Oral Answers to Questions

John Glen Excerpts

Tuesday 15th September 2020 Commons Chamber

[Holly Mumby-Croft (Scunthorpe) (Con)]

What fiscal steps his Department is taking to support businesses affected by the covid-19 outbreak.

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

The Government recognise the extreme disruption that the pandemic has caused businesses, which is why we have delivered a generous and comprehensive package of support, in line with best practices globally, totalling more than £190 billion. That has included grants, loans, the furlough scheme, the self-employment income support scheme, deferred VAT payments, business rate reliefs and protections for commercial tenants.

[Bim Afolami]

I thank the Minister for his answer. Will he and the Treasury consider reviewing the rules of the furlough scheme to deal with cases where some small businesses, particularly one in my constituency, missed out on that scheme through administrative error and, in effect, paid staff when that could have been done through the furlough? Will he discuss that with me separately to see whether we could review the rules to deal with that sort of administrative mistake?

[John Glen]

Obviously, the scheme has helped 1.2 million employers, and that involves 9.6 million jobs. I am happy to engage with my hon. Friend on the specific example he raises. No appeal process is available for those who have made administrative errors, but if a mistake has been made by Her Majesty’s Revenue and Customs, a complaints procedure can be followed. I will follow up on this with him personally.

[Miriam Cates]

This Government’s support for businesses throughout the pandemic has been wide-ranging and delivered at speed. Without the real-time information held by HMRC, it would have taken significantly longer for those grants to reach employers and many more jobs would have been lost. Digital tax administration not only helps HMRC, but cuts costs to businesses, so what is the Treasury doing to build on those successes and make the UK one of the most digitally advanced places in the world to run a business?

[John Glen]

My hon. Friend is right; it is incumbent on the Government, in all Departments, to look at how we can refine the way we operate, to be more effective. That is why in July my right hon. Friend the Chancellor published a 10-year tax administration strategy, setting out our vision for a modern system, which will involve extending making tax digital to more taxpayers. That is a first step, and we hope it will bring us to a world-leading situation in this country.

[Holly Mumby-Croft]

I have been told by businesses in my constituency that the hospitality VAT cut was a lifeline to them and helped them to continue. Will my right hon. Friend consider extending that VAT cut beyond January next year, to help those businesses with that recovery?

[John Glen]

Clearly, every intervention has a cost, and that measure provided support for 150,000 businesses, protecting 2.4 million jobs. As we approach future fiscal events, all contributions and businesses cases for changes will be looked at carefully by my right hon. Friend the Chancellor. I am sure that he has heard my hon. Friend’s representations today.

[Duncan Baker (North Norfolk) (Con)]

What fiscal steps he is taking to support retail and high street businesses affected by the covid-19 outbreak.

--- Later in debate ---

[Daniel Zeichner (Cambridge) (Lab)]

  The Government will be aware of the significance of the sale of Cambridge-based ARM to American chip maker Nvidia. Will the Government intervene both to secure the headquartering and jobs in Cambridge, but perhaps more significantly, to get an exemption from the American CFIUS—Committee on Foreign Investment in the United States—rules, which give the American Government such leverage? Why on earth would we want to throw away such a bargaining chip in advance of trade negotiations?

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

The hon. Gentleman is right to raise ARM, which is obviously a key employer in his constituency. The Government are taking a very close interest in this transaction. It was pleasing to see yesterday that parties close to the transaction said that the headquarters would remain in Cambridge. It is a matter we are engaging very closely on, and I am very happy to engage with him personally on any questions arising from that.

[Dr Kieran Mullan (Crewe and Nantwich) (Con)]

  Bounce back loans have been vital to many businesses in Crewe and Nantwich. Although they appreciate the help they have had from the scheme, some have been left waiting too long to access the support. For example, Axis Boats in my constituency waited eight weeks. Until it approached me and we worked together on it, it was not able to get the finance. Will my hon. Friend agree to meet me to discuss examples such as this and to ensure that banks are fully playing their part in getting people access to this support?

[John Glen]

My hon. Friend is right to raise this point, which he has raised before. In his constituency, 1,400 businesses have benefited from the bounce back loans from 28 providers across the country, but I am happy to engage with him in relation to the number of cases he has dealt with and see what interventions can be made at this time.

[Zarah Sultana (Coventry South) (Lab)]

  The likes of Amazon, Facebook and Google have seen their profits soar during the pandemic. Using accounting tricks, these companies avoid paying their fair share of tax, which is how Amazon UK’s pre-tax profits have risen by 35%, while its tax bill rose by less than 3%. Will the Chancellor promise to keep the digital services tax and promise that it will be billionaires and the multi- national corporations who will pay for coronavirus spending, not workers and small businesses who have been hit so hard?

Co-operative and Community Benefit Societies (Environmentally Sustainable Investment) Bill

John Glen Excerpts

2nd reading & 2nd reading: House of Commons
Friday 11th September 2020 Commons Chamber

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

I congratulate the hon. Member for Cardiff North (Anna McMorrin) both on securing this private Member’s Bill and on highlighting the important issue to the House. I acknowledge the many significant contributions so far: from my hon. Friends the Members for Northampton South (Andrew Lewer), for Berwickshire, Roxburgh and Selkirk (John Lamont), the hon. Member for Croydon Central (Sarah Jones), my hon. Friends the Members for Clwyd South (Simon Baynes), for Grantham and Stamford (Gareth Davies), for Christchurch (Sir Christopher Chope), for Rushcliffe (Ruth Edwards), for Bolton West (Chris Green), for Sedgefield (Paul Howell), for Darlington (Peter Gibson) and for Gedling (Tom Randall). All of them have interrogated the Bill very carefully and thoughtfully with some interesting exchanges along the way.

I wish to put it on record that I fully agree with the ambitions of the hon. Lady’s Bill to support the growth and development of the co-operative and mutual sector and to tackle climate change; I have enjoyed our dialogue during the preparation of the Bill to get to this point. They are two key drivers of my tenure as Economic Secretary. I also wish to put it on record that the Government have taken significant steps to support the co-operative and mutual sector to reach its potential, and I will continue to champion mutuals of all kinds. Just last week, I was pleased to attend a roundtable on the topic of regional mutual banks chaired by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) who has also made contributions again today. I will be taking some of those thoughts from that discussion forward.

Treasury officials who work with me also hosted an innovative mutuals workshop with representatives from across the sector last year to drive practical changes to help co-operatives. In 2014, as has been mentioned, we passed the Co-operative and Community Benefit Societies Act to reduce legal complexity and, at the same time, we increased the amount of capital a member could invest in a society from £20,000 to £100,000.

[Kevin Hollinrake]

The Minister refers to the roundtable we held on mutual banks. One of the astounding figures in that roundtable was the SME lending by mutual banks in other countries throughout the financial crisis. In Japan, there was no reduction in lending to SMEs. In Germany, there was a 20% increase. In Switzerland, there was a 30% increase over that five-year period. In the UK, there was a 25% decrease in lending to SMEs. Does that not show the power of mutual banks as a solution to SME lending?

[John Glen]

It does show the considerable potential, but we must be clear about the different legal traditions and frameworks that exist in those different jurisdictions. Right now, we are looking at where we can examine ways of moving forward constructively from the basis that we have in this country.

I would like to move on and examine some of the other elements where the Treasury has made contributions to assist this broad agenda. Where we have identified barriers holding mutuals back, we have acted to remove them. This year, we worked with Her Majesty’s Revenue and Customs to ensure that companies converting to co-operatives are treated on a level playing field. At the Budget, the Government announced that the tax burden on housing co-operatives would be reduced. Most recently, the Treasury has worked closely with the Department for Business, Energy and Industrial Strategy to ensure that co-operatives can benefit from the Government’s covid-19 business support offer, including through the Corporate Insolvency and Governance Act 2020.

I am conscious that the interest of the hon. Member for Cardiff North is not just about the development of the co-operative sector. In our discussions, her passion for taking action to address climate change and her considerable experience in Wales prior to coming to this place have been abundantly clear to me. The Government share that ambition. As the House will be aware, we legislated to reduce emissions to net zero by 2050, becoming the first major economy to do so. In the Budget earlier this year, the Chancellor also announced a series of real, tangible measures to support green growth and tackle climate change. They were wide-ranging and included: committing to the carbon capture and storage infrastructure fund; fulfilling the manifesto commitment to tree planting and peatland restoration through a £640 million Nature for Climate fund; delivering on our commitment to increase the proportion of green gas in the grid by consulting on introducing a Great Britain-wide green gas levy to support biomethane production, alongside other measures to decarbonise heat; doubling the size of our energy innovation programme; and, at the summer economic update in July, the Government announced a further ambitious £3.05 billion package for housing decarbonisation designed to cut carbon, save people money and create jobs.

In my own area of responsibility at the Treasury, green finance is a priority. We published our green finance strategy in July last year. It sets out very clear objectives to align private sector financial flows with clean environmentally sustainable and resilient growth, and to strengthen the competitiveness of the UK financial sector. The tone of the debate and the content of colleagues’ speeches today has shown that there has to be an almost limitless ambition in terms of the dimensions of interventions. A number of contributions focused on the issue of green bonds and mobilising green finance. That means accelerating investments to support clean growth and our environmental ambitions. I think I would want to say that the issuance of green bonds will be an important part of the pathway to delivering the transition to net zero by 2050. It is something that the Treasury keeps under active and ongoing review as we approach fiscal events in the future.

I would like to turn now to the reasons the Government cannot support this Bill, despite sharing the ambitions of the hon. Member for Cardiff North. For the benefit of the House, it may be worth restating that societies can currently issue shares to raise capital and may also issue debt in much the same way as companies, as the Opposition Front-Bench spokesman, the right hon. Member for Wolverhampton South East (Mr McFadden) correctly set out. The current arrangement allows for a considerable amount of flexibility for co-operatives seeking to raise capital, while safeguarding their status as genuinely mutual member-owned and controlled entities.

The Government believe that the UK should have a strong and robust regulatory system which provides strong protection for consumers. Investment in mutuals, like any other investment, is not risk-free—a point that has been made by several hon. Members. Although it is for investors to make their own choices about risk—as has been pointed out, investments can go up and down—it is crucial that the Government ensure that appropriate protections are in place, particularly where a new type of investment instrument or product is being created.

The recent public and regulatory attention, following the failure of London Capital and Finance, to retail investments such as those that are often referred to as mini bonds highlights that care is needed when developing investment products for retail investors. From the beginning of this year, the Financial Conduct Authority took action to limit the promotion of a certain type of mini bond to certain retail investors, citing concerns about the high risk that capital invested would not be repaid and the illiquid nature of the investment. The FCA is now consulting on making those temporary rules permanent and extending them to some similar securities.

Unfortunately, we believe that the type of share proposed in the Bill may unintentionally—I do accept that it would be unintentional—create a capital instrument with characteristics similar to those of a mini bond, without ensuring that adequate protections for consumers were in place. Some of the significant issues with mini bonds arose as a result of their illiquid nature—the fact that they cannot easily be transferred—limiting investors’ ability to access their funds. Although the share proposed in the Bill is transferable, we believe that, in practice, it is likely that it would be highly illiquid. Mutual shares can ordinarily only be transferred at par value, which in turn limits the potential for the emergence of any secondary market for the shares, because the incentive to purchase existing shares is limited. In the case of the share proposed in the Bill, the opportunities for retail investors to recover their funds before the term attached to the share has expired, should they need to do so, may be extremely limited. That limitation could pose risks to retail investors with relatively low net worth who may need to access their capital.

Investment in mutuals is not risk-free. Many investors in mini bonds were motivated by the opportunity to support a brand or product that they had some relationship with, so they may not have fully considered the risks posed to their capital. That issue should be considered carefully in this case, because it is likely that individual socially minded investors may see investment in a green co-operative as an ethical use of their funds and may underestimate the associated risk.

That issue may be compounded by two further considerations. First, although the FCA is the registering authority for co-operatives, where they are not undertaking regulated activity they are not supervised by the FCA in the manner in which financial services firms are. We believe, therefore, that there is a significant risk of mistaking registration with the FCA to suggest a level of scrutiny that does not exist, and that may cause investors to underestimate the risk. Furthermore, as the investments are unlikely to be covered by the Financial Services Compensation Scheme, there would be no compensation available to consumers if the issuing co-operative were unable to repay the original investment. That has been a particularly contentious area with mini bonds.

More broadly, the Treasury’s review of the current regulatory arrangements for the issuance and marketing of non-transferable debt securities, such as some mini bonds, is ongoing. It is right that we consider carefully the outcome of that review before consideration is given to the creation of any capital instrument with similar characteristics. We do not want to have to do another review when we have not concluded this one yet. I hope I have made it clear to the House that the Government have significant concerns about the potential consumer detriment that may unintentionally arise as a result of the type of share proposed in this Bill.

[Kevin Hollinrake]

Does the Minister agree that the issue with mini bonds, and particularly with London Capital and Finance, was the misunderstanding around what was regulated? In that case, the product itself was not regulated, but the marketing of it was. That was very confusing for consumers, many of whom thought they were buying regulated products when they were not. Would it not be more straightforward to simplify and widen the regulatory framework to bring those kinds of products into it?

[John Glen]

My hon. Friend shows his usual grasp of these matters. He is right to say that the lack of clarity about the promotions regime and the regulation of the underlying instruments poses some real challenges. Alongside Dame Elizabeth Gloster’s review, which will report in November, we are looking carefully at the right joined-up response to deal with the risks that we have seen in the recent unfortunate situation arising from these mini-bonds.

Alongside protecting consumers, it is right that the Government consider the impact of any proposed changes to the shares issued by co-operatives on the sector. We have seen clear examples in other policy areas of legal forms being used to deliver investor benefits other than for the purpose they were intended, such as tax-advantaged venture capital schemes in energy generation. The FCA noted in response to its 2015 consultation that it had taken the decision not to register a number of energy societies as co-operatives. Those decisions were taken on a case-by-case basis, when it was determined that the conditions for registration as a co-operative were not met. In those cases, the relevant condition for registration was that the society must be a bona fide co-operative society.

Key to what makes mutuals distinct from other legal forms is their purpose-driven nature—one that the hon. Member for Cardiff North set out clearly in her opening speech and to which others have referred. I am concerned that the type of share proposed in the Bill may incentivise investors to inappropriately use the co-operative legal form as a vehicle to attract investment rather than to act for the benefit of its members or community, as co-operatives are intended to. Let me be clear: we are not opposed to community energy schemes, or for that matter any other business seeking to incorporate in the mutual model. However, it is right for the Government to be cautious in proceeding without the possibility for appropriate consultation and consideration, because we have seen real examples of where the model has been used in the wrong way, to considerable consumer detriment.

Finally, I note that there does not appear to be a clear consensus from the co-operative sector in support of the Bill as it stands. I will set out the position plainly as I understand it. In a briefing to MPs, the trade body Co-operatives UK noted that the Bill would be “impractical and counterproductive” and

“would restrict rather than expand the scope for societies to take on mission-aligned investment for environmental and social purposes.”

Co-operatives UK’s preferred approach, as the hon. Lady acknowledged, is to make amendments in Committee to remove the links to environmentally sustainable investment from most of the Bill. However, I believe that would fundamentally contradict the hon. Member’s intentions in drawing the scope of the Bill and is therefore not a viable way forward.

To conclude, let me reiterate my sincere gratitude to the hon. Member for Cardiff North for bringing forward this Bill. There has been a constructive discussion today, and it is important to highlight the value of the co-operative and mutual sector, both to the House and the public. I thank her for the way that she has engaged with me and my officials in recent months. Her passion to support the sector and tackle climate change has been clear throughout. As I have indicated to her previously, I will be happy to continue to work with her and representatives from the sector, of which there are a number across the House, to understand what more can be done. I will continue to champion the work of the co-operative sector more generally and address some of the themes of today’s debate, which have been very valid and worth while.

Protection of Jobs and Businesses

John Glen Excerpts

Wednesday 9th September 2020 Commons Chamber

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

It is a privilege to close this debate on behalf of Government. I thank hon. and right hon. Members across the House for their varied and considered contributions. The Government have worked closely with colleagues across the House to help to define the interventions that we have made. I thank my hon. Friends the Members for Cities of London and Westminster (Nickie Aiken), for Dudley South (Mike Wood) and for Moray (Douglas Ross) for making further constructive contributions today.

I think I can discern four themes on which to base my remarks. First, many colleagues have referenced the support from the schemes that the Government have introduced over recent months. The Government have acted decisively to protect people’s livelihoods and support businesses, with what has been one of the most generous and comprehensive responses in the world. The Government have supported people, businesses and our public services with over £190 billion. The OBR and the Bank of England agree that the actions that we have taken in the first phase of our response have helped to safeguard millions of jobs and that without them there would have been far worse outcomes. The OBR has said that the positive action that the Government have taken

“should…help to limit any long-term economic ‘scarring’, by keeping workers attached to firms and helping otherwise viable firms stay in business.”

At the heart of today’s debate is the fact we have supported more than 9.6 million furloughed workers and 2.6 million self-employed individuals through our schemes, as my hon. Friend the Member for Wimbledon (Stephen Hammond) and others recognised. We have helped millions of the most vulnerable people in the country, with a more generous welfare system, a hardship fund and financial support through mortgage and credit payment holidays. We have intervened to reduce income losses faced by working households by up to two thirds, with the poorest working households protected the most—a point that was welcomed by my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb). We have produced extensive support schemes, working with businesses, with tax cuts, tax deferrals, direct cash grants and an extensive programme of loan schemes. I will be happy to engage with the hon. Member for Ogmore (Chris Elmore) and the hon. and learned Member for Edinburgh South West (Joanna Cherry) on the specific concerns they raised about various schemes.

Of course, the direct cash grants to businesses that my right hon. Friend the Chief Secretary has just announced will give businesses either £1,000 or £1,500, depending on rateable value, for each three-week period that they are closed. That will provide vital support to closed businesses throughout the difficult but temporary experience of local lockdown—measures that have been urged by colleagues such as my hon. Friend the Member for Bolton North East (Mark Logan) throughout these difficult weeks.

[Mark Logan (Bolton North East) (Con)]

Will the Minister give way?

[John Glen]

I am sorry; I will not be taking interventions, given the shortness of the time.

The second theme that I want to draw out is that, in response to the unfolding tragedy of people losing their jobs, the Government have announced a specific plan for jobs. We are one of the first countries in the world to do so. The plan for jobs protects, creates and supports jobs. We introduced the Eat Out to Help Out scheme—another scheme that Treasury officials had to issue a ministerial direction for—and temporarily reduced the rate of VAT on tourism and hospitality. Doing so supported millions of jobs in some of our most jobs-rich industries.

To create jobs, we are driving growth in the housing sector by increasing the stamp duty threshold temporarily to £500,000, creating green jobs with the green homes grant, and providing billions of pounds of capital investment. To support jobs, just last week we launched the kickstart scheme to subsidise the most vulnerable category of 16 to 24-year-olds. In addition, we have been providing employment support schemes, training and apprenticeships, and providing the extra support of job coaches in jobcentres.

The third theme I want to draw out from the contributions today is the furlough scheme. The furlough scheme will have run for eight months by the time it closes, and it has supported millions of people and their families. It is right to say that it is one of the most generous schemes in the world. As my hon. Friend the Member for West Bromwich East (Nicola Richards) mentioned, ending the scheme is the right thing to do. On Monday, the chief economist of the Bank of England agreed, saying that to maintain it in its current form would not help either individuals or businesses.

Although I have heard the arguments at a high level for a targeted or sector-specific furlough scheme, I have heard no clear, satisfactory answer to the questions the Chief Secretary posed earlier about which sectors would not be provided with furlough, how we would treat and define supply chains, and when such a scheme would end. Of course, we are not ending our support for furloughed employees; the job retention bonus scheme provides an incentive for businesses that bring employees back from furlough to do meaningful work and ensures that they are supported as the economy gets going. As my right hon. Friend set out, the bonus represents a significant sum that will be vital particularly for small and medium-sized enterprises, which make up 95% of the employers that have claimed for furlough grants and 60% of furloughed workers.

The final thing that I want to emphasise is that our comprehensive and generous economic response has required us to significantly increase our levels of borrowing. In the short run, that has been absolutely the right strategy so that we can protect jobs and incomes, support businesses and drive the recovery, but over the medium term it is clearly not sustainable to continue borrowing at these levels. We will need to return to strong public finances where our debt is in a more sustainable position.

With Government debt now exceeding the size of the UK economy for the first time in more than 50 years, even small changes could be hugely damaging. Thankfully, we were in a strong fiscal position coming into this crisis, which allowed us to act quickly and decisively without hesitation to support jobs and businesses. The difficulties we now face remind us once again that sound public finances are not an optional extra; they are the foundation of a good economic policy.

The Government certainly are not saying “job done”. We know that there is more we need to do to protect jobs and businesses, and today’s debate has helped us to focus on some of the future ideas and solutions.

The economic challenges that we face are extraordinary and unique in our history, but the Government have been proceeding since March with a clear plan to address those challenges. We are providing one of the most comprehensive economic responses to the coronavirus of any country in the world, and we are determined to do everything we can, not just to get through and recover the economy, but to rebuild a better, fairer and prosperous economy, as we deliver on our governing mission to level up and unite the country. That is why we are supporting the Government amendment this afternoon.

[Mr Deputy Speaker (Mr Nigel Evans)]

Apologies to the 56 Members who did not get in on this debate today. We will now put the original question to the House.

Question put, (Standing Order No. 31(2), That the original words stand part of the Question.

The House divided: Ayes 249, Noes 329.

Stamp Duty Land Tax (Temporary Relief) Bill

John Glen Excerpts

2nd reading & 2nd reading: House of Commons
Monday 13th July 2020 Commons Chamber

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

I beg to move, That the Bill be now read a Second time.

There is no doubt that the spring and early summer of 2020 will be forever remembered as one of the most testing periods in our nation’s post-war history. Covid-19 is both a health crisis and an economic crisis. It has tested the public and private sectors in equal measure, just has it has tested the population as a whole. But the virus has been brought to heel, and thanks to our collective efforts we are now in a position where it is safe to reopen our economy.

From the outset of this crisis, the Government have sought to protect business, jobs and incomes. The coronavirus jobs retention scheme and self-employment income support scheme have between them preserved millions of livelihoods through the lockdown. Meanwhile, our VAT deferrals and business rates reliefs, alongside the coronavirus business interruption loans and bounce-back loan scheme, have carried many businesses through the hardest months, so that they now have a fighting chance to recover.

In the autumn, the Government will bring forward a Budget and a spending review that will set out a longer-term strategy for the United Kingdom’s economic recovery.

However, this pandemic is not yet over. Even as we step out of lockdown, a great deal of disruption and uncertainty remains. Many businesses have yet to reopen their doors. Up and down the country, people are worried about whether their jobs will be secure when they return to work, and that is why my right hon. Friend the Chancellor of the Exchequer came to the House on Wednesday to set out the Government’s plan for jobs. As a first step, the Government are introducing a one-off job retention bonus of £1,000, available to employers for each furloughed employee who is still employed as of 31 January next year.

There will also be new, high-quality jobs for hundreds of thousands of young kick-starters. We will invest £1 billion to double the number of work coaches and support the unemployed. There will be more apprenticeships, traineeships and skills funding, and we will bring forward £8.6 billion of investment in our public services and infrastructure to trigger new job creation projects around the country. However, we know that some sectors of the economy have been hit particularly hard, and that is why the Government will support the hospitality and tourism sectors by cutting VAT on food, accommodation and attractions from 20% to just 5% for the next six months. It is why the Government have put in place a £1.57 billion rescue package for theatres, museums and other cultural industries, in recognition of the 700,000 people employed in those sectors and to safeguard the incalculable contribution they make to our national life.

[Chris Grayling (Epsom and Ewell) (Con)]

May I congratulate my hon. Friend and his colleagues on the Treasury Bench for what I think has been an exemplary response to an unprecedented crisis? He describes the challenges that still remain in the economy. Many people still face tough times, particularly in the events sector, where businesses remain as yet unopened. Many of the people who work in the events and entertainment sector have not, for various reasons to do with their employment or tax status, been able to take advantage of the schemes we have seen over the past few months. Will my hon. Friend, together with his Treasury colleagues, look at whether there are additional things we can do to support those sectors and those people in the months ahead, because for them times are still tough?

[John Glen]

I thank my right hon. Friend for his kind remarks. There is more work to be done, and I acknowledge the challenges faced by different industries in different ways. We will continue to look very carefully at further interventions that we could make and shall make in the Budget later this year.

I turn to the housing market, which is another example of a sector that has experienced considerable disruption and which brings me to the subject of this Bill. The Government’s plan for jobs will support the construction sector by injecting new confidence and certainty into the housing market. It will do so by ensuring that anyone buying a main home for under £500,000 before the end of March next year will pay no stamp duty whatever.

A thriving housing market is critical for growth and jobs in this country. Most obviously, a healthy labour market relies on people being able to move home to be closer to the jobs that match their skills, but the building industry is itself a major contributor to jobs and prosperity in the country, adding £39 billion a year to the UK economy. House building alone supports up to three quarters of a million jobs, and let us not forget the many related sectors that benefit from property transactions: estate agents, removal companies, furniture retailers, DIY stores, self-employed decorators and so forth. The lockdown sadly brought much of that trade to a juddering halt.

Rightmove estimates that 175,000 sellers were prevented from coming to the market between March and May this year. Meanwhile, HMRC data shows that residential property transactions in May were about 50% lower than the same month last year. For the first time in eight years, house prices have fallen.

[Matt Western (Warwick and Leamington) (Lab)]

The Minister is making a fair argument in support of the construction and housing sector, but, as he just described, the sector is down by 50% in terms of sales. He will appreciate that the automotive and car sector was down by 97% over the two months of April and May and down by 30% in June. Does he not think that that sector is worthy of support as well?

[John Glen]

I thank the hon. Gentleman for his observations, which he made last week as well. Of course the Government look at all industries. The automotive industry is a key industry, and we are in dialogue with companies across the country looking at the appropriate interventions necessary. Obviously, commercial sensitivities sometimes prevent us from discussing those at the Dispatch Box.

With restrictions easing, the Government have been able to reopen the housing market, and there are signs of tentative movement. Transactions in May were 16% higher than in April. It is crucial to our recovery that we maintain this momentum. People should feel confident to move, to buy, to sell, and to renovate and improve their homes. This is why the Government are cutting stamp duty land tax by temporarily increasing the nil rate band for residential property from £125,000 to £500,000, with effect from last Wednesday—8 July—until 31 March 2021.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial interests. I am very supportive of these measures. One of the risks to the housing market is the withdrawal by the lenders of high loan-to-value mortgages, especially for first-time buyers. We know that 90% and 95% loans can become a self-fulfilling prophecy that damages the market. Will the Minister do whatever he can to make sure that our banks support high loan-to-value mortgages throughout this time?

[John Glen]

I am grateful, as ever, for my hon. Friend’s intervention. Of course, he has enormous expertise in this sector. He is right to say that there is a threat given the changes in the profile of LTV mortgages that are being offered. We hope that that will return to more of the normal schedule that we would have seen pre-pandemic. We will be actively looking at this, and I am in conversations with the banks and building societies about it.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Does the Minister agree that this is actually more than a threat for first-time buyers at the moment—it is a reality? First-time buyers are queuing online for websites of lenders in an effort to get the small number of 5% deposit mortgages. Providing more incentive to people who already own their own home or are part of the buy-to-let market effectively crowds out first-time buyers.

[John Glen]

I thank the hon. Lady for her point. I would look at it in terms of opening up the market, creating more churn and momentum that allows all participants to be able to get on the housing ladder.

The Government’s cutting stamp duty land tax in this way will mean that nine out of 10 people buying their main home will pay no stamp duty at all, and buyers can save up to £15,000. In my own constituency, the average family looking to buy a home worth £349,000 will go from paying £7,450 in stamp duty to absolutely nothing. Indeed, this Bill will take most properties outside of London and the south-east out of stamp duty entirely.

The Bill is the latest in a long line of measures from this Government designed to support current and prospective homeowners in this country. Historically, stamp duty has been charged at a single rate on the whole purchase price of a property, with different rates for different value bands. The same rate of tax was charged irrespective of the number of properties owned by the buyers. In 2014, the Government reformed stamp duty land tax on residential properties, cutting the tax for 98% of buyers who pay it, unless they are purchasing additional property. In 2015, the Government introduced the higher rates of SDLT, which apply on purchases of additional residential properties such as second homes and buy-to-let properties. Finally, in 2017, the Government introduced first-time buyers relief. This increased the price at which a property becomes liable to pay stamp duty, for first-time buyers, from £125,000 to £300,000, with a reduced rate between £300,000 and £500,000.

Together, these reforms have made the tax system fairer and more efficient. They have cut the cost of home ownership for first-time buyers, helping more than 500,000 families to secure a foot on the housing ladder. This Bill will cut the cost of home ownership further, at a time when personal finances are under considerable pressure. In doing so, it will inject new momentum into the property market, protecting thousands of jobs in both the construction industry and the wider economy.

This stamp duty cut is one of several measures in the Government’s plan for jobs that will benefit families and businesses across the country. From September, homeowners and landlords will be able to apply for a green homes grant of up to £5,000 to make their homes more energy efficient. For low-income households, we will go even further, with vouchers covering the full cost up to £10,000. This, too, will support local jobs, as well as reducing carbon emissions and cutting energy bills for hard-pressed families.

[Craig Mackinlay (South Thanet) (Con)]

I wonder if the Minister could clarify a couple of points. On the 31 March date, we all worry that this will end up being a cliff edge, as the date approaches. Will that be the date of exchange, which is usual, I think, in these matters? Is he not concerned about that cliff edge? For some people, for no reason of their own, late finishing of their property will mean they fall the wrong side, very expensively?

[John Glen]

I thank my hon. Friend for his point. We are in a situation where, if the transaction is substantially completed by 31 March, it will be able to qualify for the relief.

Almost four months ago, the Government took the extraordinary step of ordering businesses across the country to close for an extended and unspecified period of time. Millions of people put their lives on hold for the greater good, but now that the virus is under control, the time has come to reopen our economy. Providing infection rates remain low, people should be able to get on with their lives, wherever possible. There are few aspirations more important to the British people than home ownership, and this Bill will ensure that those looking to buy a family home will see their stamp duty bill disappear altogether. It is part of our plan to turn our national recovery into millions of stories of personal renewal. In doing so, it will stimulate the housing market, safeguarding many thousands of jobs and helping Britain to bounce back stronger than before. For all these reasons, I commend the Bill to the House.

The Economy

John Glen Excerpts

Wednesday 8th July 2020 Commons Chamber

[Wes Streeting]

My hon. Friend is absolutely right, because, as events in Leicester have shown, the virus has not gone away. Local lockdowns, or, God forbid, another national lockdown in the event of a second peak, would deliver a knockout blow to so many businesses struggling to get back on their feet, and as my hon. Friend has just alluded to, those businesses will continue to struggle unless the public are given the confidence they need to go out and start spending money again.

Since the start of this crisis, the Government have been too slow: too slow to take the threat of covid-19 seriously; too slow to lockdown; and too slow to ramp up testing. Our criticism of the Government’s approach to track and trace is not unreasonable; this is not mission impossible. Today, the German embassy in the UK is tweeting to invite British citizens to download its Corona-Warn-App before visiting Germany, and British people are replying to the German embassy here in London asking if they can use it here in the UK. We are not even demanding the world-beating track and trace system the Government promised; we just want a system that works.

In a spirit of national unity and common purpose, we sought to work with the Government wherever possible. We have helped expedite emergency legislation through the House, and we have supported many of the measures taken to respond to the health emergency and to the economic crisis. Where Government have fallen short, we have suggested alternative approaches, and to be fair to the Government they have been prepared to listen. They listened when they introduced the job retention scheme, which we had called for and the TUC helped design, and later when the Chancellor came back with support for the self-employed that has been a lifeline to so many.

In the same spirit, we called on the Chancellor to take immediate action to tackle youth unemployment, and we pointed to the future jobs fund introduced by the last Labour Government as a model. Today’s kick-start announcement is exactly that, and we welcome it. In fact, the greatest compliment I can pay to the Chancellor from this Dispatch Box is that in announcing the kick-start scheme earlier he sounded like Gordon Brown and Alistair Darling. Maligned by the Conservatives at the time, history has been kinder to them than the Conservative Opposition of the day were; their leadership is rightly recognised by the Chancellor today, and that is to his credit.

But I do want to impress on the Chief Secretary the following point before he returns to the Treasury. The success of Labour’s future jobs fund was in no small part thanks to the hard work of the third sector and local authorities in delivering it, all of which are now in a far worse position than they were when the financial crisis hit. They have already stepped up in response to this crisis. Charities have been on the frontline of responding to covid-19, at the same time as the virus has plunged so many of them into financial crises of their own. They are at the heart of community resilience, public service delivery and tackling some of the biggest challenges of our time; we need them to come through this crisis and out the other side, so that they can help our country to do the same.

Councils were asked to do whatever it takes, whatever the cost, and they did. They have delivered food parcels to those shielding and made contact with those isolated and at risk. Their workers have kept essential services running at personal risk to themselves, and they have delivered Government grants to the businesses that need them with remarkable speed and efficiency. We have also seen endless examples of their creativity and ingenuity throughout their crisis response. The Mayor of London has worked closely with London boroughs to get rough sleepers off the streets and into safe harbour, and they are working together now to end rough sleeping for good. My own local council procured step-down accommodation for covid patients leaving hospital in order to delay the immediate discharge of those patients into care home settings to help control the spread of the virus. The Mayor of Greater Manchester, Andy Burnham, provided a loan to a local business to help it scale-up PPE production during the national shortage. While the Government dithered and delayed over supports for arts and culture, the Mayor of Liverpool City Region, Steve Rotheram, was already delivering it through his music fund and film and TV development fund. Councils such as Staffordshire County Council and Brighton and Hove City council have provided additional support to community groups and third-sector organisations, recognising the important role that they are playing in the crisis response.

Today, those local authorities are in far worse shape after a decade of cuts from Conservative Government and the double whammy of rising costs and lost revenues as a result of this crisis. The Secretary of State for Housing, Communities and Local Government promised to reimburse them, but so far he has failed to deliver and, after a decade of Tory cuts, they cannot afford to pay for the opportunity to sit next to him at the next Conservative fundraiser in the hope of a favourable decision coming out of the Government.

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

Cheap.

--- Later in debate ---

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

It is a privilege to close this debate on behalf of the Government and I thank hon. Members from across the House for their varied and considered contributions, which I will reflect on in a few moments.

At the outset of this crisis, the Government introduced a £160 billion package of measures to protect jobs, incomes and businesses from the harm and disruption caused by covid-19. Thanks to the action that we took, millions of jobs and livelihoods have been safeguarded through the worst months of the pandemic. Most importantly, our frontline services have received the money that they need to tackle this virus head-on and to support the most vulnerable in our society, but we have always been clear, as the Chancellor reiterated today, that we are ready to take further action as the circumstances developed.

Throughout this crisis, we have listened to hon. Members across the House, just as we have listened to businesses and those working in public services. That is why we announced the bounce back loan scheme in response to some of the challenges with the CBIL scheme to help the very smallest firms and sole traders who might not otherwise be able to access the finance that they needed. It is why we announced that both the coronavirus jobs retention scheme and the self-employment income support scheme would be extended into the autumn. It is worth remembering that we still have three and a half months to go on those schemes. It is why my right hon. Friend the Secretary of State for Digital, Culture, Media and Sport came to this House on Monday to announce a bespoke package of support for theatres, museums and our hard-hit creative industries. As a former Arts Minister, it is great to see the National Gallery leading the way by opening today.

Today marks a new phase in our new economic response as we look to the future and to our recovery with a plan for jobs. It is a plan that will build on the success of our jobs retention scheme by rewarding and incentivising employers to keep previously furloughed staff in work through the autumn and into the new year by paying them a jobs retention bonus.

[Karin Smyth]

Will the Minister give way?

[John Glen]

I will not, given the time.

It is a plan that puts young people front and centre, with a kick-start scheme that will pay employers to create quality jobs for 16 to 24-year-olds at risk of long-term unemployment, alongside new funding for apprenticeships, traineeships and sector-based work academies. We shall be issuing guidance very shortly on how those schemes will interact with the extra support that we are putting into jobcentres. It also means that we shall invest in infrastructure, decarbonisation, and maintenance projects that will serve the needs of communities across the country, while creating jobs and apprenticeships here and now.

Through our collective efforts, coronavirus has been brought under control in this country, but it has not disappeared completely. Even as our economy reopens, many businesses and families will continue to face significant challenges. The Chancellor made it clear today that the Government are not driven by ideology; we are guided by the simple desire to do what is right. For that reason, we will continue to take significant steps to support the economy in the weeks ahead. We will, for example, inject new certainty and confidence into the housing market by increasing the stamp duty threshold to £500,000 for first-time buyers. That recognises the additional expenditure in the economy derived from a house purchase, and, we anticipate, will have a significant effect.

Few sectors have been harder-hit, though, than retail, hospitality and entertainment, so, from next Wednesday, VAT on food, accommodation and attractions will be cut from 20% to 5%. I welcome the positive comments from across the House for that measure. Through the month of August, everyone in the country will be entitled to a Government-funded discount of 50% in restaurants, pubs and cafés, Monday to Wednesday. The “eat out to help out” discount is the first of its kind in this country, and proof that the Government will leave no stone unturned in our efforts to protect people’s jobs and livelihoods.

I shall now mention some of the themes of this afternoon’s debate. My hon. Friends the Members for Stoke-on-Trent South (Jack Brereton), for High Peak (Robert Largan) and for Keighley (Robbie Moore) emphasised the need for investment in local infrastructure and levelling up, and that means investing now to prevent long-term damage to the economy and support the private sector. That is why the Government have brought forward the shovel-ready projects.

On the theme of sustainable public finances and recapitalisation, my right hon. Friends the Members for Wokingham (John Redwood) and for Chipping Barnet (Theresa Villiers) and my hon. Friend the Member for North East Bedfordshire (Richard Fuller) recognised the challenges ahead with respect to the third phase that the Chancellor referred to today, and we shall be responding in the Budget later this year. My hon. Friend the Member for North East Bedfordshire raised a particularly important point about the need to encourage the private sector to generate the jobs ahead.

My neighbour, my right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes), made a passionate speech, referring to the need to address urgently the challenges faced by the beauty industry. She also mentioned the disproportionate impact on women, people from the BAME community and the disabled, and we shall be responding to the excellent report that her Committee, the Women and Equalities Committee, produced in the spring.

There was a moment of synergy between my hon. Friends the Members for Buckingham (Greg Smith) and for St Albans (Daisy Cooper) as they backed the “eat out to help out” campaign, and my hon. Friend the Member for South Dorset (Richard Drax) emphasised his commitment to that in terms of support for pubs.

There were also references to the need for resilience with our local authorities, who have received £3.7 billion in new grant funding. We will work closely with local authorities as we move into the next stage.

[Nick Smith]

Will the right hon. Gentleman give way?

[John Glen]

I am afraid that I will not give way because of the amount of time I have left.

I wanted to respond to the point raised by the hon. Member for North East Fife (Wendy Chamberlain)—who is not in her place—on the Treasury’s responsiveness to her constituents’ correspondence. We have had a volume increase of eight times over this crisis, but we will be working very carefully to improve our responsiveness.

Over the past few months, our economy has endured unprecedented levels of disruption and uncertainty. People and businesses have experienced considerable hardship and worry, and many will continue to do so for some time yet. However, over the past few months we have seen the best of our economy. We have seen banks and building societies providing support with mortgage holidays. The hon. Member for Glasgow South West (Chris Stephens) mentioned the important role of credit unions; we will be working closely with them as we move to the next stage. Businesses large and small turned over their production lines to the manufacture of ventilators, PPE and antibacterial sanitiser, and supermarkets, chemists, couriers and utility companies have also assisted; but we now need to move forward. As the Chancellor has unveiled a plan to protect, create and support jobs, everyone in this country has the opportunity for a fresh start. The task is not yet done. It will take time, and there will be more to come from the Government in the Budget and spending review in the autumn.

Oral Answers to Questions

John Glen Excerpts

Tuesday 7th July 2020 Commons Chamber

[Dr Luke Evans (Bosworth) (Con)]

What assessment he has made of the potential merits of providing sector-specific access to extended bounce-back loans as part of the Government’s covid-19 recovery strategy.

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

The bounce-back loan scheme is aimed at helping the smallest businesses across different sectors of the economy to access the finance they need, and we have seen 1 million loans worth almost £31 billion approved since the scheme was launched on 4 May. We are carefully monitoring the use of this scheme by businesses and will keep all policies under review.

[Dr Evans [V]]

I am grateful for the Minister’s answer. Undoubtedly, bounce-back loans have been a success of this pandemic. However, I have a concern that normally viable small and medium-sized enterprises will face acute problems due to covid and may need to make redundancies. The payments associated with redundancies may, in turn, cause normally viable companies to become insolvent, thus losing all jobs and putting more pressure on the state. With that in mind, will he consider a fund or time-limited mechanism to ensure that SMEs can provide redundancy payments due to covid, thus allowing them to remain solvent, protecting them from further job losses and providing some short-term stability for them to bounce back in the future?

[John Glen]

I thank my hon. Friend for his question. Of course we recognise the importance of SMEs—there are 5.6 million businesses across the country with fewer than 10 employees, and we need their dynamism and entrepreneurial spirit as the economy starts to recover. The Government have said from the start that they will do whatever it takes to support business. The Chancellor has introduced a significant package of measures, which will be under review, and there will be further announcements in due course.

--- Later in debate ---

[Ben Lake (Ceredigion) (PC)]

What plans he has to issue a green bond.

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

The Government have been carefully considering the potential issuance of a UK sovereign green bond. At present, we have no plans to do that, but we continue to monitor the case for one, and we will keep it under urgent review.

[Ben Lake]

I am glad that the Government will keep this matter under consideration because, as evidenced recently by Quebec, green bonds can be effective in raising capital investment and investment for operational expenditure to further the green transition. Will the Government also consider enabling the Welsh Government to issue such a bond to help the effort for a greener economy?

[John Glen]

Clearly, debt and the handling of it is a significant challenge for the Government at this time. The core gilt programme is the most stable and cost-effective way of dealing with our financing needs. The hon. Gentleman makes a reasonable point. We will continue to look constructively at all options and at the changing environment as a consequence of this crisis.

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

What fiscal support he has provided to Scotland during the covid-19 outbreak.

--- Later in debate ---

[Jane Stevenson (Wolverhampton North East) (Con)]

What fiscal steps he is taking to support innovative and fast-growing firms during the covid-19 outbreak.

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

On 20 May, the Government launched the future fund. The fund is an investment scheme for high-growth companies impacted by the pandemic. It provides between £125,000 and £5 million in Government funding through convertible loans, with third-party investors at least matching the Government funding on each loan. As of 5 July, £379 million-worth of convertible loans had been approved through the future fund, and the Government have also made £750 million of support available for innovative firms through Innovate UK grants and loans.

[Jane Stevenson]

Unemployment in Wolverhampton North East was three times the national average as we came into the pandemic, and many businesses have expressed their gratitude for the wide range of support. As we emerge from the pandemic, can my hon. Friend reassure me that this will be the party that champions innovators, start-ups and SMEs, so that we can get job opportunities and more prosperity in seats such as Wolverhampton North East?

[John Glen]

My hon. Friend makes a very good point and case for her constituency. As the Prime Minister set out last week, we will double down on levelling up and give everyone growing up in this country the opportunity that they need. The Prime Minister announced the acceleration of £96 million of investment from the towns fund, including nearly £13 million on kick-start activity in the west midlands.

[Mr Speaker]

Order. May I just say that the Members not reached are pretty upset at others taking too long? They were desperate to get in, but there we are. I am sorry about that.

Draft Northern Ireland Banknote (Designation of Authorised Bank) Regulations 2020

John Glen Excerpts

Wednesday 24th June 2020 General Committees

[The Chair]

Anyone who wishes to remove their jacket may do so.

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

I beg to move,

That the Committee has considered the draft Northern Ireland Banknote (Designation of Authorised Bank) Regulations 2020.

It is a pleasure to serve under your chairmanship, Mr Mundell. In a rather unique arrangement, the UK is one of a handful of countries where commercial banks are authorised to issue banknotes alongside the central bank. Currently, seven banks are permitted to issue commercial banknotes in the UK: four in Northern Ireland and three in Scotland. That represents a tradition with cultural importance that the Government support.

One of the issuing banks in Northern Ireland, Ulster Bank, is part of the Royal Bank of Scotland Group and a direct subsidiary of NatWest bank. As part of a planned restructure, RBS Group will remove Ulster Bank’s banking licence later this year and transfer it to the NatWest legal entity. This instrument has been laid before the Committee to ensure that Ulster Bank-branded banknotes can continue to be issued.

As is required by the Banking Act 2009, the instrument will transfer the authority of issuance from Ulster Bank to NatWest, with the consent of the Bank of England. It is a routine procedure and it has been carried out before: in 2017, the authority to issue RBS-branded banknotes in Scotland was transferred between two entities of the RBS Group. Importantly, the major stakeholders in the change, RBS Group and the Bank of England, have remained in contact with the Government throughout the process and are supportive of the measures before the Committee.

In summary, the instrument ensures that banknotes already printed or issued by Ulster Bank will remain valid once this structural change to RBS Group has taken place. Furthermore, once the authority for these notes has been transferred to NatWest, it will be able to print and issue banknotes with Ulster Bank branding. This instrument ensures that all those holding Ulster Bank banknotes can remain confident in their value. I hope colleagues will join me in supporting these regulations. I commend them to the Committee.

--- Later in debate ---

[John Glen]

I would be very happy to address the points made by the right hon. Member for Wolverhampton South East, and then the more substantive points made by the hon. Member for North Antrim. As the right hon. Member for Wolverhampton South East says, this is essentially an administrative change, and there will be no change in the validity of the notes in question. I am glad that he was not tempted to discuss the value of the pound. I can confirm that in taking any measures, we always take account of the interests of the whole of the United Kingdom; that principle will always guide the Chancellor and Ministers in the Treasury.

Among the range of issues that the hon. Member for North Antrim raised was the question of a review. There are no plans for a review. He cites the issue of commercial advantage. It is for individual banks to determine the design of a note; typically, they pick designs that are non-controversial. As he pointed out clearly, Northern Ireland’s countryside and economy have enormous merits and offer powerful symbols for a bank.

On the wider issue of access to cash, some real challenges have been thrown up by the covid experience, and we are working on them. We have clearly set out our intention to legislate, and there is a live UK Finance and LINK scheme looking at access to cash. I am pleased to confirm that Danske Bank, Ulster Bank and the Bank of Ireland have been involved in the provision of bounce-back loans. They have been active participants in conversations with the Chancellor and me.

The Government have no say whatever on the artwork featured on notes. On promoting the notes as currency that can be used in London, the Association of Commercial Banknote Issuers has a marketing endeavour to promote different types of notes. Northern Ireland bank notes are legal currency and usable, but sometimes people are not familiar with them. There is nothing the Government can do about that.

As I have set out, this statutory instrument will ensure that the long-standing practice of commercial note issuance in Northern Ireland continues under the Ulster Bank brand. The SI makes a routine procedural change, but it represents an important process in maintaining the public’s confidence in the value of the notes they hold, which is an important aspect of the economy. I hope that the Committee has found this afternoon’s sitting informative, and that it will support the regulations.

Question put and agreed to.

Exiting the European Union: Financial Services and Markets

John Glen Excerpts

Tuesday 16th June 2020 Commons Chamber

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

I beg to move,

That the draft Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020, which were laid before this House on 24 March, be approved.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following motion:

That the draft Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020, which were laid before this House on 6 May, be approved.

[John Glen]

I welcome my opposite number, the right hon. Member for Wolverhampton South East (Mr McFadden), to his place. He has a distinguished history of public service and I look forward to a constructive dialogue with him today and on future occasions.

As the House will be aware, the Treasury has been undertaking a significant programme of financial services legislation since 2018, introducing almost 60 statutory instruments under the European Union (Withdrawal) Act 2018. It has been an enormous privilege for me to do the vast majority of those measures. These SIs were made prior to exit day—31 January 2020—and covered all essential legislative changes needed to ensure a coherent and functioning financial services regime at the point of exit, had the UK not entered a transition period.

The European Union (Withdrawal Agreement) Act 2020 received Royal Assent in January this year. The 2020 Act contains a general rule that delays those parts of the SIs that would have come into force immediately before, on or after exit day, so that they instead come into force by reference to the end of the transition period, which we leave at the end of this year. Over the course of this year the Treasury will therefore, where necessary, continue to use powers under the European Union (Withdrawal) Act 2018, as amended by the 2020 Act, to prepare for 1 January 2021. This will involve the Treasury bringing forward a small number of SIs that, in particular, will ensure that recently applicable EU legislation will operate effectively in the UK at the end of the transition period. The SIs before the House today are two such instruments. The approach taken in these SIs is aligned with the general approach established by the EU (Withdrawal) Act 2018, providing continuity by retaining existing legislation at the end of the transition period but amending where necessary to ensure effectiveness in the UK-only context.

I turn to the draft Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020. From now on, I will refer to this instrument as the OTC SI. In preparation for the UK’s withdrawal from the EU on 31 January 2020, Parliament approved several EU exit instruments to ensure that the European market infrastructure regulation would continue to operate effectively in the UK at the point of exit. EMIR was updated on 1 January this year by a regulation known as EMIR 2.2, which now applies in the UK. The OTC SI that we are discussing today address deficiencies in the UK’s post-transition framework arising as a result of that update.

EMIR is Europe’s response to the G20 Pittsburgh commitment in 2009 to regulate over-the-counter derivative markets in the aftermath of the last financial crisis. EMIR mandates the use of central counterparties, known as CCPs, to manage risk between users of derivative products. EMIR has been effective in increasing the safety and transparency of derivative markets, thereby reducing the associated risks that users may face, and UK CCPs play an essential role in reducing systemic risk and ensuring the efficient functioning of global financial markets.

EMIR 2.2 introduced an updated third country or non-EU CCP supervision framework, including an updated recognition regime. This means that EU authorities can have greater oversight over third country CCPs that are systemically important to the EU. Perhaps the most substantial update in EMIR 2.2 is the ability for the European Securities and Markets Authority to tier third country CCPs according to their systemic importance to the EU as part of the recognition process. ESMA will now take on certain supervisory responsibilities for systemic third country CCPs known as tier 2 CCPs.

This OTC SI updates the UK’s recognition framework in line with EMIR 2.2 by transferring ESMA’s new powers to the Bank of England after we leave the transition period. That includes the ability to tier non-UK CCPs as part of the recognition process, and to supervise non-UK CCPs that are systemically important to the UK. The Bank of England has already been given the power to recognise non-UK CCPs wishing to operate in the UK in an earlier SI under the EU (Withdrawal) Act. EMIR 2.2 also empowers the Commission to adopt delegated Acts setting out the details of how the framework will function in practice. This includes how tiering and deference to the rules of home authorities referred to as “comparable compliance” will function. This instrument transfers the power to establish these frameworks to the Bank of England.

Since the Bank already has responsibility for safeguarding financial stability in general, and managing systemic risk in CCPs in particular, this is an appropriate conferral of functions as it allows the Bank to manage the systemic risk posed by some non-UK CCPs in a way that is appropriate for the UK. The statutory instrument therefore transfers the remaining Commission functions—including the power to deploy the so-called location policy—to Her Majesty’s Treasury.

Under EMIR 2.2, ESMA can recommend to the Commission that a third-country CCP that is felt to be substantially systemically important should lose permission to offer some services to EU clearing members, unless those services are offered from inside the EU. This is referred to as the location policy, the inclusion of which in EMIR 2.2 the UK did not support because of concerns that it could lead to market fragmentation and reduce the benefits provided by the global nature of clearing. However, the powers in the European Union (Withdrawal) Act 2018 under which we introduced the SI extend only to the addressing of deficiencies arising from withdrawal. During the passage of that legislation, commitments were made that the powers would not be used to make significant policy changes, so I am not going to deviate from that.

The OTC SI transfers the powers to use the location policy to the Treasury, subject to advice from the Bank of England and appropriate procedural safeguards and transitional provisions. I assure the House that because of the very different nature of the UK’s clearing markets, it is hard to foresee circumstances in which the Bank would appropriate the use of that tool in practice. EMIR 2.2 also makes changes to internally used supervisory and co-operation mechanisms but, as the UK is no longer part of the EU, those provisions are removed by the SI.

Finally, the OTC SI updates the recognition powers set out in the temporary recognition regime, which was established by a previous SI to enable non-UK CCPs to continue their activities in the UK after exit day, while their recognition applications are assessed. This SI updates the recognition requirements in line with the new EMIR 2.2 provisions. The Treasury has worked closely with the Bank of England to prepare the instrument and has also engaged with the financial services industry, as we have done throughout. The draft legislation has been publicly available on the legislation.gov.uk website since 24 February, and the instrument was laid before Parliament on 25 March.

In summary, the OTC SI is necessary to ensure that existing EMIR legislation will continue to function effectively in the UK from the end of the transition period, following the updates made in EMIR 2.2. In particular, it will ensure that the UK has the tools necessary to manage the financial stability risks posed by some of the largest non-UK CCPs.

Let me turn my attention towards the second of tonight’s SIs, the Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020. Although this SI makes amendments to approximately 20 pieces of legislation, the number and nature of the amendments are modest and minor. They act to preserve the effect of recent changes to EU legislation in the UK, and in doing so limit any impact on business that would otherwise arise at the end of the transition period.

Primarily, this SI fixes deficiencies in recently applicable EU legislation, which is congruous with the Treasury’s approach to previous financial services EU exit instruments and the approach required by the European Union (Withdrawal) Act 2018. It also revokes pieces of retained EU law and UK domestic law that it would not be appropriate to keep on the statute book at the end of the transition period.

This SI contains a small number of minor clarifications and corrections to previous financial services EU exit instruments. The House will be aware of the unprecedented scale of the legislative programme that the Treasury has undertaken, which has been carried out with rigorous checking procedures. However, errors are unfortunately made on occasion, and when they arise it is important that they are corrected as soon as possible. This has happened previously, and I will continue to be completely transparent when such shortcomings become apparent.

I note that this SI also includes provisions initially included in the Cross-Border Distribution of Funds, Proxy Advisors, Prospectus and Gibraltar (Amendment) (EU Exit) Regulations 2019, which were laid using the made affirmative procedure in October 2019, when at the time it was necessary to ensure that the SI was in place prior to the previous exit date of 31 October. That SI subsequently ceased to have effect, but it is important that those provisions, which include amendments to the UK’s prospectus regime to ensure it remains operational in a wholly domestic context, are in force before the end of the transition period. Those provisions have therefore been included in this IS.

I would like to say a few words on the amendments that this SI makes to a previous EU exit instrument, the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, which I shall now refer to as the equivalence SI. The equivalence SI allows the Treasury to make equivalence directions for EEA states during the transition period for specified provisions. Today’s SI adds additional equivalence regimes to the scope of the power for the Treasury to make equivalence directions for EEA states during the transition period. This is through the inclusion of provisions relating to central securities depositories, which are entities that hold financial instruments and trade repositories that collect and maintain records of derivative trades.

This SI also amends the existing drafting on the length of the direction power to tie it to the end of the transition period. This will enable Ministers to make directions during the transition period to come into force at the end of the transition period, granting equivalence to the EEA for those regimes. Finally, this SI clarifies that the Treasury can impose limitations on the application of state-level equivalence decisions in granting equivalence to the EEA—for example, in response to EU conditions placed on the UK. As with the OTC SI, the Treasury has been working closely with the financial services regulators in the drafting of this instrument and has engaged with the financial services industry.

In conclusion, the Government believe that these instruments are necessary to ensure that the UK has a coherent and functioning financial services regulatory regime at the end of this year when we leave the transition period, and I hope that the House will join me in supporting them. I commend the regulations the House.

--- Later in debate ---

[John Glen]

It is a pleasure to be able to respond to the points made by the right hon. Member for Wolverhampton South East (Mr McFadden), and the hon. Members for Glasgow Central (Alison Thewliss) and for Strangford (Jim Shannon). The latter made a number of points about the conduct issues associated with banks and his exchanges with me on the BBRS. I am sensitive to the fact that in the context of the loans and interventions the Government have made there are conduct challenges, but I think it would be appropriate for me to address that on a separate occasion. However, I note his correspondence.

The right hon. Gentleman addressed three clear questions to me, one of which was about the money laundering reference and the language. Just because we do not have an obligation, it does not mean to say that we do not have a desire to co-operate. The bottom line is that if there is not a reciprocal obligation on the other side, it would be perverse for us to insert language creating that obligation. As he made clear, we have consistently been leaders in regulations in financial services, in particular, and we would look to continue to press for ever higher standards in that regard.

The right hon. Gentleman’s second point was about the issues of the loss of passporting and the nature of the cross-border dynamics. Clearly, we are working through the equivalence process, which the Government are committed to. We are working closely with the Bank of England, the PRA and the FCA.

The SIs are required to ensure that the UK has a functioning equivalence framework during the transition period, and they are not linked to the ongoing UK-EU negotiations on financial services. I will come to the right hon. Gentleman’s further points and those of the hon. Member for Glasgow Central about the bigger picture at the end.

On the right hon. Gentleman’s third point about equivalence and the ability for us to make decisions, we have just updated what we had on the basis of changes that have happened since we left. EMIR 2.2, which is the location policy that was introduced, was something that we voted against, but we are now obliged to have it because those are the terms of reference that we adopted through the passage of the legislation. As I said in my earlier remarks, however, I think it is improbable that we would use that. We hold most of the systemic CCPs and we would probably not have a need to use that in an offensive way.

The hon. Member for Glasgow Central made some broader points. She pointed out the mistakes that we have made and that this had happened before. During the 60 SIs—she has participated in the vast majority of them—these have been the exceptions. This legislation was laid out in advance. It was available and accessible to everyone. My officials and officials from the regulators have worked very hard, but I concede that these mistakes need to be rectified.

On the sentiments around the notion that we will not achieve the same level of access, having the freedom to set our rules does not mean that we are automatically predetermined and predisposed to divergence. Indeed, across the globe in financial services regulation, we have taken a leadership role at the Basel Committee and in other regulatory environments. I anticipate that that is the posture that we will wish to take in future. Within the EU, when we were members, we had a leadership role in financial services.

The Government are committed to supporting the growth of financial services not only in the City but outside the south-east. The hon. Lady is correct to say that we wish to see more jobs and financial services across the United Kingdom, including in Glasgow and Edinburgh.

I have addressed the substantive points that have been raised. There was a wider discussion about the nature of the financial services negotiation and the wider negotiation, but I do not think that is in scope tonight. I hope that I have conveyed that the instruments are necessary to ensure that the UK has a coherent and functioning financial services regulatory regime at the end of the transition period, and that hon. Members across the House will join me in supporting the regulations. I commend them to the House and I hope that the conversation has been informative.

Question put and agreed to.

Resolved,

That the draft Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020, which were laid before this House on 24 March, be approved.

EXITING THE EUROPEAN UNION (FINANCIAL SERVICES AND MARKETS)

Resolved,

That the draft Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020, which were laid before this House on 6 May, be approved.—(John Glen.)

UK Debt management Office

John Glen Excerpts

Thursday 11th June 2020 Written Statements

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

The United Kingdom Debt Management Office (DMO) has today published its business plan for the financial year 2020-21. Copies have been deposited in the Libraries of both Houses and are available on the DMO’s website, www.dmo.gov.uk.

[HCWS289]

UK Counter-Terrorist Asset Freezing Regime: 1 October 2019 to 31 December 2019

John Glen Excerpts

Tuesday 19th May 2020 Written Statements

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

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is 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 2019 to 31 December 2019.

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 OFSI has 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.

The tables setting out the key asset-freezing activity in the UK during the quarter can be viewed online at https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-05-19/HCWS244/.

[HCWS244]