded trusts to ensure that the burden of registration is proportionate to the money laundering risk that certain types of trust pose. I thank Committee members for their examination of this important piece of legislation. In summary, the instrument will amend the money laundering regulations as they relate to trust registration to ensure that the regulations strike an appropriate balance between providing an effective anti-money laundering tool for law enforcement and minimising the administrative burden on those who use trusts for legitimate purposes. This amendment will enable the money laundering regulations to continue to work as effectively as possible to protect the UK financial system and allow the UK to continue to play a leading role in the fight against economic crime. I hope colleagues will join me in supporting this legislation.

Budget Resolutions

John Baron Excerpts

Wednesday 27th October 2021 Commons Chamber

[Mel Stride]

My right hon. Friend is absolutely correct about skills. He, of course, through his Committee, has done so much to promote that agenda, which I will come to momentarily, but the background is extremely tough.

While the Chancellor is right to point out that the deficit is falling, it is none the less very highly elevated compared with historical measures. The debt, in financial terms at least, is at a record level of £2.2 billion, and the economy has the headwinds of supply chain bottlenecks and the mismatch between demand and supply that we are seeing in parts of the labour force.

However, there are reasons to be cheerful, which my right hon. Friend outlined. Those are the OBR’s revised forecast showing that growth is much stronger this year—I think the Chancellor suggested 6.5%, compared with the March forecast of just 4%—and the scarring downgrade from 3% to 2%. By my calculation, that is probably worth about £10 billion or thereabouts per year; it is a significant achievement. All that has been achieved through the hard work of the last 18 months to two years. I do not think we should take that away from my right hon. Friend.

That has left my right hon. Friend with some breathing space, and he recognises that there are many challenges facing the economy and uncertainties going forward. A big test as we unpack the Budget is what he has done with that additional headroom. Not surprisingly, he has spent quite a lot of it. It appears to me that, with his fiscal rule of keeping day to day expenditure without borrowing and debt coming down as a percentage of GDP, he has headroom of about £25 billion in 2024-25 on the net debt target, which is about 0.9% of GDP, with the OBR economic and fiscal outlook suggesting he has a 55% to 60% chance of hitting that particular metric. The Committee will want to look very closely at how prudent an approach my right hon. Friend has taken to the Budget.

I see my hon. Friend the Member for Basildon and Billericay (Mr Baron) itching to intervene, so I give way to him.

[Mr John Baron (Basildon and Billericay) (Con)]

I am listening intently. I do believe that the Government have done extraordinarily well in raising the national living wage as part of that headroom. That is a major step towards a high-wage, high-tech economy, and it bolsters our one nation agenda, which is to be applauded.

[Mel Stride]

My hon. Friend is absolutely right. I will come to the matter of wages and wage growth momentarily, but let me dwell on the challenges facing the economy.

Another thing that the OBR points out is the increased sensitivity to interest rate rises—the Chancellor made this point—and the damage that they can do to the public finances. I think my right hon. Friend gave the example of a 1% rise leading to a £23 billion increase in debt servicing costs. To put that in perspective, it would wipe out the value of the corporation tax increases and income tax threshold freezes that my right hon. Friend announced in the last Budget. That would be gone in one enormous gulp, so we must be careful about the vulnerability we have. Though we have low interest rates, and interest rates might move up in baby steps, that applies to a very large debt indeed.

Let me touch on inflation—I am pleased that my right hon. Friend spent quite a lot of time on it during his speech—and its impact on interest rates. We have already seen the Monetary Policy Committee beginning to divide on whether rates should go up, and there is an expectation, certainly in the markets, that rates will start to increase. We have seen 10-year gilts going up in more recent times, and it is possible that quantitative easing will start to unwind —perhaps passively initially—when we reach a certain trigger level of interest rates, so it is important that this credible plan is there to deliver on those fiscal targets.

The history, however, is not good in that respect. We have had Chancellor after Chancellor failing to meet their fiscal targets; they have either abandoned them completely or delayed or modified them in some form. Depending on what happens to demand in the economy relative to supply, there may be a case for fiscal stimulus even further down the line. One thinks of the removal of the universal credit uplift, the energy price increases, the labour market demand-supply mismatches and the rise in taxes, often taking demand out of the economy. None the less, and setting that to one side, the Chancellor’s default position must be to stick to those fiscal targets and resist the huge cacophony of demands for more and more expenditure, particularly the day-to-day expenditure that he is rightly targeting in his fiscal rules.

Some of those demands might end up being necessary. If we do not get back to the pattern of demand for public transport that we had before we locked down, it is conceivable that further subsidy will need to go to the public transport sector. Other areas, such as the health service, might have additional demands, but I point out to my right hon. Friend—he knows this more than most —that the NHS public expenditure take has risen in the last 10 years from 32% to 42%. He must get very good at saying no to Ministers when it is necessary to do so, and telling them to go back to their Departments, work harder and get more out of what they are given. That is a lesson for us all, incidentally, particularly those of us on this side of the House.

If we fail in that endeavour and inflation takes off, interest rates go through the roof, the cost of servicing our debt becomes ruinous and international markets lose faith in our economy, we will be back broadly where we were in 1992 when we had Black Wednesday. Conservative Members will remember the long, hard lesson of that: it took us a generation to re-establish our ability to look the electorate in the eye and say, “We can offer a fiscally responsible Government.”

There were some announcements on tax today. May I say first that the drop in the bank surcharge is absolutely the right thing to do? We are putting corporation tax rates up to 25% from 19%, so it would be absurd to cripple our financial institutions with uncompetitive international tax rates.

I was particularly delighted by the shift in the universal credit taper rate from 63% to 55%. That will help countless low-paid families to earn more and keep more of their money, and encourage more people into work. When I was a Treasury Minister, we looked endlessly at this and I pushed really hard on it. I know how expensive it is to do that—my right hon. Friend the Chancellor suggested £2 billion a year—so I take my hat off to him for having grasped that particular nettle.

My right hon. Friend is also right to set out an aspiration to get taxes down before the end of this Parliament. The same pattern occurred under Lady Thatcher, who is much referred to when we talk about tax. In the early years of the Thatcher Government, the tax burden rose quite strongly, and it was my right hon. Friend’s hero Lord Lawson who was able to bring tax rates down. Let us hope that my right hon. Friend is in a position to emulate that in due course.

I turn briefly to inflation, which is right at the core of what is happening in the economy. The threat to the public finances from inflation cannot be overstated. The big debate now is whether price surges and increases in inflationary expectations will be transitory or more persistent. My right hon. Friend referred to the surge in demand relative to supply, which of course will lead to price increases; all else being equal, one might imagine that it will pass relatively quickly.

We have seen the commodity, transport and energy price increases that my right hon. Friend referred to, but there are other price increases that we might expect to be stickier. There are bottlenecks that are often outside our control—a south-east Asian chip manufacturer can have a bottleneck that results in our being unable to produce cars in the United Kingdom. Structurally, the labour market has changed: as a consequence of the pandemic, there is now greater demand for goods relative to services. It will take time to mop that up.

The Bank of England MPC has expressed increasing concerns, in different ways, about inflation and has been constantly deferring the moment at which it believes inflation will peak. There is a debate as to when deferred “transitory” becomes “persistent”, but the huge danger is that we will go into a wage price spiral. One way in which that might happen is if we talk up wages by inducing companies to put them up without a coincident increase in productivity. That will simply feed the inflationary tiger. We have to be very careful on that point.

--- Later in debate ---

[Mr John Baron (Basildon and Billericay) (Con)]

I refer the House to my business interests in the Register of Members’ Financial Interests.

May I start by saying what a pleasure it is to follow my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton)? I think I agree with everything he said, particularly his point about the importance of early years. All I would perhaps say is that, like him, I have been drinking English wine since the 1970s, and we had to grimace at the time. It has got a lot better, and I commend it not just to the House but to the world. It is first class.

This has been said a few times, but may I say well done to the Treasury Ministers? When a colleague says that, there is usually a “but” at the end of it, but I do mean it. The Chancellor has done a phenomenal job. He has been very sure-footed during the last 18 months, and that is what we have needed. He and the Treasury team have been absolutely right in ensuring that we minimise the economic impact of the pandemic, with the furlough scheme and all the rest of it. I think the success that we are seeing with the economy now is a testament to that period when tough decisions were required, and taken, for the good of all.

I thought the Budget overall was very good. There was lots of optimism in it, quite rightly; that was quite justified. I liked the measures to help the lower paid, including the reduction in tapering on universal credit; I liked the green jobs emphasis; I liked the science and technology emphasis, and I liked the reform of how we levy duties on alcohol. I particularly liked the introduction of a £9.50-an-hour national living wage, as a result of which those working full time will be something like £1,000 better off per year. That will particularly support younger and lower-paid workers and help the UK transition to the high-wage, high-skill economy that we need.

I suggest that the Government should not be pushed off course by big business. For too long—perhaps 20 years —because of unlimited immigration while we were a member of the EU, it has relied perhaps too frequently on lower wages as a substitute for investment in R&D, the skilling up of the labour force and increased automation, all things that will now lead to the emergence of new and better-paid jobs. That in turn will serve to increase productivity. That is excellent news, and higher wages and controlled immigration will also bolster our one nation agenda, the aim of which is to encourage economic prosperity in order to better help the less fortunate in society.

Having said all that, in the few minutes I have left, I would like to share a few concerns with Treasury Ministers. I do not think that I am alone in being concerned that the level of spending increases forecast over the next four or five years is nearly double the growth rate of the economy. If we think it through, that is unsustainable. It can only result in financial pinch points—perhaps the raising of taxes and the taking on of more debt. It cannot be sustained indefinitely.

I am not someone who attaches much credence to forecasts, but even the Treasury forecast suggests that, as this five-year spending review period unfolds, the growth rate, if anything, will fall off. We have to look at this very seriously. We have to try to reboot growth, in many respects, and at the same time keep an eye on inflation. We are at a tipping point as to whether inflation is indeed transitory or whether it will become embedded. We have to be very careful about that, because it will have serious consequences for living standards generally if we let inflation out of the bag. We have to look at rebooting growth and do everything we can, because at the end of the day, growth is where it’s at. It is growth that is the engine room when it comes to a prosperous economy, a prosperous society and helping to raise living standards.

I make no apologies in opposing the increase in national insurance. We used to believe in the Conservative party that it was a tax on jobs. We seem to have drifted away from that. I urge Treasury Ministers to think about that, because in the end an increase in national insurance is reflected in lower pay and higher prices, which are bad for workers, businesses, customers and the economy as a whole.

We need to take another look at corporation tax. We need to reduce corporation tax over time. All the evidence suggests that if we reduce corporation tax or taxes generally, in the medium to long term, we increase revenues. It is not a zero-sum game. Low taxes equals greater prosperity. I also encourage the Government to consider bringing back a lower rate of corporation tax for small and medium-sized enterprises, which we all know employ a disproportionate number of people.

It is not just about lower taxes, however. We need to deregulate more if we are to reboot growth. There is too much regulation out there, including in financial services and in industry generally. I specialise in something called investment trusts, a hangover from our EU membership. Key information documents—KIDs—are still far too complex. They should be pushed to one side, with better and simpler regulation brought in.

We should also, now that we are out of the EU, consider scrapping more tariffs. Why do we still have tariffs on imported goods? I do wonder. The trade deal with New Zealand, announced last week, is a step in the right direction. A lot of tariffs were reduced or removed altogether. I did not know, for example, that we charged an 8% tariff on New Zealand onions, but that has now been scrapped and rightly so. We need to look again at reducing taxes, deregulating and scrapping tariffs.

In the minute or so I have left, let me touch briefly on one or two other items that perhaps were not touched on enough in the Budget. The cladding issue was mentioned. The Government have to look at that again. The problem is not the fault of leaseholders. It has been an extraordinary consumer regulation failure. I made my opposition known. The Government have moved a long way on this, but I still think it is wrong that we should ask leaseholders to pay anything when it has not been their fault. So I ask Treasury Ministers to look at that again.

On soft power, as chair of the British Council all-party parliamentary group, we recently fought a campaign to get the Government to think again. For the sake of an extra £10 million, the Government opted to compel the British Council to close 20 of its overseas offices, as defined by removing a country director and staff. That will damage our soft power. It has been the largest set of closures in the proud history of the British Council. Some people forget that it was established in the 1930s to help to counter the rise of Nazism. It is too much to ask. If we want to give meaning to our concept of global Britain and engaging with the world, we cannot be closing 20 offices. The British Council does an inordinate amount of work when it comes to our soft power.

I would suggest this, if money needs to be raised. I opposed HS2. I think it is the biggest white elephant this Government or any Government have spent money on for a long time. Yes, some forecasts suggest we would lose £10 billion, but we would save £90 billion. A fair bit of money could be saved if we scrapped it even at this stage. I would also take a close look at quangos. We have far too many quangos. The TaxPayers’ Alliance reckons that billions of pounds would be saved if we consolidated them or brought them under more control.

I reiterate what a good number of other hon. Members mentioned, which is getting value for money for the expenditure we are asking the taxpayer to incur. I was chair of the all-party parliamentary group on cancer for 10 years, so I can testify to the fact that Governments of all parties have, for good reasons, bombarded the NHS with process targets, such as two-week and four-week waiting times, but not focused enough on outcome measures—in other words, one-year cancer survival rates. That is why, despite all the money that has gone into the NHS, we are still not catching up with international averages when it comes to cancer survival rates.

Half those who work in the NHS are not medically trained, but just a tweaking of that figure—say, 60:40—would make a phenomenal difference on the frontline. We must re-examine how money is spent. Overall, however, this is an excellent Budget and I commend it to the House.