Rural Banking Services

John Glen Excerpts

Tuesday 20th July 2021 Westminster Hall

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

It is a pleasure to serve under your chairmanship this morning, Mr Gray, and I commend my hon. Friend the Member for Brecon and Radnorshire (Fay Jones) on securing this debate and on the eloquent way in which she set out a whole range of issues concerning her constituents. I know that she has deep first-hand experience of rural affairs, given her prior role working for the National Farmers Union before she came to this place, and she spoke very clearly about the significance of bank branches for many in rural areas across Wales, England, and indeed Scotland too. I also listened very carefully to the three interventions from the hon. Members for Pontypridd (Alex Davies-Jones) and for Strangford (Jim Shannon) and my hon. Friend the Member for Aberconwy (Robin Millar), and I am keen to address those in my response.

From my first-hand experience growing up in rural Wiltshire, as part of a family running a very small business, I know the significance of bank branches and the central role that they have in the community. However, I also have to recognise that the world that we live in today is very different from the one of a few decades ago. Technological progress means that more consumers and businesses are opting for digital payments and banking, and last year’s figures from UK Finance show that around seven in 10 adults in this country used online banking and eight in 10 used contactless payments. Although cash represented almost a fifth of the total number of payments, this was a reduction from 56% a decade earlier in 2009, so while the longer-term impact of the pandemic on banking is not yet absolutely clear, the switch to those digital methods is likely to have been accelerated by coronavirus. Times are changing and have clearly changed, and digital technology is transforming banking just like ATMs did in the 1960s.

None the less, as we have heard today, bank branches still matter a great deal to many people, and permanent branch closures can be a source of real dismay to communities across the country. Although closures can be upsetting, they are commercial matters and the Government cannot intervene. Indeed, one could argue that the UK’s financial services sector is among the most competitive and productive in the world precisely because it has the flexibility to respond to market changes.

It is also crucial that the impact of branch closures is understood, considered and, where possible, mitigated so that all consumers across the country can continue to access over-the-counter banking services as they choose. As has been mentioned, since 2017 the major high street banks have been signed up to the access to banking standard, which commits banks to ensuring that customers are well informed about branch closures and the reasons behind them, and that customers have options for continued access to banking services, including specialist assistance for those who need more help. That is not some passive intervention. The operation of the standard is monitored and enforced by the independent Lending Standards Board, which holds banks that close branches accountable for their treatment of customers. That means monitoring to see whether they help individual customers to make the transfer to using the Post Office or other solutions.

Last September, banks’ responsibilities around closures were further clarified by the Financial Conduct Authority when it published guidance setting out its expectations of firms that decide to reduce their physical branches or the number of free-to-use ATMs. Under that guidance, which seeks to ensure that customers are treated fairly, banks are expected to consider the impact of planned closures on customers’ everyday banking and cash access needs. In addition, banks should consider alternative access arrangements. On that last point, it is my understanding that within a short distance of the Llandrindod Wells Barclays, which my hon. Friend the Member for Brecon and Radnorshire mentioned, there are two post offices and two free ATMs. In addition, I note that Lloyds and NatWest provide fortnightly mobile bank branches throughout the constituency.

My hon. Friend quite rightly highlighted the great significance of cash to constituents, and the Government recognise that we have to address that need and the ongoing importance of cash to millions of people, particularly those in vulnerable groups—often the elderly and the poorest. I am therefore glad that LINK has already said that it will protect the broad geographic spread of free-to-use ATMs. It is being held to account against those commitments by the Payment Systems Regulator.

As my hon. Friend acknowledged, the Government are committed to legislating to protect access to cash for those who need it while ensuring that the UK’s cash infrastructure is sustainable. Clearly, the way it is funded and the way the wholesale system works has to evolve to reflect the changing usage pattern. That is why we brought new laws into effect at the end of June through the Financial Services Act 2021 to support the widespread offering of cashback without a purchase by shops and other businesses. That exciting development unlocks the potential for cashback without a purchase. It will provide a valuable facility for cash users and will play a major role in the UK’s cash infrastructure. As my hon. Friend highlighted, cashback without a purchase has been trialled in Hay-on-Wye—clearly a community with a strong independent streak, from what she said—for some months under the community access to cash pilots.

In addition, earlier this month we published a consultation outlining broader legislative proposals to protect access to cash. Those proposals seek to ensure that people need to travel only a reasonable distance to pay in or take out cash, and that the right regulatory oversight for cash access is in place for the future. My hon. Friend made a point about the rurality of her distinctive and distinguished constituency, with respect to its geographical size. This is obviously a matter that we must consider carefully as we move forward with these proposals.

Together, these measures will support the use of cash and help local businesses to continue accepting it by ensuring reasonable access to cash depositing facilities for small and medium-sized enterprises. The Post Office is also playing a key role; the Post Office banking framework allows 95% of businesses and 99% of personal banking customers to deposit cheques, check their balances and withdraw and deposit cash, across a network of 11,500 post office branches across the country. The Post Office is also required to ensure that 95% of the total UK rural population is within three miles of an outlet. I am pleased to tell hon. Members that the Post Office is trialling bank hubs as part of the eight community access to cash pilots around the country that I mentioned earlier. Rochford in Essex and Cambuslang in south Lanarkshire are benefiting from those shared branches. They are a significant innovation from the business hubs that were on offer a few years ago, and I am very pleased with the direction of travel in that area. The hubs will offer access to face-to-face community banking services provided by the banks with the most customers in each area. In addition, Hay-on-Wye’s post office is being refurbished to better support banking services, as part of the eight pilots. I look forward to learning lessons from the pilots and to the future industry models for supporting access to cash that they will help to inform.

A final point, which has been raised, is that there is a need to improve mobile and broadband coverage in rural areas, to make the immense benefits and opportunities of online products open to all. That is why the Government remain committed to delivering UK-wide gigabit connectivity as soon as possible, with £5 billion to support roll-out in the hardest to reach areas. As the Prime Minister mentioned in his levelling-up speech last week, we have made great progress. By the end of this year, 60% of the country will have a gigabit connection. We are working with industry to target a minimum of 85% giga-capable coverage in just four years in 2025. We will seek to accelerate roll-out further to get as close to 100% as possible.

However, while 4G coverage continues to improve in rural areas, admittedly it is not yet as good as in towns and cities—again, Members rightly raised that. As a result, the Government are providing £510 million for the shared rural network. Mobile operators will contribute an additional £532 million as part of this deal, which will extend high-quality 4G mobile coverage to 95% of the UK by 2025. We are also focused on removing the practical barriers that stand in the way of our broadband and mobile coverage targets, through our barrier busting task force. We are looking at the difficult challenges in some communities, many of which are in rural areas, to try to make a real difference on the ground.

While technology is continually changing, the principles that guide the Government’s approach to banking services remain entirely consistent. I have been in this role now for more than three and a half years, and I continue to work with banks, the Post Office and industry stakeholders to try to find practical solutions. We are working to ensure that all consumers, in both rural and urban areas, can access the services they need. We are committed to legislating to protect access to cash for those who need it, and to maintaining the sustainable cash infrastructure that the country needs. We are determined to help the whole country benefit from better broadband and mobile coverage, so that everyone who wishes to use digital and online services can do so.

I will continue work with colleagues across the House, and with my hon. Friend, on these important matters in the coming weeks and months. I hope that that is a reasonable appraisal of and response to the issues that she rightly raised this morning. I am happy to continue correspondence with all Members, because I know that this is something that concerns our constituents.

Question put and agreed to.

Covid-19: Household Debt

John Glen Excerpts

Thursday 8th July 2021 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Bone. I congratulate the hon. Member for Makerfield (Yvonne Fovargue) and my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) on securing this debate. I know that both Members care a great deal about the question of how best to protect the personal finances of the most vulnerable. They have made many valuable contributions in Parliament on this matter, including through the hon. Lady’s role as chair of the all-party parliamentary group on debt and personal finance and my hon. Friend’s Local Welfare Assistance Provision (Review) Bill, which has been mentioned today.

I thank all Members who have contributed this afternoon for their deeply thoughtful and considered speeches, especially my hon. Friend the Member for South West Bedfordshire (Andrew Selous). Our thinking may diverge in some areas, but I believe that there is a great degree of commonality between us. We have a shared desire to tackle problem debt and a shared understanding that this complex issue cannot be wished away with quick fixes, much as we might like it to be. We also have a shared recognition that we must tackle this issue strategically. As a number of Members highlighted this afternoon, the covid-19 pandemic has meant that action in this area is required now more than ever before.

The Government have responded to the crisis with one of the most comprehensive economic plans in the world. I reject the assertion that that somehow means that there is a degree of complacency: that is not the case. With the furlough scheme, the self-employed income support schemes and substantial welfare support, including the £20 universal credit uplift, a suspension of the universal credit minimum floor and an increase to local housing allowance rates, the Government have sought to make a range of interventions across society. I believe that that plan is working.

We also recognise that even when the economy bounces back, and there are very encouraging signs in that direction, there will still be people living in fear of a knock from a debt collector or another payment demand. That is why we have introduced the numerous policies that have been mentioned this afternoon. I would like to respond to Members’ points about the policies that we have introduced to help people escape debt. As has been highlighted today, we are maintaining record levels of funding for free debt advice in England through the Money and Pensions Service this year, with a budget of £96.4 million. I recognise that there is still some uncertainty about the nature of that demand as people’s situations become clearer, but that includes funding for the Money Adviser Network pilots, which simplify access to debt advice. I am pleased to say that more than 40 different creditor organisations are now signed up, including HM Revenue and Customs.

I recognise hon. Members’ concerns about the complexity of tax debts, but consumers referred via the network will first have a conversation with an HMRC adviser, which should minimise the risk of misunderstanding over what is owed. The Money and Pensions Service budget also includes funding for the administration of debt relief orders. A number of colleagues have raised that this afternoon. We know that DROs can be an important solution for some, which is why we worked closely with the Insolvency Service to raise the monetary eligibility limits for DROs from the end of last month, a step that will help more people take advantage of this valuable option.

I recognise that some Members would like the Government to review the £90 DRO fee, as the Woolard review recommended earlier this year. I acknowledge those concerns but the Government believe that further changes to DROs should not be considered in isolation. A number of Members have made the point that we need joined-up solutions, so we will undertake a wider consultation on the personal insolvency framework. We will in due course launch a call for evidence to help us gain a deeper understanding of the situation.

I want to talk about Breathing Space. The steps we have taken are significant, because we recognise that the barrage of letters, calls and bills can be overwhelming, leaving borrowers unable to tackle what they owe. We launched the Breathing Space scheme on 4 May, just two months ago, whereby lenders agree to hold off fees and payment requests for 60 days. That relieves the pressures on borrowers and gives them time to tackle their finances with the support of a qualified debt adviser.

I will address the point, made by several Members, about whether 60 days is long enough. We believe that that period finds the right balance between debt advice, clients’ interests and their creditors’ rights. It has only been there for two months. However, we should also recognise that greater flexibility is built into the system for those experiencing mental health crises, reflecting the nature of the treatment and the challenges that might arise in supporting those clients. We will use a similar model of respite from bills and demands for our statutory debt repayment plan, which is currently being developed to work alongside the Breathing Space scheme. Under the plan, people struggling with problem debt will enter into formal agreements with creditors to repay their debts over a more manageable timeframe. Our aim is to lay legislation at the end of next year and introduce the scheme thereafter in 2024.

As my hon. Friend the Member for Blackpool North and Cleveleys so aptly put it, debt should not mean destitution. Income that could be spent on essential items, such as cookers or washing machines, or that could build savings, should not be swallowed up by sky-high interest rates. Fair and affordable credit should be available to all those who need it. I will turn to our work in this area. As has been highlighted, at the Budget we announced plans to provide up to £3.8 million to work on a pilot for no-interest loan schemes. I care passionately about this area, and I think it could make a real difference to many vulnerable people’s lives.

I note my hon. Friend’s comments about a cut and paste from Australia. He is right that we can learn a lot from the equivalent Australian scheme, especially in terms of partnership. Their scheme has been so successful because hundreds of socially minded organisations have played their part alongside the Government. We hope to follow that model and develop a scheme that is sustainable and properly supports vulnerable customers. I hear the urgency around that, and indeed I spoke to my officials just yesterday about securing an update on it in the coming days. Our next step is to appoint a delivery organisation with suitable expertise. Further details will be announced soon.

My hon. Friend is also correct to point out that greater market diversity is critical if we are to achieve our goals in this area. That is why we have used a significant part of the £96 million dormant assets scheme—money that would otherwise have remained idle—to boost financial inclusion. We have also committed to legislate to enable credit unions in Great Britain to offer a wider range of products and services; my hon. Friend the Member for Barrow and Furness (Simon Fell) mentioned his involvement in a credit union. There are, I think, 411 credit unions across the country, of wide and varying expertise. We have worked closely with the Association of British Credit Unions Ltd, one of the significant trade bodies for credit unions, to develop that approach. While legislation will play an important part in widening access to affordable credit, innovation is also key, as some Members picked up on. That is why, in this year’s Budget, we announced a number of actions in response to the independent Ron Kalifa review into FinTech, including measures to make it easier for firms to attract staff and develop new concepts.

I will make a final point on two other issues that I know are of real interest to contributors this afternoon. First, it is true that buy-now, pay-later agreements can be a helpful way of managing finance, but we need to make sure that consumers are protected. As we indicated during the passage of the Financial Services Act 2021 earlier this year, we will bring buy-now, pay-later under regulation, as the Woolard review recommended. However, any future regulation must be proportionate so as not to fundamentally damage those products that are innovative and low cost. There is a distinction between smoothing lumpy expenditures and multiple, unsustainable deferred payments. We must get that right, but I recognise the urgency around it.

I appreciate the positive words about our recent “access to cash” consultation. I assure Members that the Treasury is working closely with the private sector—indeed, I had meetings just this morning—to ensure that we get that right, and that cash services are provided for people in an environment where the use of cash is diminishing significantly.

I reiterate the acknowledgment that there is a real desire to provide urgent help to those who are dealing with significant debts. I share that strength of feeling, as I hope my track record in this role demonstrates. It is vital that these policies improve the lives of as many people as possible, so I welcome the range of speeches this afternoon and the constructive spirit that was relayed in many of them. I look forward to further collaboration to deepen and improve our interventions in this area.

Draft Bank of England Act 1998 (Macro-Prudential Measures) (Amendment) Order 2021

John Glen Excerpts

Tuesday 6th July 2021 General Committees

[The Chair]

Before we begin, I would like to remind Members to observe social distancing and only sit in places that are clearly marked. I remind Members that Mr Speaker has stated that masks must be warn in Committee. Hansard colleagues would be most grateful if Members could send their speaking notes to [e-mail].

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

I beg to move,

That the Committee has considered the draft Bank of England Act 1998 (Macro-prudential Measures) (Amendment) Order 2021.

May I say what a pleasure it is to serve under your chairmanship, Mr Efford? Since the financial crisis, the Government have implemented significant reforms to address the problems of the past and make the financial sector safer and more stable. The key element of those reforms was establishing the Financial Policy Committee, the FPC, which is responsible for identifying, monitoring and addressing risks to the financial system as a whole. The FPC addresses macro-prudential risks through its powers to issue recommendations and, importantly, directions to the Prudential Regulatory Authority, the PRA, and the Financial Conduct Authority, the FCA.

Successive Governments have legislated to provide the FPC with the powers of direction it needs to address risks to financial stability. Through those existing powers, the FPC can ensure that firms are not allowed to take on excessive levels of leverage, effectively tackle systemic risks in the UK housing market and vary firms’ capital requirements against exposures to specific sectors over time.

This statutory instrument amends the existing powers of direction granted to the FPC by Parliament to ensure that they continue to operate effectively given changes that have been made to the wider prudential regime since they were first introduced.

The Financial Services Act 2021 represents a major milestone in shaping a regulatory framework for UK financial services outside of the EU. It enhances the competitiveness of the sector and ensures it continues to deliver for UK consumers and businesses. The Act extended the powers for the PRA to make rules that apply to holding companies for the purposes of prudential regulation. Accordingly, the Act granted the FPC the ability to make directions or recommendations that relate to holding companies, ensuring a coherent regime under which holding companies become responsible for meeting prudential requirements.

Consistent with those changes, the instrument amends the FPC’s existing powers of direction where necessary, so that they can also be applied in relation to holding companies. In addition, the Government have stated their intention to move the detail of the leverage ratio framework exclusively into rules made by the PRA using powers introduced by the Financial Services Act 2021.

The leverage ratio is intended to be a broadly risk-insensitive measure of a bank or investment firm’s level of leverage and seeks to provide an important complement to the risk-based capital regime. This instrument, therefore, amends the FPC’s powers of direction over the leverage ratio so that the method for measuring a bank’s exposures when calculating the leverage ratio is defined by reference to rules made by the PRA. This method will be subject to any specifications made by the FPC when it issues a direction in relation to leverage.

For example, the FPC currently recommends that the PRA excludes central bank reserves from banks’ exposures for leverage purposes, to ensure that macro-prudential policy does not impede the smooth transition of monetary policy. Under this SI it would instead be able to direct the PRA to make such an exclusion.

The Treasury has worked closely with the Bank of England to prepare this instrument. In accordance with our statutory obligations, officials have consulted the FPC, which agreed with the approach being taken. We have also engaged with the financial services industry on the contents of the SI.

In conclusion, the SI is necessary to ensure that the FPC’s existing macro-prudential tools continue to operate effectively given changes that have been made to the wider prudential regime since they were first introduced. I commend the order to the Committee.

--- Later in debate ---

[John Glen]

As ever, I thank the right hon. Gentleman for his questions. He referenced the leverage framework, on which I will go into some detail in answering his second and third questions.

It is the Government’s view that this instrument is necessary to ensure that the existing macro-prudential tools that the FPC has continue to operate effectively in the light of the changes that we have made in that wider prudential regime. In so far as all those changes are consequential of decisions made five years ago, I suppose that there is a tangential link, but it is not a direct causal relationship.

The right hon. Gentleman also asked about the leverage framework. It may be helpful to the Committee if I set out that that leverage ratio is an indicator of a firm’s solvency relating to its capital resources and assets and, unlike the risk-weighted capital framework, a leverage ratio does not seek to estimate the relative riskiness of assets. The purpose of the leverage ratio requirement, alongside risk-weighted capital requirements, is to guard against the danger that the firm’s models or regulatory requirements fail to reflect the current riskiness of its assets. Currently, the leverage ratio framework requires that major banks and building societies satisfy a minimum tier 1 leverage ratio of 3.25% on a measure of exposures that excludes central bank reserves, along with various buffers that relate to those in the risk-weighted capital framework. Separately, the PRA also maintains a supervisory expectation that all firms maintain a minimum leverage ratio.

The FPC and PRA have undertaken a review of the UK leverage ratio framework in the light of the finalised international standards. The Bank published a consultation on the outcome of that review on 29 June and there are three main proposals incorporated in the FPC’s consultation.

The first is the level. The proposal is to keep the existing leverage ratio framework broadly unchanged for UK consolidated groups of major UK banks, apart from implementing the Basel 3.1 changes.

The second is around scope—to extend the framework to UK banks, building societies, investment firms with significant non-UK assets and, where relevant, certain holding companies, which reflects the importance that such firms have for the functioning of the UK financial market and that the Basel standards require the leverage ratio to be applied to internationally active banks. The PRA propose to extend the leverage ratio of firms with non-UK assets of at least £10 billion, which will capture the larger, non-ringfenced banks and international broker dealers, including Goldman Sachs, JP Morgan and Morgan Stanley.

The third element is the level of the application—the leverage ratio framework would generally be extended at the individual level, except where a relevant firm is subject to a requirement on the basis of its consolidated situation. The PRA would also have discretion to allow a sub-consolidated requirement, rather than an individual one, to be applied in certain circumstances.

The Bank believes that the extension of the leverage ratio framework to internationally active firms would only result in modest additional costs for firms, which reflects that, for many firms, their risk-weighted capital requirements remain more binding than their leverage ratio requirements, firms typically hold management buffers above their capital requirements or they are part of wider groups.

In addition, the PRA has proposed other less significant changes, which reflect updated Basel standards relating to the leverage exposure measure used for calculating the ratio, and reporting and disclosure requirements, aligning with the Basel III standards to ensure that the UK remains consistent with transparency requirements in other jurisdictions.

The review of the leverage ratio framework took place in the light of those revised Basel standards. They require the leverage ratio to be applied to internationally active banks and therefore the main change being proposed to the framework moves the UK closer to international standards.

If the consultation proposals are implemented, the FPC will argue that the UK leverage ratio framework would be equivalent to Basel standards on an outcomes basis—indeed, in some areas, super-equivalent. For example, the FPC requires the leverage ratio to be met with a higher quality of capital than the Basel framework and includes some buffers that are not mandated by Basel. However, the UK framework would potentially be sub-equivalent to Basel on a line-by-line basis, as, for instance, the FPC framework does not put restrictions on distribution —for example, the paying of dividends—if a firm breaches its leverage ratio requirements. It also has a lower leverage buffer for globally systemic important banks.

There has been little reaction to these measures at the moment, but we will continue to monitor that. These are obviously complex matters that the Treasury keeps under close review. The provisions essentially ensure that we have absolute alignment of the FPC’s responsibilities and discretions to the new environment that we passed in the 2021 Act.

I hope that addresses the questions that have been raised—I am happy to give way to the right hon. Gentleman if not.

[Mr McFadden]

I thank the Minister for that explanation. Does the instrument and what it does on excluding the Bank of England balances make any difference to what he has just outlined and what the leverage ratio is? I think the answer is no.

--- Later in debate ---

[John Glen]

No.

[Mr McFadden]

I want to press the Minister a bit on this. Does the Government have a view on these capital requirements that is any different outside the EU from when we were in the EU?

[John Glen]

I confirm to the right hon. Gentleman that we do not. Though we are outside the capital requirements regime of the EU, our objective is to align to the highest global standards—we will just do that in a way that reflects the nuances of our banking system. We will always maintain the highest possible standards. Indeed, our international reputation relies on it.

I hope that the Committee has found my observations helpful to some degree and will be able to support the order.

Question put and agreed to.

Financial Services Consultation

John Glen Excerpts

Thursday 1st July 2021 Written Statements

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

The Government are today publishing the “Access to Cash: Consultation” on legislative proposals to protect access to cash. Our society and economy are embracing the transition to a more digital world and as part of this the transition towards digital payments brings many opportunities, including the opportunity for faster and cheaper payments. None the less, cash remains an essential payment mechanism for many people and businesses across the United Kingdom.

The Government therefore committed at March Budget 2020 to bring forward legislation to protect access to cash and ensure that the UK’s cash infrastructure is sustainable long term. The Government support and welcome innovation in payments; this is an area where the UK is at the cutting edge globally, and we wish to see that continue. The Government’s aim in protecting access to cash is consistent with this approach and seeks to ensure continued choice in payments solutions for all parts of the UK, and for people that rely on more traditional options.

In October 2020, the Treasury published a call for evidence, which sought views on the key considerations associated with cash access. The responses demonstrated strong and broad support for Government intervention to protect access to cash, and the Treasury is publishing a summary of responses to the call for evidence today.

Furthermore, the Government took action to make legislative changes to support the widespread offering of cashback without a purchase by shops and other businesses as part of the Financial Services Act 2021. Cashback has the potential to be a valuable facility to cash users, and play an important role in the evolution of the UK’s cash infrastructure.

The access to cash consultation is the next step to progress our commitment to legislate to protect access to cash.

The consultation sets out proposals for legislation to ensure that people and businesses can continue to make cash withdrawals and deposits within a reasonable distance. This will help to ensure that the cash system continues to meet the needs of businesses and consumers and that the UK’s cash infrastructure is sustainable in the long term.

To achieve this, the consultation seeks views in three key areas:

Geographic access requirements for providing access to cash withdrawals and deposits

Designation of firms to meet requirements to provide access

Regulatory oversight, including proposals to ensure the FCA has appropriate powers and responsibilities to hold firms to account to meet requirements

The Government’s proposals for consultation seek to ensure a stable and resilient solution for cash access in the long term, where large current account providers are obliged to ensure their customers can access key cash services alongside new and convenient digital payments solutions. The decline in cash usage is a trend that is occurring in many countries across the world. The Government’s proposed approach is in line with international precedent. For example, Sweden, is one of the most advanced countries in terms of declining cash usage and it has placed legislative geographic access requirements for deposit and withdrawal facilities on its largest banks.

The consultation will be published on gov.uk https://www.gov.uk/government/consultations/access-to-cash-consultation and will run for 12 weeks, closing on 23 September 2021.

Today’s publication helps to ensure that the financial system supports the real economy and delivers for businesses and consumers. As my right hon. Friend the Chancellor set out at Mansion House today, the Government are taking action to deliver on our vision for a world-leading financial services sector, which includes this consultation. It is important that our financial services sector is open, green, technologically advanced and globally competitive and acts in the interests of our communities and citizens, creating jobs, supporting businesses, and powering growth across all of the UK.

[HCWS146]

Publication of UK Government Green Financing Framework

John Glen Excerpts

Thursday 1st July 2021 Written Statements

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

In November 2020, the Chancellor of the Exchequer, my right hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), announced plans for the UK to issue its inaugural sovereign green bond (or “Green Gilt”). Green financing products like these are a form of Government borrowing to finance projects with clearly defined environmental benefits.

Since then, the Government have set out their intention to issue a series of green gilts to meet growing investor demand. Budget 2021 confirmed the following ambitious commitments, including that:

the UK will conduct at least two green gilt issuances in 2021;

Green gilt issuances in the 2021-22 financial year will total a minimum of £15 billion;

the UK will also issue retail green savings bonds via NS&I, the first standalone retail product tied to a sovereign green bond; and

in another first for comparable sovereign issuers, the UK will report on social co-benefits of expenditures financed by the green gilt and retail green savings bonds, such as job creation, access to affordable infrastructure and socioeconomic advancement.

Green financing will be a multi-year programme, and HM Treasury will announce future years’ green financing targets as part of its usual approach to debt management.

In May 2021, the UK Debt Management Office (DMO) announced that the first green gilt will be issued in September 2021, subject to demand and market conditions.

NS&I today announced that green savings bonds will go on sale later in the year, with full details available on the NS&I website.

Ahead of this, HM Treasury and the DMO yesterday published the UK Government green financing framework. This document sets out the Government’s ambitious climate and environmental agenda and their vision for enhancing the UK’s leadership as the world’s preeminent green financial centre. The framework also details how the proceeds from the green gilt and retail green savings bonds will finance expenditures to help tackle climate change, biodiversity loss, and other environmental challenges, while creating green jobs across the UK.

As part of this, the framework lists the six types of green expenditures that will be financed across the UK by the green gilt and retail green savings bonds:

Clean transportation

Renewable energy

Energy efficiency

Pollution prevention and control

Living and natural resources

Climate change adaptation.

The framework also stipulates that funds raised from each offering must be allocated to Government expenditures occurring no earlier than 12 months before and no later than two budget years after that offering. At least 50% of funds will be allocated to current and future expenditure rather than refinancing past expenditures, matching the strongest commitments of other major sovereigns.

Finally, this document commits the Government to annual allocation reporting and at least biennial reporting of metrics on environmental impacts and social co-benefits, ensuring transparency for retail and institutional investors and other interested parties.

Two independent reports assessing the framework and the eligible Government expenditure were published alongside the framework on 30 June 2021:

In line with market best practice, V.E, part of Moody’s ESG Solutions, has provided a second party opinion on the sustainability credentials of the Government of the United Kingdom’s green financing framework, which asses the alignment of the framework with the green bond principles 2021 published by the International Capital Market Association. V.E expressed a “robust” level of assurance on the contribution of the UK’s framework to sustainable development, which is the same positive assessment achieved by major sovereign issuers. V.E also assessed the UK’s environmental, social and governance performance as “advanced”, the highest level on V.E’s four-point scale;

the Carbon Trust has produced a pre-issuance impact report on the UK Government green financing programme, which reviews the Government’s intended allocation of proceeds under the framework and the proposed impact metrics. They found that the allocations “align sensibly” with the Climate Change Committee’s recommended climate targets for the UK (known as its “Sixth Carbon Budget”) and they are “confident that the programme will contribute to achieving net zero by 2050”. This is the first report of its kind among sovereign issuers and provides additional evidence of the coherence of the Government’s green financing programme with its wider environmental agenda.

Copies of the framework, second party opinion, and pre-issuance impact assessment have been placed in the Libraries of both Houses and are published on www.gov. uk/government/publications/uk-government-green-financing. Further information can also be found on the DMO and NS&I websites.

[HCWS138]

Financial Conduct Authority and Blackmore Bond plc

John Glen Excerpts

Wednesday 30th June 2021 Commons Chamber

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

I congratulate the hon. Member for Glenrothes (Peter Grant) on securing this debate. I also pay tribute to the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for their contributions. I extend my sympathies to the Blackmore Bond investors. The hon. Member for Glenrothes set out the distress that has been caused to those many individuals, some of whom are his constituents. I am painfully aware of their very challenging situation through my own conversations and correspondence, and this evening we have heard more of those troubling accounts. Given these difficult circumstances, it is only right that I explain the reasoning behind the Government’s course of action and some of the decisions that we have made so far. I will also touch on the conduct of the FCA, the independent regulator.

Let me first remind the House of the background to this situation. As Members will be aware, Blackmore Bond was an unregulated firm established in 2016. Between 2016 and 2018, it issued non-transferable debt securities, otherwise known as mini-bonds, to retail investors. It raised £46 million, involving approximately 2,800 UK investors, to be used in property development projects. Blackmore stopped making coupon payments in 2019 and administrators were appointed on 22 April last year.

The orientation of most of the hon. Gentleman’s remarks was about the failures of the FCA, but I want to try to address some of his other specific points. He asked about the way that Blackmore hid behind other regulated firms such as Amyma. It is true that although several other firms were involved in the distribution of Blackmore bonds, some of which were authorised by the FCA, the Blackmore bond itself was not regulated. Amyma was not directly authorised by the FCA. It was an appointed representative of another authorised firm, Equity For Growth (Securities) Ltd, between July 2018 and September 2019, when its status was terminated. The FCA intervened to take down Amyma’s website following further investigation. Similarly, as a result of steps taken by the FCA, Northern Provident Investments, an FCA-authorised firm, withdrew its approval of Blackmore’s promotional materials, meaning that its bonds could no longer be marketed. This is clearly a very complex area, but ultimately the FCA cannot be said to have the same set of responsibilities towards unauthorised firms engaged in unregulated activities.

[Peter Grant]

The Minister gave the same dates on Amyma as me—between 2018 and 2019. Did it not strike him, as it struck me, that Amyma was an appointed representative of another company, but the concerns about it arose in 2017, before it appeared to be an appointed representative of anybody? Does he not agree that there is something to be looked at there and that the Financial Conduct Authority should be asking questions about it?

[John Glen]

I have set out the record as the FCA has presented it. I am sure that the hon. Gentleman will wish to continue correspondence with the FCA on some of those unresolved matters. However, I do make the distinction between the different responsibilities that the FCA has with regard to the different actors in this case.

It is only right that we do our utmost to minimise the chance of episodes like Blackmore Bond taking place in future, so I want to turn to the regulation of mini-bonds and the steps we are taking to safeguard consumers, which was a key focus of the hon. Gentleman’s remarks. I want to be clear to the House that the Government are committed to ensuring that the financial services sector is well regulated and consumers are adequately protected. That is why in April we launched a consultation that includes proposals to bring the issuance of mini-bonds into regulation. This follows the action taken by the FCA to ban the promotion of high-risk mini-bonds. This work is the culmination of a review into the regulation of mini-bonds that I announced in May 2019, and it delivers on one of the recommendations of Dame Elizabeth Gloster’s recent report. The consultation closes next month, in July, after which the Government hope to bring forward plans to legislate in the autumn.

The hon. Member for Glenrothes also referred to the financial promotions regime, and I think that underlying that was a concern about what the Government are doing to improve the efficacy of the regime. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. The Government have set out our intention to bring forward legislation to create a regulatory gateway for authorised firms approving the promotion of unauthorised firms. That change is designed to strengthen the regime by ensuring that the firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be able to better identify when a financial promotion has breached the restriction and take action accordingly.

[Kevin Hollinrake]

The Minister is doing a lot to close down opportunities for these scams, but there is a further way that we could take this forward, which we have discussed. Google has today said that it will ensure that all firms advertising on its platform are regulated firms. We could require that of all platforms and all firms that provide an internet channel, for example through the online harms Bill, so that all internet advertising in this area is regulated.

[John Glen]

I thank my hon. Friend for his intervention. He speaks with some authority on these matters. There is a process that will continue, as he knows, through the scrutiny of that legislative vehicle. We do need to make sure that, overall, including through the Department for Digital, Culture, Media and Sport’s online advertising review, we come out at the right place in dealing with these significant challenges for consumers.

As well as introducing new legislation to protect savers, it is right that our regulator also closely examines its own operations, to ensure that it can protect consumers as effectively as possible. As a result, the Government welcome the FCA’s ongoing transformation programme, which is introducing reforms that will fundamentally change the way it works. The programme will help the regulator become more efficient and effective by, among other things, enhancing its use of technology in order to make interventions earlier, which clearly is desirable.

It is heartening to see that significant steps have already been taken. Those include important structural changes within the organisation, as well as the appointment of the FCA’s first chief data information and intelligence officer. I particularly welcome this focus on improving the FCA’s use of data and analytics, which will improve the efficiency and speed with which the regulator can act.

These are serious matters, and we have spoken about the number of our constituents who have been adversely affected. I regularly meet the FCA’s chief executive, Nikhil Rathi, to discuss the transformation programme and monitor progress. There can be no complacency. This is a complex area where financial services are evolving all the time, as are fraudulent activities. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) mentioned the innovation announced today by Google, which is a welcome step, but we will need to look at these matters and at the experience through different cases, such as the Blackmore Bond, in order to get this right.

I close by reiterating my deep sympathies to all those who have suffered as a result of the Blackmore scheme. As a Government, we recognise that financial services are constantly evolving and the regulatory system must, therefore, be ready to respond. As I have highlighted this evening, we are committed to a process of continuous improvement in all dimensions to ensure our regulations benefit both UK consumers and the wider economy.

[Mr Deputy Speaker (Mr Nigel Evans)]

The Speaker started the day with some wonderful warm words in tribute to Ian Davis on his retirement after long and dedicated service here in Parliament. On behalf of the Chairman of Ways and Means, the First Deputy Chairman and myself, I wish Ian well on his well-deserved retirement and thank him. Because of the skill he demonstrated on a daily basis in Parliament, he made the work we do from this Chair so much easier. We wish you well, Ian. Thank you for everything you have done.

Question put and agreed to.

Financial Markets and insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021

John Glen Excerpts

Thursday 24th June 2021 General Committees

[The Chair]

Before we begin, may I remind Members that we have moved to one metre-plus social distancing in general Committees, in line with the Chamber and Westminster Hall. Members should continue to sit only in places that are clearly marked. I also remind Members that Mr Speaker has stated that masks should be worn in Committee except when speaking and unless Members are exempt.

Hansard colleagues would be grateful if Members could send any speaking notes to [e-mail].

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

I beg to move,

That the Committee has considered the draft Financial Markets and Insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021.

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

As the Committee will be aware, prior to the end of the transition period, the Treasury introduced more than 65 statutory instruments under the European Union (Withdrawal) Act 2018. This was a significant programme of legislation. These SIs covered all the essential legislative changes that needed to be in law to ensure we had an effective and coherent financial services regulatory regime at the end of the transition period. This SI amends a transitional regime created in an earlier financial services EU Exit instrument, to ensure that the transitional regime continues to provide continuity for UK firms, as was originally intended.

The original SI, which this instrument amends, onshored the insolvency-related protections that are provided to systems under the EU settlement finality directive—or SFD. These systems are financial market infrastructure such as central counterparties, central securities depositories and payment systems, which provide essential services and functions relied upon by the financial services sector. Prior to the end of the transition period, if an EEA-based system was designated under the SFD, it received specific protections from insolvency laws across all EEA states and the UK. This meant that, where a designated system had received funds or securities from a system user—for example, a UK bank—then those funds or securities could not be clawed back in the event of the UK bank being subject to insolvency proceedings. In treating transactions made through a designated system as final and irreversible, this framework ensured that these vital elements of the financial plumbing were not at risk where individual members were in insolvency procedures.

Without these protections set out in legislation, there would be an increased burden on members of these systems, given that they would have to provide further assurance that, in the event of insolvency, payments they had made to a system could not be reversed. This could result in increased costs or even loss of access to providers of financial market services who need to use these systems in the EEA.

In the SI that we are amending today, a UK framework was established to allow any non-UK system to apply to the Bank of England for designation, so that it could receive settlement finality protections under UK law. It also established a temporary designation regime to provide UK insolvency protections for a period of three years to existing designated EEA systems that intended to apply for permanent designation under the UK’s framework. The purpose of temporary designation is to allow time for applications to be processed by the Bank of England, while ensuring continuity of access for UK firms to relevant EEA systems.

However, there is a requirement for EEA systems in the transitional regime to submit an application by 30 June 2021—next Wednesday—otherwise they will immediately lose the protections provided for in the regime. This instrument amends the consequences of failing to apply by this deadline. Instead of immediately losing settlement finality protections under the temporary designation regime, EEA systems will retain protections for an additional two years. This ensures that UK firms which are using those EEA systems have sufficient time to put mitigants in place should access to those systems be impacted.

The Treasury has worked closely with the Bank of England and the Financial Conduct Authority to prepare this instrument. We have also engaged extensively with the financial services industry on the instrument to which this SI relates. I should also note that the Secondary Legislation Scrutiny Committee has reported on this SI as an instrument of interest. We have answered all questions pertaining to that, and the SI passed through the Lords a few weeks ago.

In conclusion, this SI is necessary to provide certainty for UK firms, and I commend these regulations to the Committee this morning.

--- Later in debate ---

[John Glen]

As ever, I am grateful to the right hon. Gentleman for his contribution. I do not think he raised any substantive points and do not want to detain the Committee with a wider political discussion. All I would say is that the Government’s view is that this instrument is necessary to ensure that the transitional regime for the settlement finality protection of EEA systems continues to provide that continuity for UK firms. About 37 systems are in play, and we anticipate that the vast majority will have made applications by next week. I will continue to do whatever is necessary to protect the integrity of the system. I commend the regulations to the Committee.

Question put and agreed to.

Oral Answers to Questions

John Glen Excerpts

Tuesday 22nd June 2021 Commons Chamber

[Mr Toby Perkins (Chesterfield) (Lab)]

What assessment he has made of recent trends in personal credit availability for self-employed people.

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

The Government have put together an unprecedented package of support for the self-employed, including the self-employed income support scheme, the temporary £20 per week increase in the universal credit standard allowance, and temporarily suspending the minimum income floor. The self-employed are also able to access the restart grant, the recovery loan scheme and business rates relief.

[Mr Perkins]

I am grateful to the Minister for that answer. However, my experience with some self-employed people in my constituency is that, having been self-employed for several years and accepted support from the self-employed scheme, if they then try to get credit, they are told that because they were on that scheme they are no longer eligible for credit, even though there is no reason to suspect that they will not be able to carry on being a guitar teacher, or whatever it is that they do, after the crisis is over. What can he say to the banks to ensure that they take a sensible approach to these people, who have perfectly sustainable businesses that have been suspended temporarily because of the Government’s restrictions but are just as good a credit risk as they were three or four years ago?

[John Glen]

The hon. Gentleman makes a very sensible and worthwhile point on this matter. We are looking closely at the Financial Conduct Authority’s “Financial Lives” survey, which indicates the degree of liquidity that exists. I work closely with the lenders on affordability assessments for the self-employed. I am happy to commit to continue to keep this matter under review and to receive further representations from him.

[Sir Robert Neill (Bromley and Chislehurst) (Con)]

What assessment he has made of the adequacy of the support provided to the culture and arts sector during the covid-19 outbreak.

--- Later in debate ---

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

The Chancellor set out the Government’s strategy on financial services to the House in November—a vision of a sector that is more open, more technologically advanced and a world leader in the use of green finance, serving the communities and citizens of this country. Since then, we passed the Financial Services Act 2021 in April to begin the necessary reforms to our framework, and we have agreed text with the EU for a regulatory co-operation forum.

[Sarah Atherton]

There is no doubt that all should be done to support British businesses to export, no more so than in my constituency of Wrexham, which houses one of the largest trading estates in the UK. Businesses are keen to grasp these opportunities—none more so than Matclad, a specialist clay brick slip manufacturer, which is already reaping the benefits of exporting. Does my hon. Friend agree that schemes such as the parliamentary export programme, which I recently took part in, are an excellent opportunity?

[John Glen]

I am very happy to agree with my hon. Friend. I experienced that myself with my hon. Friend the Member for North Wiltshire (James Gray). The parliamentary export programme is an excellent way of getting that ambition to export out across the country, and it is just another example of this Government’s commitment to grow exports. My hon. Friend the Member for Wrexham (Sarah Atherton) may also be interested to know that I shall be visiting Cardiff tomorrow to meet the first cohort of FinTech Wales’s FinTech Foundry, a new accelerator programme that will support firms as they seek to build their footprint.

[Chris Grayling]

My hon. Friend knows of my concern about the protectionist attitude towards financial services that the European Union has shown over the past few months, and the risks to the City that result from it. We have President Macron hosting people from Wall Street next week, and we have the unlocking of travel in the European Union, which will help the financial services sector there. I hope that the Chancellor and the Minister will do everything they can to encourage ministerial colleagues to do the same here, but will the Minister take whatever responsible steps are necessary in modifying our regulations to ensure that the City and our financial services sector have a strong, competitive future regardless of the behaviour of the European Union?

[John Glen]

I thank my right hon. Friend for his representations on this matter, and I heartily agree with him. We are promoting the international role of the sector and developing ambitious trade and regulatory relationships with other jurisdictions. We keep all these matters under review. We have taken on board the work of the taskforce on innovation, growth and regulatory reform, and just after Question Time, the Chancellor and I will be meeting representatives of banks as we seek to work with them to make those interventions that our financial services sector needs.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Financial services were not even part of the Brexit agreement that the Government negotiated, because they never made them a priority. Equivalence arrangements are nowhere in sight, £1 trillion-worth of assets have been moved abroad, and now food and drink exports to the EU have fallen by 47% in the first three months of the year. The Government estimate their new trade deal will add just 0.02% to our GDP. Is the sight of Ministers doing a lap of honour for that trade deal not the equivalent of asking our export industries to give thanks for losing a pound and finding a penny? When will the Government actually help our industries with the red tape that is baked into the agreement that they negotiated?

[John Glen]

I do not accept the right hon. Gentleman’s characterisation of where we are. On financial services, as I hope he knows by now, we have deep dialogue across a number of jurisdictions. That is an ongoing process. If I think about the work we are doing with Brazil, India and China and the dialogues we are having with Switzerland, there is no end to this Government’s ambition to improve our financial services’ relationships and deepen the opportunities that Brexit has given us.

[Gavin Robinson (Belfast East) (DUP)]

What industries his Department is planning to include in the sector visions set out in the Plan for Growth.

--- Later in debate ---

[Jack Lopresti (Filton and Bradley Stoke) (Con)]

What steps his Department is taking to encourage home ownership.

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

The Government are committed to helping people own their own home. Our new mortgage guarantee scheme is increasing the availability of mortgages for credit-worthy households who only have a 5% deposit, helping them realise their dream of home ownership. The lifetime ISA provides a bonus to those under 40 saving towards a home, worth up to £450,000.

[Dr Lewis]

I refer to my entry in the Register of Members’ Financial Interests. Last week, The Sunday Times detailed the colossal sums imposed on ordinary people by rapacious freeholders and reckless developers. Why should anyone risk purchasing a lease on a residential flat if we fail as a Government to protect innocent leaseholders from bearing the costs of defective extra storeys or defective extra cladding forced on them by those who are actually responsible for such terrible defects?

[John Glen]

I thank my right hon. Friend for his question. The Government are investing more than £5 billion in building safety, including an additional £3.5 billion announced this year for the remediation of unsafe cladding for all leaseholders living in high-rise residential buildings. We are also introducing a new tax on the UK residential property development sector and a new levy on developers of certain high-rise buildings to help pay for cladding remediation costs.

[Jack Lopresti]

Does my hon. Friend agree that the mortgage guarantee scheme has in a short time seen a dramatic increase in the availability of 95% mortgages, which will make home ownership a realistic goal for people aspiring to be homeowners?

[John Glen]

My hon. Friend is absolutely right. Since the scheme has been up and running—as he says, it has been a matter of only a few weeks—we have seen the provision of 95% mortgages expand from just five to 192. This is a significant change, and I am grateful to the industry for the moves that it has made, with Government support.

[Mohammad Yasin (Bedford) (Lab)]

What assessment he has made with the Secretary of State for Education of the (a) effectiveness, (b) value for money and (c) adequacy of the funding allocated to educational catch-up provision announced on 2 June 2021.

--- Later in debate ---

[Ronnie Cowan (Inverclyde) (SNP)]

What steps his Department is taking to protect access to cash within local communities.

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

The Government recognise that cash is crucial to the daily lives of millions of individuals and businesses across the UK, and we have committed to legislate to protect access to cash. The Government made legislative changes to support the widespread offering of cashback without a purchase by shops and other businesses in the recent Financial Services Act 2021 and this summer we will consult on further legislative proposals for protecting cash for the long term.

[Ronnie Cowan [V]]

I welcome the announcement that there will be further consultation, but will the Minister confirm that any legislation introduced post consultation will include a requirement on banks to provide adequate access to cash withdrawals that are free at the point of service and meet the needs of local communities in both urban and rural areas?

[John Glen]

I can commit that we will look very carefully at the evidence on the best possible interventions to make. I am pleased that, as of March 2020, 98% of the population could access free cash within 3 km, but we have to come to terms with the fact that from 2009, when 56% of transactions were by cash, we were down to 17% by last year. We have to come up with appropriate legislation to meet that change.

[Mr Speaker]

We now come to the Chair of the Public Accounts Committee, Dame Meg Hillier.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Thank you, Mr Speaker.

More than 1 million people still use only cash, and approximately 4 million use cash regularly, so it is vital that they have access to it. This is now the second consultation that the Treasury is going through, but as the PAC has seen, all the distribution of cash is in the hands of private providers. Can the Economic Secretary give any indication of the type of legislation that he can introduce to ensure that if people are very poor, they can get cash? That does not mean going to the supermarket and getting it out when they do not even know what is in their own account.

[John Glen]

I congratulate the hon. Lady on her recent elevation. I take her points on board, but this is a complex area. There will need to be a range of interventions from industry, working with regulators. The LINK scheme already has a £5 million fund to help areas of great deprivation and provide extra access points for cash, but we need to recognise that technology will have to play a significant role. We will also use the extensive network of 11,500 post offices to make good on our pledge to ensure that access to cash remains available across the country.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

If he will make a statement on his departmental responsibilities.

--- Later in debate ---

[Rosie Cooper (West Lancashire) (Lab) [V]]

Does the Chancellor have confidence in the Financial Conduct Authority’s ability to appropriately regulate and sanction companies that defraud their investors? Furthermore, does he believe that if it is found that the regulator has failed to prevent this fraudulent activity, the Government have a duty to compensate?

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

It is absolutely clear that there are significant lessons for the FCA to learn from the Gloster review, and I have regular conversations, including just last week, with the new chief executive on the transformation programme. He has employed five new senior executives to drive that programme forward urgently, and I look forward to seeing the results of that intervention.

[Sally-Ann Hart (Hastings and Rye) (Con)]

The role of regulation has been in the spotlight recently in an independent report by the taskforce on innovation, growth and regulatory reform, which was welcomed by the Prime Minister. The report highlights that as the EU has expanded, its internal processes and regulation have become slower and more bureaucratic, impacting on economic competitiveness. What steps is my hon. Friend taking to reduce onerous regulation as regards UK Treasury matters to ensure that all such regulation reflects our national interest and ensures that the UK maximises its economic agility and competitiveness?

[John Glen]

My hon. Friend rightly recognises the value of the TIGRR report, which we received last week, and we will be looking very carefully at those recommendations. In addition, my right hon. Friend the Chancellor chairs the better regulation committee, which has been established to drive forward a new strategy to deliver better regulation outside the EU. There is a lot of work to be done, but progress is being made.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab) [V]]

My constituent is a travel counsellor who established her home-based business nine years ago. She has been excluded from Government support because she is not registered for business rates, and when she tried to register for business rates in 2020, she missed the deadline by six days because of delays at the Valuation Office. What financial support can the Treasury give her and others like her, who remain excluded from support?

UK’s Financial Services Industry

John Glen Excerpts

Monday 21st June 2021 Commons Chamber

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

I congratulate my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) on securing this debate, and I thank him for the many insightful and constructive contributions he has made on financial services-related matters in this House. I welcome the opportunity to discuss the sector’s future. As he rightly noted, the financial services industry is incredibly important to the UK, and the huge support it has provided to the economy over the past 16 months is testimony to that. Its work with the Government has meant that businesses across the UK could borrow more than £75 billion to help them through the pandemic.

There is no doubt that the sector has an equally important role to play in our economic recovery and long-term future, by boosting our competitiveness and spreading opportunity and prosperity throughout the United Kingdom. As Members will recall, in November the Chancellor set out the Government’s vision for the future of financial services in a post-pandemic, post-Brexit world. The goal is simple: we want to help ensure that the sector is even more open, technologically advanced, and greener than ever before.

How will we do that? On openness, we are building new and deeper relationships with countries around the world. As my hon. Friend acknowledged, we have a clear opportunity to strengthen ties with markets beyond Europe, from the US to Japan, and ensure that we build new links with fast-growing markets in the east, including India and China. In particular, he mentioned the exciting possibilities from the ambitious mutual recognition agreement that we are pursuing with Switzerland. That will facilitate a broad range of wholesale financial services between the UK and Switzerland, on the basis of co-operation and high standards of regulation. It will also recognise that jurisdictions can achieve similarly high standards of regulation in different ways.

Our objective for the mutual recognition agreement is to improve cross-border financial services provision between the UK and Switzerland across insurance, banking, asset management, capital markets and market infrastructure. We now have the freedom to build new, deeper financial services relationships with like-minded global financial centres. The share trading obligation decision, which came into force earlier this year and allows UK shares to be traded on Swiss exchanges, is a good example of that freedom.

On the broader topic of international competitiveness, my hon. Friend asks for an update on the review of the level of the bank surcharge announced in the Budget earlier this year. It is critical that the UK’s bank taxes are set at a level that does not compromise our objective for a strong and competitive banking sector. That is precisely why, in the light of the changes to the headline rate of corporation tax, the Government will review the appropriate level of the bank surcharge with a view to making an announcement in the autumn on how we will ensure that the combined rate of taxes on banks’ profits does not increase substantially from its current level.

Let me stress that the Government recognise the value of certainty to financial services. The changes resulting from the review will therefore be legislated for in the Finance Bill 2021-22 and will have effect from the same time as the increase to the main rate of corporation tax. At no point will the banks be subject to a tax rate on their profits at or near 33%.

As well as working to ensure international competitiveness, we also have an extremely busy domestic agenda. Among our main areas of focus is getting the right regulation in place to take advantage of our new position outside the institutional frameworks of the EU. We are committed to upholding the UK’s high regulatory standards while ensuring that we maintain our position as a global financial hub, but we have an opportunity to do things differently. My hon. Friend rightly highlighted the importance of our future regulatory framework review; I welcome the important contribution of his all-party group and its recent report to this important debate. Let me remind the House of the details of the Government’s review: it explores the reforms needed to tailor our regulations to life outside the EU, and aims to establish an approach to financial services regulation that meets the specific needs of UK firms, markets and consumers.

I stress that Parliament will continue to have a vital role in shaping the financial services regulatory landscape. We believe that appropriate democratic accountability and scrutiny of the regulators is vital for an effective and legitimate regulatory framework. We agree that greater responsibility for regulators should be balanced with appropriate democratic policy input and oversight from Government and Parliament.

I turn to FinTech. When it comes to our vision for a more technologically advanced financial services sector, we are focused on helping our FinTech industry to stay at the cutting edge of global innovation. My hon. Friend asked about the implementation of the Kalifa review’s recommendations. As I outlined in my written ministerial statement in April, the Government and the regulators have confirmed a number of actions in response, including help for FinTech firms to recruit the best talent through our new scale-up visa scheme to attract global talent and boost the FinTech workforce; a regulatory scalebox that will enhance support for early-stage FinTech firms and allow them to grow as quickly as possible; the Treasury and the Bank of England’s new central bank digital currency taskforce to co-ordinate the exploration of a potential UK CBDC; Government support for an industry-led centre for finance, innovation and technology; and an initiative from the Department for International Trade to support UK FinTech firms to expand internationally and encourage overseas firms to establish a presence in the UK.

I fully recognise my hon. Friend’s interest in capital and wholesale markets. We want to help businesses to list and grow on stock markets in the UK when they are ready. We have therefore announced how we will take forward each of the recommendations addressed to the Treasury in Lord Hill’s recent listings review. I thank Jonathan Hill, my constituent, for the enormous amount of work that he put into that review.

We expect to consult on detailed policy proposals in the summer, including proposals to delete the share trading obligation and double volume cap, but rest assured, we will aim to deliver a rulebook that is fair, outcomes-based and supports competitiveness, while ensuring that the UK maintains the highest regulatory standards. Undoubtedly, the future of the UK financial services sector is linked to the future of our planet, and that connection is clearer than ever as we prepare to host COP26 in November.

I mentioned earlier that building a greener industry is a key element of our vision for financial services, and that is why a central focus of the COP26 finance campaign will be to ensure that every professional financial decision takes climate change into account. Furthermore, we believe that financial services have an important part to play in helping us to level up the country by generating jobs and growth, and we are focused on unlocking the hundreds of billions of pounds sitting with UK institutional investors to drive our country forward.

I thank my hon. Friend the Member for Hitchin and Harpenden and the hon. Member for Strangford (Jim Shannon) for contributing to a wide-ranging discussion of the issues facing this country’s financial services sector. Clearly, engagement will be crucial to help the UK financial services sector fulfil its full potential. I have been meeting industry actors very regularly and will continue to do so, so that I can understand how this Government can support them to achieve their goals, and I look forward to pursuing that work further. I am very grateful to my hon. Friend for raising the points that he has this evening.

Question put and agreed to.

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill (Second sitting)

John Glen Excerpts

Tuesday 15th June 2021 Public Bill Committees

[Mr McFadden]

My hon. Friend is right; the lacuna referred to in the report relates particularly to the allocation of ISA status. We asked Dame Elizabeth about that during the oral evidence session this morning. This is important because if there are two things that gave the mini-bonds the stamp of respectability, it would be that prominent in LCF’s advertising was the statement that it was regulated by the FCA, which at firm level was true but was not true of the mini-bonds being sold, and that they could be placed inside an ISA wrapper. Although it is, of course, true that people who invest in ISAs can lose money, for understandable reasons, the ISA wrapper has a certain cachet and a note of respectability.

Dame Elizabeth confirmed during oral evidence this morning that once the ISA wrapper status was allocated in 2017, the degree of investment in those mini-bonds rose markedly, because people would have thought they were investing in something safe. The adverts spoke, in fact, of a 100% record in paying out, when what we were really dealing with was a pyramid scheme where any pay-outs that did come came from other investors and not normal market returns. People thought they were investing in a safe bond. They did not think they were playing investment roulette.

The Economic Secretary also emphasised the uniqueness of the LCF case in his closing speech on Second Reading. He said:

“LCF is unique in that regard; indeed, it is the only mini-bond issuer that was authorised by the FCA and that sold bonds to on-lend to other companies.”—[Official Report, 8 June 2021; Vol. 696, c. 918.]

That is an exact replica, with both Ministers saying the same thing, and I suspect that that phrase has been very carefully honed inside the Treasury. A case had to be made for the uniqueness of this that could not be applied to other investment failures, so I think that form of words is very carefully chosen. However, the Minister may be able to tell us more when he responds.

The amendment is designed to tease out the following point, which I want to clarify with the Minister. Is it the case that even though a number of mini-bond issuers have collapsed in recent years, LCF is the only one that was authorised and regulated by the FCA? The Minister can intervene now or I am happy to wait. As I said to the Ministers on Second Reading, there must have been a discussion in the Treasury about developing a compensation scheme such as the one set out in clause 1. The question would have been asked: if we did this for LCF, what about investors in the Connaught fund or Blackmore Bond or any of the other investment schemes that were raised either on Second Reading or during the oral evidence session this morning? What was the nature of those discussions at the Treasury and what is it about LCF that makes the Government convinced that compensation is due in this case but not in the others? That is why our amendment calls for a report. Having taken the decision to compensate, we believe it would be in the public interest for the Treasury to set out the circumstances under which the taxpayer might be expected to pay when investors lose money. Is it about a firm being authorised by the FCA? Is it about commissioning a report by an eminent and independent figure such as Dame Elizabeth Gloster?

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

I am very happy to respond at length in my remarks at the end. The distinction we make is that LCF is the only FCA-authorised firm that was on-lending. That is the distinction; not so much the mini-bond issuance but the on-lending nature of it.

[Mr McFadden]

I am grateful to the Minister. I am just going through this series of things to try to clarify exactly what might place the taxpayer on the hook. Does it require the kind of report carried out by Dame Elizabeth Gloster and commissioned by the FCA into the collapse of LCF? Is there a clear threshold of regulatory failure to be passed? There was obviously regulatory failure in this case, but, as we saw from the witnesses this morning, people will argue that other regulatory failures have applied to other firms.

In this case, the regulatory failures were multiple. I do not want to go through them in detail because we will come on to other amendments in which they can be discussed, but I will mention a few of them briefly: misleading promotions by LCF using the halo effect have been regulated by the FCA yet not adequately dealt with by the financial promotions team at the FCA; a failure by the same financial promotions team to join the dots and alert other parts of the FCA, such as the supervisory team, on the implications of those misleading promotions; and multiple attempts to alert the FCA—more than 600 phone calls, according to annex 6 of Dame Elizabeth’s report. Yet, in the vast majority of cases nothing was passed up the line of pursuit, in large part because the mini-bonds were not regulated by the FCA, so the call-handlers’ instincts were, “You’re phoning us about something that we do not regulate, so we don’t have to pass it up the line”—even though the firm as a whole was regulated by the FCA.

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[John Glen]

It is a pleasure to serve under your chairmanship, Ms Ghani, and I thank all Committee members for their consideration of this important legislation.

As I set out on Second Reading, the Bill is a vital step in compensating LCF bondholders, and I will now turn directly to the consideration of amendments 1 and 7. As the right hon. Member for Wolverhampton South East set out, amendment 1 seeks to add a requirement for the Secretary of State to lay before Parliament a set of criteria for when the taxpayer should compensate investors for investment failures. In essence, it brings some clarity about when the mechanism that we are adopting, and hopefully funding, through the passage of the Bill would be used. Amendment 7 seeks to require the Secretary of State to lay before Parliament a report that assesses the impact of the Government’s compensating the customers of London Capital & Finance plc, as well as broader issues relevant to the mis-selling scandal.

I have listened very carefully to the speeches made during the passage of the Bill, on Second Reading and today, and to the evidence that we received this morning. I am particularly drawn to the remarks of my hon. Friend the Member for North East Bedfordshire, who acknowledged that a degree of risk is involved with any investment. With the right set of regulations and requirements, however, investors can be equipped with the right information to understand their risks and to make informed choices. The Government’s scheme appropriately balances the interests of both bondholders and the taxpayer, and it will ensure that all LCF bondholders receive a fair level of compensation for the financial loss they have suffered.

I turn now to compensation. I must reiterate that LCF’s failure was unique and exceptional. It is the only failed mini-bond issuer that was FCA-authorised and was selling bonds in order to on-lend to other companies. In conjunction with the FCA, the Treasury has looked at eight mini-bond firms that have failed in recent years, and LCF is unique in that respect. It is important to emphasise that the Government cannot and should not stand behind every investment loss. As I have probably said previously, LCF’s business model was highly unusual in both its scale and structure, and the extraordinary circumstances surrounding its collapse are unique.

[Peter Grant]

Has the Economic Secretary or any of his advisers actually read the promotional material that companies such as Blackmore Bond were giving out, to assess the number of times that words such as “guarantee” and “secure” were included in those documents? Does he not accept that something needs to be looked at there—maybe not for compensation this time, but certainly for tighter regulation in the future?

[John Glen]

I am grateful to the hon. Gentleman for his intervention because it takes me to the question of what the Government are doing to improve the efficacy of the financial promotions regime that he mentioned in respect of a different failure. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. Many of the promotions are obviously online. We will publish a response in the early summer to the consultation on a regulatory gateway for authorised firms approving the promotion of unauthorised firms. It is not an issue that we take lightly. Change, once in place, is designed to strengthen the regime by ensuring that firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be better able to identify when a financial promotion has breached the restrictions and take action accordingly, but that does not mean that the LCF failure is not unique and of a different scale and quality from some of the other failures.

[Mr McFadden]

I want to ask the Minister about the point he made about on-lending. What is the relationship between on-lending and the degree of regulatory failure? He is probably right that this was the only firm doing on-lending, but Dame Elizabeth’s report focuses on an egregious regulatory failure and she sets out all the different things that we will discuss. I suspect that the Government have found something about this case that is unique in order to insulate themselves from claims from other investment failures. I do not see the relationship between that uniqueness and the regulatory failures outlined in Dame Elizabeth’s report.

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[John Glen]

As the right hon. Gentleman set out, Dame Elizabeth’s report showed enormous failure in the way that the FCA discharged its responsibility for a regulated firm carrying out unauthorised activities. The point that he is making specifically is about the distinctiveness of the on-lending. There is a distinction between a firm, such as BrewDog or Hotel Chocolat, that raises funds for its own business activities and a firm that, although authorised, has not carried out regulated activities. Through the failure of the FCA’s oversight to look at the broader activities of the firm, it is impossible to verify whether those activities on lending bore any relationship to the raising of funds for that business. That is the distinctive difference. It is that failure of the FCA to execute its broader responsibility for an authorised firm carrying out an unauthorised activity in this distinct area that gives us licence to intervene.

On the specific issue of non-transferable debt securities, which are commonly known as mini-bonds, the Government are consulting on proposals to bring their issuance into FCA regulation. After listening to the evidence this morning, I would just make the point that Dame Elizabeth Gloster made 13 recommendations in her report. In the written ministerial statement of 17 December 2020 that was issued in my name all those recommendations were accepted—nine pertaining to the FCA and four to the Treasury. There has also been a subsequent undertaking by the FCA to report on progress against those actions and recommendations. The FCA is conducting a detailed piece of work to look at the issue of high-risk investments holistically, and that includes a discussion paper to get views on changes that can strengthen the FCA’s financial promotion rules for high-risk investments. This work follows the FCA’s ban on the mass marketing of speculative illiquid securities.

As the right hon. Gentleman rightly said, only three Government compensation schemes have been established in the past three decades: Barlow Clowes, Equitable Life and LCF. I acknowledge that, for some, they have not been complete and satisfactory. Despite many investment firms failing over that period, the fact that there have only been those three interventions on the scale that we are seeking to secure today demonstrates that this type of intervention is the exception and not the rule. Moreover, the particular circumstances of these three cases are quite different. For example, compensation was provided to Equitable Life investors, in most cases not because they had lost their original capital but because the firm had not met the expected returns on which many investors had based their future retirement plans. That contrasts starkly with LCF, where investors stood to lose their principal sum.

The common feature in each case is a degree of maladministration or misregulation—a major factor that the Government considered in deciding to launch the LCF compensation scheme—but the circumstances are idiosyncratic. It therefore would not be possible in any meaningful sense to set out the precise framework for Government to consider when establishing such schemes in future or to stipulate the threshold of misregulation ex ante.

That does not mean to say that as a Minister, and in my frequent engagement with the FCA, I do not look closely at all these matters. Indeed, I have done so throughout the process in getting to this point today. I believe that such a framework could create an unrealistic expectation among investors about the possibility of future Government compensation schemes and the misconception that Government will stand behind bad investments. That would create a moral hazard for investors and potentially lead individuals to choose unsuitable investments, thinking that the Government will provide compensation if things go wrong.

I want to address some of the points that the right hon. Gentleman made. He mentioned ISAs. As we announced in response to Dame Elizabeth’s report, HMRC and the FCA have now established an ISA intelligence working group to strengthen communication and information sharing between the two organisations. The group has met and agreed the structure and objectives, which is already resulting in information sharing between the two organisations.

In parallel, from this autumn, once recruitment of personnel is complete, HMRC will reinforce its ISA compliance regime with a programme of ISA manager audits. This will not focus on consumer protection, which does not fall within HMRC’s remit, but could detect technical breaches of the ISA regulations.

We are exploring steps to increase consumer understanding of the ISA wrapper. As the right hon. Gentleman rightly said, this has a large degree of consumer confidence vested in it. We need to tackle the misplaced perception that ISAs benefit from greater Government or regulatory assistance.

I have deep engagement with the FCA. I will speak later this week to the chief executive as part of my routine, regular engagement and I will relay the detailed comments of, in particular, the hon. Member for Harrow West on the degree of engagement of consumer groups versus the regulated firm’s representatives, and especially the case he is on at the moment.

We heard evidence this morning about the retention of one named individual. The chief executive has brought in five new people from outside the organisation in taking a balanced view on how to deliver a successful transformation programme. I urge him to continue successfully to implement the programme.

There are considerable principled and practical drawbacks to the amendment, which is why I ask that it be withdrawn.

[Mr McFadden]

I am grateful for the Minister’s response.

I am not entirely convinced about the relationship between on-lending and the decision to compensate. I am sure that the Minister is correct in the literal sense that this was the only regulated firm that was selling unregulated mini-bonds. I am not saying that the Minister is wrong, but from reading the report I believe that Dame Elizabeth would have made the same findings. The mini-bonds were not doing what it said on the tin: they were not on-lending but pyramid selling.

The degree of failure, the degree of investment loss and the degree of regulatory failure are not directly related to the point about on-lending: it is more substantial than that. I am not convinced that all the elements of the Government’s case add up. It looks to me as though they have had to find a unique element to insulate themselves from court action or other claims.

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[The Chair]

Beautifully put, Mr Thomas. I now call the Minister to respond.

[John Glen]

I will obviously now move to consideration of amendment 2. I am grateful to the right hon. Member for Wolverhampton South East, who is an experienced and distinguished former Minister himself. He referred to the catastrophe word bingo. I do not want to address that particularly, but I will address the amendment, which seeks to add a requirement for the Secretary of State to publish a report setting out progress on the implementation of the 13 recommendations in the report by Dame Elizabeth Gloster.

I will also tell the right hon. Gentleman precisely what we have done, what I think the FCA has done, and where I think that takes us, and I will address his concerns, raised throughout this debate, on the perimeter, on the halo effect and some of the points that Dame Elizabeth Gloster made.

The Treasury accepted Dame Elizabeth’s four recommendations regarding the Treasury and we welcome the FCA’s commitment to implement all nine of her recommendations that apply to it. We are committed as a Government to act on Dame Elizabeth’s recommendations, to ensure that the regulatory system maintains the trust of consumers. I submit that progress has already been made in implementing the recommendations and I set that out during my evidence session for the Treasury Committee’s inquiry into the FCA’s regulation of London Capital & Finance on 21 April.

Regarding Dame Elizabeth’s recommendations for the FCA, I obviously welcome the FCA’s acceptance of them, and I am sure that the Committee will have noted its commitment to report publicly on its progress in implementing these recommendations and indeed on its wider transformation programme. I am sensitive to the criticism that this is an empty exercise where there is nothing specific that Parliament and Members can address. I would therefore draw attention to the fact that Charles Randell, the current chair of the FCA, provided a detailed update in his letter to me on 16 April.

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[Mr McFadden]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[John Glen]

London Capital & Finance was an FCA-authorised firm that primarily offered an unregulated investment product, commonly known as mini-bonds, to retail consumers. It entered administration in January 2019, impacting 11,625 people who invested around £237 million. The Serious Fraud Office and FCA enforcement have launched an investigation into individuals associated with LCF. The Financial Reporting Council has also launched investigations into the audits of LCF. As the Committee will know, Dame Elizabeth Gloster led that independent investigation, which also revealed shortcomings in the FCA’s supervision of LCF. A complex range of interconnected factors contributed to the scale of losses for LCF bondholders, creating a situation that is unique and exceptional. While other mini-bond firms have failed, LCF is the only one that was authorised by the FCA and sold bonds in order to “on-lend” to other companies. As I have said before, LCF’s business model was highly unusual both in its scale and structure. In particular, it was authorised by the FCA despite generating no income from regulated activities. Bondholders were badly let down by LCF and the regulatory system designed to protect them, and I announced that the Treasury had set up a compensation scheme for bondholders who suffered losses after investing in LCF. The scheme will be available to all LCF bondholders who have not already received compensation from the FSCS and will provide 80% of the compensation that they would have received had they been eligible for FSCS protection up to the maximum cap of £68,000. The LCF scheme is expected to pay out £120 million in compensation to around 8,800 bondholders in total. Where bondholders have received interest payments from LCF or distributions from the administrators, Smith & Williamson, these will be deducted from the amount of compensation paid.

There are two main aspects of clause 1, which I shall explain in turn. First, legislation is required to establish the financial authority to enable the Treasury to incur expenditure in relation to the scheme. That will ensure that the Treasury complies with the 1932 Baldwin concordat and the principles of managing public money. Clause 1 provides the Treasury with the spending authority that will enable payments to be made to eligible bondholders. We are working on the details of that scheme but I hope that it will be possible to reimburse them within six months of Royal Assent.

Secondly, the Treasury intends to use the process set out in part 15A of the Financial Services and Markets Act 2000 to require the Financial Services Compensation Scheme to administer the scheme on behalf of the Treasury. Clause 1 disapplies the FCA’s rule-making requirement so that existing rules relating to the FSCS can be applied to the scheme without the need to undertake a lengthy consultation. That reflects the fact that existing rules have already been consulted on and avoids any further unnecessary delays to compensation payments. In addition, as the Treasury will pay for the scheme, there is not the same obligation to consult FSCS levy payers as there would be for rules that sought to make use of FSCS funds raised by the levy.

I submit that clause 1 is an essential step in the introduction of the LCF compensation scheme without which compensation payments cannot be made. I therefore recommend that the clause stand part of the Bill.

[The Chair]

I understand that the right hon. Member for Wolverhampton South East wishes to make a short contribution.

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[Peter Grant]

The Minister referred to the fact that there are ongoing investigations in relation to LCF. Does he recognise that some of the individuals and intermediary businesses that are now under criminal investigation for their part in LCF also played a major part in other mini-bond scandals that I have written to him about separately? Although he made the point about the uniqueness of LCF, the aftershock of LCF is very definitely being felt in other mini-bond scandals that have happened since then.

[John Glen]

Out of courtesy, I am very happy to respond to my colleagues. The right hon. Member for Wolverhampton South East asked why the 80% figure was not 100%. As I have tried to explain through the submissions that I have made, the Government have been trying throughout to balance the interests of bondholders and the taxpayer to ensure that we have a fair level of compensation in respect of the financial losses incurred. The scheme is based on the FSCS level of compensation but, as he knows, it is 80% up to that cap of £68,000 to reflect the unregulated nature of the LCF product.

I emphasise that it is imperative to avoid creating the misconception that Government will stand behind bad investments in future, even where the FSCS does not apply. That would create a moral hazard for investors and potentially lead individuals to choose unsuitable investments thinking that the Government will provide compensation when things go wrong. To avoid creating that misconception, and to take into account the wide range of factors that contributed to the losses that the Government would not ordinarily compensate for, the Government will establish the scheme at the level of 80% of LCF bondholders’ initial investment up to the maximum of £68,000. With any investment, there is clearly a risk that sometimes investors will lose money, and the Government and taxpayer cannot and should not be expected to step in and compensate for every failure and every loss. It would not be right or fair for investors in non-regulated products to receive fuller compensation than those who have invested in regulated products, for which the maximum amount is capped at £85,000 under the FSCS.

On the remarks of the hon. Member for Glenrothes about the individuals involved in an ongoing serious fraud inquiry, I am not familiar with the detail, but obviously I am happy to receive any representations. I hope that brings satisfaction to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Loans to the Board of the Pension Protection Fund

[Matt Rodda (Reading East) (Lab)]

I beg to move amendment 3, in clause 2, page 2, line 7, at end insert—

“(3) No loan shall be made under this section until the Secretary of State has laid before Parliament an impact assessment of the means of repaying the loan, including specifically the impact on pension schemes from the Fraud Compensation Fund levy.”

This amendment would prevent the Secretary of State from making a loan to the Board of the Pension Protection Fund for the purpose of compensating eligible pension schemes until he or she has laid before Parliament an impact assessment of the Fraud Compensation Fund levy on different pension sectors.