Bilateral Loan to Ireland
John Glen Excerpts(3 years, 8 months ago)
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The Economic Secretary to the Treasury (John Glen)
I would like to update Parliament on the loan to Ireland.
In December 2010, the UK agreed to provide a bilateral loan of £3.2 billion as part of a €67.5 billion international assistance package for Ireland. The loan was disbursed in eight tranches, and the final tranche was drawn down on 26 September 2013. Ireland has made interest payments on the loan every six months since the first disbursement.
On 26 March, in line with the agreed repayment schedule, HM Treasury received a total payment of £406,428,318.19 from Ireland. This comprises the repayment of £403,370,000 in principal and £3,058,318.19 in accrued interest.
HM Treasury has also provided a further report to Parliament in relation to the loan as required under the Loans to Ireland Act 2010. The report relates to the period from 1 October 2020 to 31 March 2021. It reports fully on the two final principal repayments received by HM Treasury during this period. The loan has been repaid in full and on time.
A written ministerial statement on the previous statutory report regarding the loan to Ireland was issued to Parliament on 5 October 2020, Official Report, column 18WS.
[HCWS907]
NatWest Group: Disposal of Government-owned Shares
John Glen Excerpts(3 years, 8 months ago)
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The Economic Secretary to the Treasury (John Glen)
I can today inform the House of the disposal of approximately £1.1 billion-worth of Government-owned NatWest Group (NWG, formerly Royal Bank of Scotland, RBS) shares, representing 4.86% of the company, by way of a directed buyback transaction. Government stake in NWG pre-sale 61.7% Total shares sold to NWG 590,730,325 million (4.86%) Sale price per share 190.5p Share price at market close on 18/03/2021 190.5p Total proceeds from the sale £1,125,341,269 billion Government stake in NWG post-sale 59.8% Metric Impact Net sale proceeds £1,125,341,269 billion Retention value range Within the valuation range Nil Public sector net borrowing There may be future indirect impacts as a result of the sale. The sale proceeds reduce public sector debt. All else being equal, the sale will reduce future debt interest costs for Government. The reduction in Government’s shareholding means it will not receive future dividend income it may otherwise have been entitled to through these shares. Public sector net debt Reduced by £1,125,341,269 billion Public sector net debt Reduced by £1,125,341,269 billion Public sector net financial liabilities Nil Public sector net liabilities Nil
Approximately £1.1 billion-worth of shares were sold to NWG in a single bilateral transaction on 19 March 2021.
Rationale
It is Government policy that where a Government asset no longer serves a public policy purpose, or that purpose may be more efficiently realised with the asset in private ownership, the Government may choose to sell that asset, subject to being able to achieve value for money. This frees up public resource tied up in the asset which can be deployed to achieve other public policy objectives.
The Government are committed to returning NWG to full private ownership, now that the original policy objective for the intervention in NWG—to preserve financial and economic stability at a time of crisis—has been achieved. The Government only conduct sales of NWG shares when it represents value for money to do so and market conditions allow. This sale represents a further step forward for Government in exiting the assets acquired as a result of the 2007 to 2008 financial crisis.
Format and Timing
The Government, supported by advice from UK Government Investments (UKGI), concluded that selling shares to NWG, in a single bilateral transaction, represented value for money.
Share buybacks are a common practice undertaken by companies looking to efficiently deploy their excess capital. On 6 February 2019, NWG obtained shareholder authority to purchase shares held by Government at market price. This authority was renewed at subsequent NWG annual general meetings in April 2019 and April 2020.
This is the third sale of NWG shares undertaken by the Government, following previous disposals in August 2015 and June 2018. This is the first sale of shares via an off-market share sale directly to the company.
The sale concluded on 19 March 2021, with NWG purchasing a limited number of its Government-owned shares. A total of c. 591 million shares—4.86% of the bank—were sold at the 18 March 2021 closing price of 190.5 p per share. The reduction in the Government’s shareholding is less than the percentage sold following the cancellation of shares by NatWest. Following this transaction the Government’s shareholding will stand at 59.8%.
Details of the sale are summarised below:
Fiscal impacts
The net impacts of the sale on a selection of fiscal metrics are summarised as follows:
[HCWS865]
UK Counter-Terrorist Asset-Freezing Regime: 1 October 2020 to 31 December 2020
John Glen Excerpts(3 years, 9 months ago)
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The Economic Secretary to the Treasury (John Glen)
Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury was required to prepare a quarterly report regarding its exercise of the powers conferred on it by part 1 of TAFA 2010. This written statement satisfies that requirement for the period 1 October 2020 to 31 December 2020.
This report also covers the UK’s implementation of the UN’s ISIL (Da’esh) and Al-Qaida asset-freezing regime (ISIL-AQ), and the operation of the EU’s asset-freezing regime under EU regulation (EC) 2580/2001 concerning external terrorist threats to the EU (also referred to as the CP 931 regime).
Under the ISIL-AQ asset-freezing regime, the UN has responsibility for designations and the Treasury, through the Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Da’esh) and Al-Qaida (Asset-Freezing) Regulations 2011.
Under EU regulation 2580/2001, the EU has responsibility for designations and while the UK was a member of the EU and throughout the transition period OFSI had responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.
EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous Al-Qaida and ISIL (Da’esh) listings.
UK sanctions following the end of the transition period
Since the transition period ended at 11:00 pm on 31 December 2020, the UK no longer applies EU sanctions regulations and all sanctions regimes will be implemented through UK regulations. The Sanctions and Anti-Money Laundering Act 2018 (the Sanctions Act) provides the legal framework for the UK to impose, update and lift sanctions autonomously. Information on the three new counter-terrorism sanctions regimes can be found via this link:
https://www.gov.uk/government/collections/uk-counter-terrorism-sanctions
These new sanction regimes ensure that the UK implements its international obligations under UN Security Council resolution 1373 and give effect to the UK’s obligations under UN Security Council resolution 2368.
This is the final quarterly report to Parliament on the UK’s terrorist asset-freezing regime.
The attached tables set out the key asset-freezing activity in the UK during the quarter.
Attachments can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2021-03-18/HCWS862/.
[HCWS862]
Oral Answers to Questions
John Glen Excerpts(3 years, 9 months ago)
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Mary Kelly Foy (City of Durham) (Lab)
The Economic Secretary to the Treasury (John Glen)
The Chancellor regularly engages with his international partners in the G7, G20 and the Paris Club on debt issues, including private sector participation in debt restructurings, and Treasury officials are also engaging with the private sector on this issue.
Mary Kelly Foy [V]
As the Government slash international aid, covid-19 could push up to 150 million people globally into extreme poverty, yet many banks and asset managers operating in the UK, including HSBC, BlackRock and J.P. Morgan, continue to demand debt repayments from developing countries, leaving them with less money to respond to covid-19. Will the Government urgently introduce new legislation to prevent developing countries from being sued in UK courts by banks, asset managers and vulture funds if they are unable to pay their debts as a result of the pandemic?
John Glen
I note the hon. Lady’s long-standing interest in this subject, but I want to state clearly that the Government support the role of the low-income developing countries to be supported by the UK’s G7 presidency. We have made clear our expectation that the private sector and the firms she mentioned will offer debt treatment on at least as favourable terms as the official sector, under the common framework, as agreed by the G20 last November.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Mrs Pauline Latham (Mid Derbyshire) (Con) [V]
The Economic Secretary to the Treasury (John Glen)
The Foreign Secretary is continuing to look very carefully at the legislative requirements and will set out further detail in due course on how the Government intend to proceed.
Kenny MacAskill (East Lothian) (SNP) [V]
Nick Fletcher (Don Valley) (Con) [V]
John Glen
The Government are committed to encouraging business investment in Doncaster and its surrounding area, and at the Budget we confirmed £23 million funding for Goldthorpe’s town deal—just due west of the town—and that will boost economic growth and encourage business investment in the area. MHCLG is currently assessing the remaining 49 towns fund bids, including those from Doncaster and Stainforth; we will make further announcements on those in due course.
Mr Speaker
I am suspending the House for a few minutes to enable the necessary arrangements for the next business to be made.
Contingent Liability Notification and Disclosure of Asset Sale
John Glen Excerpts(3 years, 9 months ago)
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The Economic Secretary to the Treasury (John Glen)
I can confirm today that I have laid a Treasury Minute informing the House of certain liabilities that HM Treasury has taken on in authorising the sale of the remaining loan assets and share capital of Bradford & Bingley plc (B&B) and NRAM Limited. Metric Impact Sale proceeds c. £5.0 billion Hold valuation Net present value of the assets if held to maturity using Green Book assumptions The price achieve this above the hold value range. Public Sector Net Investment Nil Decreased by: Current budget £350 million in 2024-25 Increased by: Public Sector Net Borrowing £350 million in 2024-25 Public Sector Net Debt Reduced by £5.0 billion— £4.4 billion in 2020-21 and £0.6 billion in 2021-22 Public Sector Net Liabilities Increased by £100 million in 2020-21 Public Sector Net Financial Liabilities Increased by £100 million in 2020-21
This sale generates proceeds of £5.0 billion for the Exchequer, and will see NRAM, B&B and their subsidiary companies, including Mortgage Express (MX), together with their remaining mortgages and loan portfolios, sold to a consortium comprising Davidson Kempner Capital Management LP (Davidson Kempner) and Citibank (Citi). The majority of the financing for the transaction is being provided by funds managed by Pacific Investment Management Company LLC (PIMCO).
The transaction has been agreed and will complete in two stages. The first stage is the sale of the loans to Citi which is expected to complete within the next few weeks. The second stage is completion of the sale of the companies, and will see the sale of the legal entities of B&B and NRAM to Davidson Kempner. This stage is subject to the receipt of regulatory approvals from the Financial Conduct Authority (FCA)and is expected to take place in the summer.
This sale constitutes a significant milestone in the work to achieve the Government’s aim of returning the institutions brought into public ownership as a result of the 2007-2008 financial crisis to private ownership.
Rationale
It is Government policy that where a Government asset no longer serves a public purpose, or that purpose can be more efficiently realised with the asset in private ownership, the Government may choose to sell that asset, subject to value for money and market conditions being supportive.
The Government intervened in the financial sector to preserve financial stability. As this policy objective has now been met, those assets which came into public ownership should be returned to the private sector.
Format and Timing
The Government, UK Asset Resolution (UKAR) and UK Government Investments (UKGI) concluded that this sale achieves value for money having:
Conducted a rigorous analysis of whether market conditions were conducive for the sale of this portfolio:
considered whether the transaction had generated sufficient competitive tension to lead to a properly competitive process; and
conducted an assessment of the fair market value for the assets, including the legal entities of B&B and NRAM.
The sale made use of a structured bidding process, which has been shown to create competitive tension and has been used for previous Government asset sales.
Customer protections:
A key element in selecting the successful bidder was the treatment of customers. As in previous UKAR asset sales, bidders were required to agree to a robust package of customer protections before their bids were considered on other factors.
Customers do not need to take any action and can be assured that there will be no changes to the terms and conditions of any loans as a result of this transaction. They will continue to receive the same protections for the lifetime of their mortgage as they do today, and their right to re-mortgage will be unaffected.
The structure of this transaction also means that the legal title holder and administrator of customers’ loans will not change at the point of sale. B&B, NRAM and MX will remain the legal title holders of the loans. Computershare will continue to service the loans.
Only the beneficial owner will change as a result of this sale, and the beneficial owner does not have an active role in the management of customers’ loans.
B&B, NRAM, MX and Computershare are all regulated by the FCA. This means that customers will continue to enjoy the protections of the FCA’s Treating Customers Fairly(TCF)principles and its Mortgages and Home Finance: Conduct of Business(MCOB)rules, as well as recourse to the Financial Ombudsman Service.
As the customer protections require that the administrator and legal title holder of these loans will always be an FCA-regulated entity, customers will continue to enjoy the protection of the FCA’s rules if the legal title holder of their loans changes again at some point in the future.
Contingent Liability
On this occasion, due to the sensitivities surrounding the commercial negotiation of this transaction, it was not possible to notify Parliament of the particulars of the contingent liabilities in advance of the sale announcement.
The contingent liabilities HM Treasury is taking on include those which relate to certain warranties and indemnities that were given to the purchasers and which confirm regulatory, legislative and contractual compliance relating to the loans, assets and the share capital of the companies. The maximum contingent liability arising from the warranties and indemnities to the loan assets is approximately £4.9 billion.
The maximum contingent liability arising from the warranties and indemnities relating to the share capital of the companies is c.£290 million—100% of the purchase price of the shares. More information on these contingent liabilities has been set out in a Departmental Minute that has been laid before the House alongside this statement.
Fiscal Impacts
The impacts on the fiscal aggregates, in line with fiscal forecasting convention, are not discounted to present value. The net impacts of the sale on a selection of fiscal metrics are summarised as follows:
[HCWS813]
Alcohol Duty
John Glen Excerpts(3 years, 9 months ago)
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The Economic Secretary to the Treasury (John Glen) [V]
May I start my response by congratulating my hon. Friend the Member for Moray (Douglas Ross) on securing this debate, particularly since his constituency of Moray lays claim to hosting the largest number of distilleries in any United Kingdom constituency? He has indeed been a tireless advocate for the interests of Scotland. From lobbying for the removal of US tariffs to ensuring officials press on with the alcohol duty review, he has continually supported the Scottish alcohol industry, and he is absolutely right to do so. Distillers such as those in Moray are not just a source of refreshment; they are part of our heritage, they are significant tourism attractions in their own right, and they are important employers up and down the country. In 2019, the number of visitors to the Speyside whisky trail surpassed 2 million. That is a reflection of the sector’s remarkable growth, which my hon. Friend mentioned, and the innovation that it has seen in recent years. I am confident that, post pandemic, the sector will continue to flourish, attracting millions more visitors each year. Distillers, like so many other businesses, have had a very challenging year, and as hon. Members will know, the Government have acted decisively to help them, just as we have acted decisively to help thousands of other businesses across other sectors.
Today, though, we are debating the future of the UK’s alcohol duty system—a system that in fact has a long and fascinating history. Dating back to 1643, it was first introduced by Parliament as a way of financing its fight in the English civil war. Over time, the UK alcohol duty system evolved to become an important provider of Government revenue, and that is very much still the case. As my hon. Friend noted, the sector has experienced an impressive period of growth, helping to generate billions of pounds for the UK Exchequer. Each year the UK’s alcohol duty system raises over £12 billion, helping to fund public services such as the NHS. In that way it helps to address the harm caused to society and public health by excessive or irresponsible drinking.
Those benefits, though, are balanced by the Government’s pragmatic, reasonable approach to the level of duty applied. The Government have cut or frozen duty at seven of the last eight Budgets. In fact, the price of a typical bottle of Scotch whisky is £1.79 lower than it would have been, since we ended the spirits duty escalator seven years ago, in 2014.
As hon. Members may be aware, the current UK duty system is comprised of four distinct categories—beer duty, cider duty, spirits duty and wine duty. That means that the tax applied to each unit of alcohol varies according to whether the alcohol used to produce it came from malt, grapes or apples. That inconsistency was, in part, a consequence of EU directives. Now that the United Kingdom has left the European Union, the Government have the opportunity to take a fresh look at the alcohol duty system to see whether we can create a system that is simpler, more consistent, less administratively burdensome to producers, and does a better job of protecting public health. I know that many of our constituents agree that there is need for reform.
My hon. Friend has once again eloquently voiced his concerns, urging the Government to create a system that works in the best interests of business, his constituents and the industry as a whole. As he noted, at Budget 2020 the Chancellor announced that the Government would review the alcohol duty system. That, of course, was a commitment made in our manifesto, which, as my hon. Friend said, was announced when the Prime Minister visited the distillery in his constituency at Roseisle during, I think, the election campaign, and this review came about only because of the campaigning efforts of my hon. Friend and other Scottish Conservatives to raise the need for reform. The review has come about in part because the Treasury recognises that the alcohol drinks industry is innovative and entrepreneurial, and that traditional assumptions may no longer hold. I was heartened to hear from his speech that Scotland is turning its distilling expertise to gin, with explosive growth in the number of Scottish gin brands.
Since that announcement at the 2020 budget, my officials and my hon. Friend the Exchequer Secretary have engaged with stakeholders across the industry, as well as with public health officials and tax experts. Our goal has been to assess how well the alcohol duty system works now and how it could work better in future. A call for evidence launched in October 2020 asked a series of key questions such as: overall, how well do the different duties work when combined together as a system? Is there a case to move to a standard method of taxation? Would a more consistent systemic approach to indexing alcohol duties be of benefit? Could we reduce burdens by standardising the way businesses declare and pay their duty?
I am pleased to say that we received more than 100 submissions expressing, as one might expect, a wide range of views, which we—my officials and my hon. Friend the Exchequer Secretary—are now analysing. We will provide further updates from the review in due course, as quickly as we can. I would like to assure my hon. Friend that my right hon. Friend the Chancellor and my hon. Friend the Exchequer Secretary are taking a very close interest in this issue and the detailed analysis and work that has been undertaken and are keen to make the most swift progress possible.
Since my hon. Friend the Member for Moray has also raised the issue of small brewers’ relief, I should add that the Government are running a separate technical consultation specifically on this issue. That closes on 4 April. I encourage any craft breweries based in his constituency or in Scotland to make their views heard by responding to this consultation. The Chancellor will set out plans for the coming year at the Budget next Wednesday, and hon. Members will understand that it would be inappropriate for me to comment in any more detail at this stage. I note that my hon. Friend has also rightly raised concerns about the 25% US tariffs on Scotch whisky, and I agree entirely with his assessment that the continued application of these tariffs is particularly disappointing and unfair, given that they have nothing to do with the Scotch whisky industry. To be clear, the UK has negotiated intensively with the US and the EU on these disputes and remains committed to reaching a fair and balanced settlement. I share my hon. Friend’s desire to help struggling producers and reach a settlement that works for the UK as a whole.
To sum up, Mr Deputy Speaker, the UK’s alcohol duty system makes an important contribution to funding vital public services and addressing alcohol-related harms. However, as my hon. Friend has compellingly explained, once again the current system is in need of reform. Leaving the EU provides an invaluable historic opportunity to undertake that reform, and our guiding intention is to do what we can to support this country’s historic and vibrant drinks industry for the long term. By challenging and tackling existing anomalies and reducing inconsistencies that distort the market, our hope is to support innovation and growth within the industry and thereby give the sector the future that it deserves.
I thank my hon. Friend for his contribution today. I know that he will be a little bit frustrated that I cannot set out a clearer timetable, but he certainly can know that the Government are fully committed to addressing the issue and will urgently respond to the challenge that he has set us.
Mr Deputy Speaker (Mr Nigel Evans)
At the end of this week I thank everybody at the broadcasting unit, the technicians and their teams for working supremely well to ensure that the vast majority of Members were able to make their contributions remotely, thereby making this Parliament much safer for those who have to work here.
Question put and agreed to.
Normal Minimum Pension Age: Consultation
John Glen Excerpts(3 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
The normal minimum pension age is the minimum age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge (unless they are taking their pension due to ill health). The normal minimum pension age is currently age 55. This minimum helps to ensure that tax relieved pension savings are used to provide an income, or funds on which an individual can draw, in later life. In 2010 the minimum pension age was increased from age 50 to 55. In 2014, the coalition Government announced that the normal minimum pension age would increase from age 55 to 57 in 2028.
Since the normal minimum pension age was introduced, life expectancy at birth for both men and women has continued to increase, according to the latest data from the Office for National Statistics. It has continued to increase since the announcement in 2014. Increasing the normal minimum pension age reflects increases in longevity and changing expectations of how long we will remain in work and in retirement. Raising the normal minimum pension age to age 57 could encourage individuals to save longer for their retirement, and so help ensure that individuals will have financial security in later life.
The Government therefore reconfirm their intention to legislate to increase the normal minimum pension age to age 57 on 6 April 2028 and are today publishing a consultation on how to implement the increase. The consultation is available at
www.gov.uk/government/consultations/increasing-the-normal-minimum-pension-age-consultation-on-implementation.
The increase to age 57 will not apply to those who are members of the firefighters, police and armed forces public service pension schemes. This reflects the unique nature of these occupations. The consultation also sets out the proposed protection regime for some other pension savers. The Government do not intend for this increase to apply to individuals who already have unqualified rights to take a pension at an earlier age. Protected pension ages will be specific to an individual as a member of a particular scheme, so protection will not apply to other schemes where there is no existing right held.
People in the UK are living longer, and the proportion of over-50s in the labour force is continuing to increase. The Government recognise the importance of supporting over 50s to remain active in the labour market and are committed to supporting them to find and retain employment. The Government are working with employers via the business champion for older workers to enable over-50s to retain employment and are aiming to provide early and targeted employment and skills support to help individuals move back into work, including into new sectors.
This consultation on implementing the increase in normal minimum pension age will run for 10 weeks.
[HCWS780]
Oral Answers to Questions
John Glen Excerpts(3 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Carolyn Harris (Swansea East) (Lab)
The Economic Secretary to the Treasury (John Glen)
Throughout the covid crisis, the Government have sought to protect people’s jobs and livelihoods, and support businesses and public services across the UK. We recognise that food and drink wholesalers have been severely impacted by the necessary action we have taken to control the virus, but those businesses have been eligible for a number of our economic support schemes, including the job retention scheme, VAT deferral and bounce back loans.
Carolyn Harris [V]
Food service wholesalers have again seen their trade drop by 95% with hospitality businesses closing, yet they continue to supply our hospitals, schools, care homes and prisons at a financial loss. Many now are on the brink of collapse. What more are the Government going to do to help the industry, which is suffering a double whammy of lost stock and ongoing fixed costs?
John Glen
I thank the hon. Lady for her question, and, indeed, I met representatives of the sector in my constituency a few weeks ago. The Treasury is in regular discussion with the Department for Environment, Food and Rural Affairs and they are assessing the systemic risks to the food supply chain of the fulfilment of those public sector contracts to schools, hospitals and prisons. We keep these matters under close review, but at the moment there is no threat to those supply chains and, as I referenced, the options that are available to those firms continue to be available.
Chris Bryant (Rhondda) (Lab)
Stephen Hammond (Wimbledon) (Con)
The Economic Secretary to the Treasury (John Glen)
Equivalence is an autonomous technical process that each side is undertaking separately. Officials have had a number of meetings with their counterparts in the Commission over the past 12 months to discuss each other’s processes, and we remain open and committed to continuing dialogue with the EU about its intentions for equivalence.
Stephen Hammond [V]
I thank my hon. Friend for that answer. Clearly, it would be disappointing if the EU could not follow the UK’s offer on equivalence, given the relative starting positions. Will my hon. Friend comment on the Government’s ambitions with regard to mutual recognition of professional qualifications? What are those ambitions and does he hope that they will be achieved by the signing of the memorandum in March?
John Glen
My hon. Friend has a lot of expertise in this area. He will know that, alongside the trade and co-operation agreement, we had a joint declaration to establish a structured regulatory co-operation for financial services and to discuss a whole range of matters around equivalence determinations going forward. The memorandum of understanding will be agreed in discussions between the EU and UK by March 2021. That will establish a framework for that co-operation. It would not be appropriate for me to give a running commentary on that, but the plans will come to fruition over the coming weeks.
Mr Pat McFadden (Wolverhampton South East) (Lab) [V]
The Brexit deal was, in effect, a no-deal outcome for financial services. Already some trade has moved, and there is big uncertainty hanging over access to European markets for this vital UK sector. Can the Minister confirm that it is in fact a Government negotiating aim to secure equivalence recognition for UK financial services in the memorandum of understanding being discussed between now and the end of March?
John Glen
To clarify for the right hon. Gentleman, the equivalence granting process is an autonomous, separate process from the MOU discussion. The MOU is about a framework to evaluate the future direction of financial services across the EU and UK. I remain very ambitious for the financial services sector. The Chancellor and I are continuing to have a dialogue—with roundtables with representatives of the sector this week and next week, as well as one-to-one meetings—to ensure that we listen to the sector, and respond appropriately and ambitiously for the future.
Paul Blomfield (Sheffield Central) (Lab)
Ian Levy (Blyth Valley) (Con) [V]
The Economic Secretary to the Treasury (John Glen)
I thank my hon. Friend for his question. Across the pandemic, the Government have created a number of innovative responses, like Eat out to Help Out. We will continue to examine very carefully what package of measures we need to intervene with, and the Chancellor has indicated that he will be coming forward at the Budget with an update to the House on that package in due course.
James Sunderland (Bracknell) (Con)
Given the current imperative to forge new trade deals worldwide, and also to make the new EU trade deal work, what incentives are being considered by the Treasury to both attract new companies to the UK and retain those that are already here?
Equitable Life
John Glen Excerpts(3 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (John Glen)
Let me start, as others have done, by acknowledging the role of my hon. Friend the Member for Harrow East (Bob Blackman), his long-standing work on the issue and his success in securing the debate. I also need to declare an interest, as I did when I responded to the debate on 31 January 2019: my late father was an investor in Equitable Life and, therefore, I am keenly aware of the history and the importance of the issue to all concerned.
As we have heard and grasped again today, this is a complex and technical subject, the history of which has been very well documented over many years. I should also remind Members that the Equitable Life payment scheme closed to new claims over five years ago, so nothing has changed since that previous debate two years ago. Many of the speeches made today have covered the long and sad history of this matter. I do not propose to revisit all of that this afternoon. I do, however, want to remind hon. Members that the Government took more action than any of their predecessors to resolve this issue and committed significantly more funding than any other.
I appreciate that some investors remain disappointed by the steps that we took and would like to see further funds made available, but the Government have been clear and consistent in saying that this issue is closed and no further money will be paid out. This is in line with the ombudsman’s report, which was explicit about having no expectation of the full amount being paid.
John Glen
I will not, because of time. Indeed, the ombudsman wrote to the APPG to clarify that position. Today, we have heard additional representations on the transparency and accuracy of the payments made by the scheme. I heard very clearly that point from my right hon. Friend and his reference to me during the debate, and I shall respond to that now.
First, the Treasury published the calculation methodology in full in 2011, as well as a simplified explanation to assist members of the scheme who were anxious about how it would work, with worked examples of the calculation. These explain how every payment made by the scheme was calculated. In addition, the Treasury has also incurred actuarial fees well in excess of £100,000, answering the questions reasonably posed by the actuarial representative of the Equitable Members Action Group, in an effort to ensure that there was maximum transparency to that group and to those members who were concerned, but no errors were found in the methodology. The group confirmed to their members that the payments to annuitants were accurate, and all this was set out in detail to the Public Accounts Committee in 2018.
Some hon. Members have spoken about policyholders who have received increased payments from the scheme, but given the closure of the scheme to new claims, I can only assume that these are historical cases. The Treasury is not aware of any corrected payments having been made to policyholders since the scheme closed, but I recognise that it may be helpful to go into some more detail on this point. The most critical determinant of the value of any payment is the input data received from Equitable itself, including payments in, payments out and the type of policy bought. Actuaries checked this data carefully and made any obvious corrections automatically before payments were made. But then the scheme also gave policyholders the opportunity to verify their own input data, which would be a significant driver of any errors, and where an error was found, the scheme corrected it and recalculated the payment. That is likely to have been what happened in specific cases that Members have raised today, and I believe that they show that the system that the scheme established to ensure accurate payments worked well.
The Government have taken significant action to resolve this issue and to balance the expectations of the policyholder with the needs of the taxpayer. The scheme was fully transparent, as I have set out. We published the calculation methodology in full. We made significant resources available to explain it. And we put systems in place to ensure that where there were errors in that input data and, therefore, payments, they were remedied swiftly. I appreciate investors’ desire that the scheme should pay out more, but the Government’s position has always been clear and consistent, both since the original announcement back in 2010 and since the scheme was wound down over five years ago. I am afraid that that position remains and will not change.
Draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2020
John Glen Excerpts(3 years, 10 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
Before we begin, I remind Members about the social distancing requirements. Spaces available to Members are clearly marked. Hansard colleagues would be grateful if you could send any speaking notes to hansardnotes@parliament.uk. I call the Minister to move the motion.
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2020.
It is a pleasure to serve under your chairmanship, Mr Mundell, as we consider the order, which was laid before the House on 26 November last year.
At the spring Budget in 2020, following comprehensive consultation and stakeholder engagement, the Government published their consultation response and the Chancellor announced the Government’s intention to legislate to bring pre-paid funeral plan providers within the remit of the Financial Conduct Authority. That will ensure that, for the first time, all providers that sell and administer pre-paid funeral plans will be subject to compulsory and robust regulation. Compulsory regulation in this area is long overdue, and it is right that the Government act to ensure that vulnerable consumers are protected by a coherent and proportionate regulatory regime.
This issue has attracted interest from across the House over a number of years and I thank all Members who have campaigned, spoken and written to me about it in that time, including the hon. Member for Airdrie and Shotts (Neil Gray), the right hon. Member for East Antrim (Sammy Wilson), my hon. Friend the Member for South Cambridgeshire (Anthony Browne), my right hon. Friend the Member for South Holland and The Deepings (Sir John Hayes), and the hon. Member for Bethnal Green and Bow, who is a member of the Committee. The order will introduce a compulsory regulatory regime by amending the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, and other related legislation.
A funeral plan is a contract under which a policyholder makes one or more payments to a funeral plan provider, who subsequently provides or pays for a funeral upon the death of the policyholder. Entering into such plans in effect allows policyholders to lock in the price of their future funeral when they purchase the plan. Although there is a voluntary regulatory body in the market, the Funeral Planning Authority, over recent years there have been troubling reports from Fairer Finance and Citizens Advice Scotland of consumer detriment in the sector.
Following those reports, in 2018 the Government launched a call for evidence in order to seek views and information on the potential risk of consumer detriment in the market. The responses to that call for evidence confirmed the existence of consumer harm, which included a lack of clarity for consumers over what is covered by their plan, high- pressure and misleading sales tactics, and a lack of access to redress schemes if things go wrong. The call for evidence also confirmed broad demand in the sector for moving to a compulsory regulatory regime, with 84% of respondents expressing their support.
Following further consultation on a new legislative framework, the Government have decided to bring the pre-paid funeral plan market within the remit of the FCA. That will ensure that funeral plan providers are subject to robust and enforceable conduct standards that aim to protect consumers from further harm. Under the current legislative framework, entering into a funeral plan contract is a regulated activity; however, the 2001 order currently excludes plans covered by a trust arrangement or insurance contract from the definition of a funeral plan.
Because all known providers meet those conditions, no pre-paid funeral plan provider is currently, or ever has been, authorised and regulated by the FCA. The draft order will remove those exclusions, with the effect that providers will generally be required to be authorised by the FCA in relation to entering into—that is, selling—funeral plan contracts. The order will also introduce a new regulated activity that will require providers to be authorised by the FCA in relation to the administration of funeral plans, including existing plans.
Those changes to the 2001 order will ensure that the FCA is able to introduce rules to protect consumers at the point of sale, ensure that providers administer the plans properly, and ensure that they have sufficient reserves to pay for funerals as they fall due. Many funeral plan contracts are sold by smaller intermediaries and in particular by funeral directors, a point made to me yesterday in a letter from my right hon. Friend the Member for South Holland and The Deepings. Failing to capture the sale of funeral plan contracts by that large part of the market would result in an ineffective regulatory regime and expose individuals to the risk of unfair selling practices. Therefore this order also makes amendments to the regulated activities order in order to make dealing in funeral plan contracts as an agent a regulated activity. The effect is that all relevant activities undertaken by intermediaries or third-party distributors who promote or sell funeral plans will also be brought within the scope of the amended regulatory regime.
I am mindful that funeral directors are in general not financial services firms, and the Treasury has received many representations from stakeholders concerned about the ability of these small, often family-run businesses to become directly authorised by the FCA. Therefore this order amends the relevant regulations in order to allow intermediaries of funeral plan providers to become appointed representatives of “principal” firms. That means that funeral plan providers, acting as the “principal” firm, must ensure that the representatives whom they appoint to sell or promote their funeral plans comply with the relevant regulatory regimes. For the Committee’s benefit, I point out that that is not dissimilar to a travel agent selling insurance but not actually being responsible individually for being regulated as an insurance provider. It results in a proportionate approach whereby smaller firms that operate as intermediaries will be required to follow the rules that protect consumers, without necessarily needing to undergo full FCA authorisation.
The order also makes consequential amendments to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001.
Finally, the order will bring this sector into the scope of the Financial Ombudsman Service. The Government consider that consumers should have access to the financial ombudsman in respect of both plans purchased after the order comes fully into force and plans that would otherwise have benefited from the complaints procedure of the current voluntary regulator. Accordingly, the order extends the jurisdiction of the financial ombudsman to allow it to deal with complaints in relation to matters that occurred when the funeral plan provider was registered with the Funeral Planning Authority.
I thank the FPA for its work up to this point. I hope that it will continue to operate until the new FCA regime comes into force and I urge providers to retain their registration and, of course, abide by the authority’s code of conduct in this transitional period.
Following consultation with the industry, the Treasury has concluded that the majority of providers operating in this market are well run, with properly funded trusts. That is important, because it provides a foundation on which a proper regulatory regime can be based. The Treasury has also found that the reported poor practices have largely been attributed to providers that had chosen not to register with the FPA, demonstrating that in this case a voluntary system of regulation cannot be fully effective because providers can simply choose not to comply.
It is a regrettable fact that bringing a previously unregulated sector into regulation—whatever form that may take—creates a possibility that some providers are not able to meet the threshold for the new authorisation. I therefore cannot rule out the possibility that, in the authorising of those firms under the new regime, it is revealed that some providers are unable to deliver on the promises that they have made to their customers. However, I can assure the Committee that the Treasury and the FCA will monitor the situation very closely and, subject to the facts at the time, stand ready to take any appropriate action.
I will briefly outline the next steps. Once this order is made, there will be an 18-month implementation period before the new regulatory framework comes fully into force. That will allow time for the FCA to design, consult on and implement the regulatory architecture for the new regime. It will also allow time for funeral plan providers and intermediaries to take the necessary steps to familiarise themselves with the new regulatory requirements.
I also fully expect funeral plans to be brought within the scope of the Financial Services Compensation Scheme, but ultimately the scope of the FSCS is determined by the FCA, which will need to consult on the matter. The Government are currently considering whether further legislation is required to ensure that the compensation scheme would operate effectively for consumers if it were extended to cover this sector.
As I said, compulsory regulation in this area is long overdue. We must ensure that vulnerable and elderly consumers in this sector are protected. I therefore commend this order to the Committee.
John Glen
I am very grateful to the right hon. Gentleman for his thoughtful remarks. I echo his sentiments about the contribution that funeral directors make up and down the country, in very difficult circumstances over the recent period. I understand the trauma that exists out there and it is obviously incredibly challenging to enact regulations that are appropriate but still cause massive distress. He raised a number of substantive points, which I will happily respond to. Obviously, we did not start out seeking to regulate at any cost and without due consultation. I accept that the number of responses was relatively modest, but there was a clear consensus from them.
I acknowledge the points that the right hon. Gentleman made on behalf of the existing voluntary body, the Funeral Planning Authority, which is not in favour of the regulation, but the reality, as I said, is that for many of its members this is not an issue; the issue comes with those that do not choose to register with the FPA and the burden of distress that those firms cause. That is why we are having to act.
The right hon. Gentleman asked about the costs for small firms. I explained the model by which small firms will be able to act as essentially intermediaries in terms of selling these products, and the relationship with the FCA not being a direct one. I accept that the issue about current providers and plans that would, subsequent to the authorisation process, potentially not be authorised, and the attendant consumer detriment, is a legitimate one that we cannot resolve at this point. As I said, it is a matter that the FCA would keep under review. I accept that the issue exists, but that does not mean that we should not tackle the fact that we need to regulate going forward, and we need to regulate for those that have come before.
The right hon. Gentleman asked about FCA resourcing, which is obviously a matter for the FCA to resolve. Notwithstanding the challenges that it faces at different times with different issues, it has a good reputation for doing this sort of work, and we expect to work very closely with it. I have regular conversations—indeed, I will have one today—with the chief executive of the FCA, and I will keep the matter under close review.
I think this is the right thing for the Government to be doing. It is based on evidence, cross-party support and clearly, as matters move forward and the detail of the work and the regulations come into play, there will be an opportunity to debate the measure further in the House.
Question put and agreed to.