Draft Double Taxation Relief and International Tax Enforcement (Gibraltar) Order 2020
John Glen Excerpts(4 years, 9 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Gibraltar) Order 2020.
May I say what a pleasure it is to serve under your chairmanship, Ms McDonagh? The order before the Committee gives effect to a new double taxation agreement, or DTA, with Gibraltar. DTAs remove barriers to international trade and investment and provide a clear and fair framework for taxing businesses that trade across borders. By doing that, they benefit both businesses and the economies of the countries signed up to them.
I shall say a few words about this agreement. We have agreed a comprehensive DTA with Gibraltar that is based on the OECD’s model tax convention and the domestic tax laws and the treaty preferences of both jurisdictions. This is a first-time DTA with Gibraltar and will introduce a number of improvements for businesses, individuals and Her Majesty’s Revenue and Customs. It will strengthen our relationship with Gibraltar, promote trade and investment and help to tackle tax avoidance.
I shall outline the agreement’s key features. First, it complies with the minimum standards laid down in the base erosion and profit shifting, or BEPS, project, which is the OECD’s framework for combating tax avoidance by multinationals. That means that our DTA includes a statement in the preamble that the DTA is not intended by the parties to facilitate avoidance or evasion, as well as including the principal purpose test—a provision denying benefits under the DTA where the main purpose of the transactions or arrangements is to avoid tax.
Mr Mark Harper (Forest of Dean) (Con)
Does my hon. Friend find it an interesting coincidence, as I do, that at the moment when, in the main Chamber, the Opposition are trying to persuade the House that this Government have done nothing about combating tax avoidance and evasion, the Minister is putting before the Committee a clear example of where the Government are leading our international colleagues in putting in place mechanisms to ensure that we facilitate international trade and business while ensuring that people pay the tax that is rightly due to the British taxpayer?
John Glen
I thank my right hon. Friend for that intervention. I am always very interested in what he has to say. I confess that on this occasion I have not been able to attend the Chamber yet. I look forward to hearing the arguments deployed and will reserve judgment, but what I can do is commend to him the logic and value of this intervention by the Government, and I will go on to explain further why this DTA is a positive step forward.
The DTA is comprehensive in scope, and as such covers all income and gains, including dividends, interest and royalties. However, we have ensured that we will retain the right to apply a withholding tax of 15% on distributions from real estate investment trusts. Also, benefits in respect of interest and royalties are limited to persons who can demonstrate a close connection to Gibraltar. That provides an additional layer of protection against residents of third countries exploiting the provisions.
The new agreement also provides for mandatory binding arbitration, which ensures that disputes are resolved and that double taxation is therefore avoided. Finally, the new DTA provides for mutual assistance in the collection of tax debts. That will mean that, for the first time, the UK can ask Gibraltar to collect tax debts on our behalf.
Together, these features strengthen both countries’ defences against tax avoidance and evasion. In summary, the agreement is one that both the UK and Gibraltar can be happy with. It protects UK revenue and provides a stable framework in which trade and investment between the UK and Gibraltar can continue to flourish. I therefore commend the order to the Committee.
John Glen
I am grateful for the constructive observations of the hon. Member for Stalybridge and Hyde. With respect to the BEPS standards and the principle of stopping the abuse of DTAs, and the wider issue of how the Government might use those standards to inform future DTAs, I acknowledge what he says about the leeway in the OECD standards. I cannot give him a specific commentary, however, because DTAs are done country by country. It is probably appropriate for me to write to him to give him more specific detail, as far as I can, about how we are applying the standards across different DTAs.
The hon. Gentleman asked about transparency and how the arrangement can be scrutinised. The signed agreement was published on the Government website and a ministerial statement was made to that effect on 17 October 2019, which gives MPs the opportunity to make representations. The Government do not consult generally on the content of DTAs, because they are the product of bilateral negotiations that deal with a vast range of complex issues. They are not really suitable for open negotiation, but we have been as transparent as we would expect to be, and as everyone would expect us to be, on that matter.
The hon. Gentleman’s third point was about the UK’s observer status at ECOFIN. I do not have any further information on that; that will be a supplement to the first point in the letter that I write to him. I am aware of the Cayman Islands blacklisting last Monday or Tuesday and the Financial Action Task Force rulings, which we take seriously. I will write to him to give him clarity on that matter, rather than waffle on any further. I hope that that gives him some satisfaction, and that the Committee will approve the order.
Question put and agreed to.
Treasury
John Glen Excerpts(4 years, 9 months ago)
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Damian Hinds (East Hampshire) (Con)
Creditor enforcement action can greatly exacerbate the problems that people going through mental health crises can experience. May I commend the Chancellor and the Economic Secretary for the breathing space initiative, which will help to ease the pressure on those people and so many more?
John Glen
I thank my right hon. Friend for his comments, and I am very pleased that the breathing space scheme is moving forward. We published the impact assessment last week, and 700,000 people will benefit from the scheme next year when it comes into force. That number will rise to 1 million in the following year.
[Official Report, 11 February 2020, Vol. 671, c. 707.]
Letter of correction from the Economic Secretary to the Treasury, the hon. Member for Salisbury (John Glen).
An error has been identified in the response I gave to my hon. Friend the Member for East Hampshire (Damian Hinds).
The correct response should have been:
The Economic Secretary to the Treasury (John Glen)
I thank my right hon. Friend for his comments, and I am very pleased that the breathing space scheme is moving forward. We published the impact assessment last week, and 700,000 people will benefit from the scheme next year when it comes into force. That number will rise to 1 million in following years.
Oral Answers to Questions
John Glen Excerpts(4 years, 10 months ago)
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Sir David Evennett (Bexleyheath and Crayford) (Con)
The Economic Secretary to the Treasury (John Glen)
The UK’s 5.8 million small businesses play a vital role in our economy. We have lowered corporation tax from 28% in 2010 to 19%. We have introduced the employment allowance, to reduce employers’ national insurance contributions bill by £3,000 every year, and we have reduced the business rates burden, so that more than 675,000 of the smallest businesses pay no rates at all.
Anthony Mangnall
Last week, Members from across the House came together to celebrate our beers, breweries and pubs. Will the Chancellor and his team raise a glass to our pubs and breweries and lower the duty on those institutions?
John Glen
The Treasury team love pubs, and we recognise the importance of pubs to the economy and to community life up and down this country; they provide a place to socialise and drink responsibly. That is why we have frozen the duty over six of the last seven years, which means that a pint of beer is 14p cheaper than it would have been otherwise, and we are now at a 30-year low in real terms.
Sir David Evennett
We all know that small businesses are the driver of growth and prosperity across our country, but too many struggle because of high business rates. Can the Minister confirm that the Conservative Government will extend the retail discount of 50% later this year, giving a much-needed tax cut to millions of small businesses on high streets across the country?
John Glen
I am delighted to confirm that the retail discount of 50% will operate from 1 April this year. We will also extend the discount to include cinemas and music venues, extend the duration of the local newspaper office space discount, and introduce an additional discount for pubs, worth £1,000, for up to 18,000 pubs up and down the country.
Chris Evans (Islwyn) (Lab/Co-op)
Most businesses in my constituency are microbusinesses employing one or two people. The biggest problem they have is larger firms not paying their bills on time. What measures can be put in place to ensure that larger companies pay small companies on time so that they can continue with their business?
John Glen
The hon. Gentleman is right to raise that point. That is why we have the Small Business Commissioner. We are working closely with trade bodies to ensure best practice. The Department for Business, Energy and Industrial Strategy leads on this, but we work closely with that Department so that more progress is made on this vital matter.
Thangam Debbonaire (Bristol West) (Lab)
But small businesses will be affected by the news over the weekend that there will not be frictionless trade and that the Government are insisting on not sticking to a level playing field, which will affect small businesses, whether they import or export. So what is the Chancellor of the Exchequer and his Department doing to prepare small businesses for the inevitable changes that that will bring?
John Glen
We are working closely with the representative organisations to understand those concerns, but it is important that we move forward, secure a free trade agreement and give certainty to small businesses. Their principal concern over the past year is a lack of progress, and it is our responsibility to remove that uncertainty and reach a clear position.
Paul Holmes (Eastleigh) (Con)
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
The Economic Secretary to the Treasury (John Glen)
I recognise the positive impact that co-operatives and mutuals have across all sectors of the economy, including retail, agriculture and financial services. No assessment has been made of the amount of tax paid by co-operative and mutual businesses, but I note that the report last year from the all-party group for mutuals found that mutuals generate over £130 billion to benefit the wider economy each year.
Jim McMahon
It is a matter of fact that the three largest co-ops in this country pay more tax than Facebook, Amazon and Caffé Nero combined, so not only are they creating jobs but; they are also paying fairly into the Exchequer. Will the Minister meet me and representatives from the co-op and mutuals sector to discuss that part of the economy and make sure that Britain can thrive in an inclusive way?
John Glen
Yes, I will. There are 7,000 co-ops across the United Kingdom, employing nearly a quarter of a million people. I have had numerous meetings over the past two years with representatives of co-ops and mutuals, and we had a mutuals workshop last July. I am very happy to meet the hon. Gentleman to discuss the recent Manchester mutuals report and to see what we can do together.
Mike Wood (Dudley South) (Con)
Thank you, Mr Deputy Speaker—[Interruption.] I am sorry, Mr Speaker—it has been so long!
Perhaps I should declare an interest as a member of the Midcounties co-operative. Will my hon. Friend consider broadening the eligibility for social investment tax relief so that more mutuals and social enterprises can deliver excellent services and outstanding social value?
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Damian Hinds (East Hampshire) (Con)
The Economic Secretary to the Treasury (John Glen)
I thank my right hon. Friend for his comments, and I am very pleased that the breathing space scheme is moving forward. We published the impact assessment last week, and 700,000 people will benefit from the scheme next year when it comes into force. That number will rise to 1 million in the following year.[Official Report, 24 February 2020, Vol. 672, c. 2MC.]
Mr Ben Bradshaw (Exeter) (Lab)
Depending on which briefing to today’s newspapers was accurate, the infrastructure announcement will fund a grand total of either 250 or 1,000 miles of new designated cycleway. That is to be compared with the 1,800 being provided by the Labour Mayor in Manchester alone. How can a small city such as Exeter hope to get any of the help, resources or the powers it needs to deliver on the cycling infrastructure as it desperately wants to do?
Andrey Lugvoy and Dmitri Kovtun Freezing Order 2020
John Glen Excerpts(4 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the Andrey Lugovoy and Dmitri Kovtun Freezing Order 2020 (S.I. 2020, No. 36).
May I say what a pleasure it is to serve under your chairmanship, Mr Robertson?
The order was laid before the House on 17 January this year and came into force on 19 January. It has the effect of maintaining a freeze of any funds or assets that these two individuals hold in the UK or with any UK- incorporated entities, denying them access to the UK financial system and prohibiting UK persons from making funds available to them.
The order was made because in 2016 an independent inquiry, chaired by Sir Robert Owen, concluded that Mr Alexander Litvinenko was deliberately poisoned in 2006 by Lugovoy and Kovtun through the use of polonium-210. The inquiry also concluded that there was a “strong probability” that Mr Litvinenko, an ex-KGB and ex-FSB officer and critic of the Russian Government, was murdered on the order of the FSB, the Russian domestic security service. The inquiry further concluded that the killing was “probably approved” by the then head of the FSB, Nikolai Patrushev, and the Russian President, Vladimir Putin.
As part of its response to the gravity of those findings, in January 2016 the Treasury imposed an asset freeze on Lugovoy and Kovtun by making a freezing order under the Anti-terrorism, Crime and Security Act 2001. A second order was imposed in January 2018, which expired at the end of 18 January this year. This order, which I commend to the House, was therefore put in place to ensure that there was no gap in the freezing measures that have been enforced against Andrey Lugovoy and Dmitri Kovtun since 2016. Under section 8 of the Act, the duration of a freezing order is limited to two years.
Since 2018, as required by section 7 of the Act, the Treasury has kept the order under review. In May 2019, the Treasury reviewed the facts of the case against the relevant statutory criteria and concluded that the criteria continued to be met in respect of both individuals. Prior to the expiry of the 2018 order, the Treasury reviewed the facts of the case again and decided to make a new order to maintain the asset freeze against these two individuals.
The Treasury believes that making a new order is an appropriate and proportionate measure. The relevant conditions, as set out at section 4 of the Act, are still being met: the Treasury reasonably believes that action constituting a threat to the life or property of one or more nationals of the UK or residents of the UK has been or is likely to be taken by a person or persons resident in a country or territory outside the UK.
The freezing order is one of a limited number of measures available to the UK authorities to act directly against Lugovoy and Kovtun. We continue to believe that the freezing order acts as a deterrent and as a signal that the Government will not tolerate hostile acts on British soil and will take firm steps to defend our national security and the rule of law. The new order maintains a robust approach to Russia, and unity of approach with the US, which also sanctions these two individuals. Continued close co-ordination is a vital part of our joint effort in countering the Russian threat.
Were we not to maintain asset freezes against Lugovoy and Kovtun, we would risk sending a damaging signal that the consequences of murder in the UK are limited and time-bound if someone chooses to evade the UK justice system by remaining overseas. Not to maintain asset freezes against these individuals would likely be perceived as the UK softening its stance towards Russia. Furthermore, it would risk signalling to the Russian state that the UK is looking to normalise relations. That would be contrary to and directly undermining of Her Majesty’s Government’s consistent message that there can be no change in UK-Russia relations until Russia desists from attacks that undermine international treaties and security.
The current bilateral relationship is not the one that we want. We remain open to a different and co-operative relationship, but that depends on Russia stopping its destabilising activity, which threatens the UK and its allies. We engage with Russia on a guarded basis, defending UK national security where necessary, while ensuring that we address the global security issues of the day.
The Government believe that maintaining asset freezes against Lugovoy and Kovtun is an appropriate and proportionate measure, and that not doing so would run counter to the national interest. I hope that colleagues will join me in supporting the order, which I commend to the Committee.
John Glen
I am grateful to Members from across the Committee for their support for the new order. I will come to address the points made, but we should focus on the key point here. Absent any progress in bringing Lugovoy and Kovtun to justice, denying them access to the UK financial system, in combination with the European arrest warrants and the Interpol red notices that remain in place against them, continues to send a clear signal about how fundamentally we disapprove of the actions that they took, which led to Mr Litvinenko’s death.
The hon. Member for Bootle, perfectly reasonably and appropriately, made some points about the review of the codes of practice and ensuring that they are up to date with various pieces of legislation. He spoke about the need to bring and ensure continuing clarity and lack of ambiguity, and for the Government to be open and transparent in this area. Those codes are the responsibility of the Home Office, but I am sure they will have noted the points that he made.
The hon. Member for Glenrothes spoke about wider issues involving the Intelligence and Security Committee and its report into Russia. That Committee will be constituted in the very near future; it is not for the Government to tell the Committee when to publish its reports, but it would be good to get these matters into the public domain.
Peter Grant
I accept that the Government cannot tell the Committee when to publish the report, but they did tell the Committee when not to publish the report. Does the Minister understand that that causes considerable concern to a lot of people—and not only on the Opposition side of the House?
John Glen
I think the Government have made their position clear. It will be for the new Committee, once constituted, to determine the timings.
My hon. Friend the Member for Congleton made some points about the mechanics of how the asset freezing process works and the definition of those assets. It would probably be appropriate for me to write to her on that matter, because that is a technical process that I am not privy to this afternoon, and it would be difficult for me to give her satisfaction.
Stephen Kinnock (Aberavon) (Lab)
I fully agree with what is being proposed here with regard to Mr Lugovoy and Mr Kovtun, but the hon. Member for Glenrothes also raised the issue of unexplained wealth orders. That is an excellent piece of legislation, but to my knowledge only two unexplained wealth orders have been issued in the several years the legislation has existed. Can the Minister explain why so few have been issued?
My other point is about the Magnitsky amendment to the Sanctions and Anti-Money Laundering Act 2018; it is a very important amendment, yet absolutely no action has been taken to draw up a list of individuals from Russia who should be sanctioned under the Magnitsky legislation.
John Glen
The hon. Gentleman will be well aware that those matters are broader than what we are discussing this afternoon. I certainly recognise the Government’s commitment to legislating in this area, and I know that the matter is under urgent consideration. I cannot offer any more comments on that at this point in time.
The prevalence of the use of unexplained wealth orders is an operational matter that I am not able to comment on. I am aware from previous conversations in the House, possibly with the hon. Gentleman, about the frustration that exists in this area, part of which is about establishing a precedent and a legal basis of confidence for moving forward with those matters, but I am not able to offer him more on that at this point.
Alberto Costa (South Leicestershire) (Con)
I have a specific technical point. I would appreciate it if the Minister gave it consideration and perhaps wrote to me afterwards. As a lawyer who has read the schedule referring to legal professional privilege, I think it right that legal professional privilege should remain protected—that is, the privilege under paragraph 4, referring to counsel, barristers or solicitors, or to the confidentiality of communications, as it is known in Scotland. However, there is a little bit of confusion in paragraph 5(2), which adds, cryptically:
“Information and documentation is privileged if the person asked to provide or produce it would be entitled to refuse to do so on grounds of legal professional privilege”.
There is ongoing debate in the courts, both in Scotland and in England and Wales, about who can claim legal professional privilege. I am thinking of those regulated under the Solicitors Regulation Authority and others under the Legal Services Act 2007. Could the Minister write to us to confirm that this only applies to authorised persons in England and Wales—namely solicitors and barristers, and to solicitors and advocates in Scotland?
John Glen
I am certainly very happy to look at that matter and write to my hon. Friend with clarification as soon as possible.
I have responded to the questions as best I can; I recognise that I have not given total satisfaction to everyone, but I hope that the reason and rationale for this order are clear. The Treasury continues to believe that the conditions set out in the Anti-terrorism, Crime and Security Act 2001 for making this order remain satisfied, and I commend the order to the Committee.
Question put and agreed to.
Problem Debt: Breathing Space
John Glen Excerpts(4 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
The Government are establishing breathing space to help those individuals in problem debt. Today, the Government are updating the House in order to reaffirm our commitment to implementing this in 2021, as planned, and to provide figures from the impact assessment which is also published today.
Breathing space will provide a period of up to 60 days, where people in problem debt would be protected from enforcement action by their creditors and the accrual of further interest and fees on their debts.
This protection will help those in problem debt move towards a sustainable debt solution. The protections from enforcement action, fees and charges will encourage more people to seek out debt advice and to seek it earlier. It will provide them with the time and space to work with their debt adviser in an environment free from creditor pressure, in the knowledge their debt would not escalate due to further interest or charges. This will help give people the time and space they need to choose the right debt solution for them.
To ensure that breathing space works for everyone, people receiving treatment for mental health crisis will be able to enter breathing space without seeking advice from a debt adviser. They will be able to remain in breathing space for the period of their crisis treatment and a further 30 days.
In its impact assessment, the Government forecast;
700,000 people to be helped by breathing space in the first year, rising in time to over 1 million a year.
25,000 - 50,000 a year are expected to receive a breathing space via a specific route designed to support those in mental health crisis treatment.
The Government impact assessment can be found here:
https://www.gov.uk/government/publications/breathing-space-impact-assessment
[HCWS100]
Lloyds, HBOS and the Cranston Review
John Glen Excerpts(4 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship again, Mr Hollobone. I, too, pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). Obviously, in this role, I have shadow Ministers shadowing my every move, but I also have my hon. Friend, who has spoken up very effectively on these issues over the past 25 months. We have had a constructive dialogue on many matters, and I look forward to addressing the points he and others have made in my response.
It has been just over a year since I announced that Lloyds would commission a review into the Griggs compensation scheme, which is another stepping stone in Lloyds’ journey to right the wrongs of the past and rebuild trust with their business customers. From the outset, I was clear that if the findings of the review were to hold up to scrutiny, the person overseeing it must be truly independent. I was therefore delighted by the appointment of Sir Ross Cranston, a former Labour Member of Parliament who was Solicitor General between 1998 and 2001 and is a professor of law at the London School of Economics, a Queen’s counsel, and a retired High Court judge. I met him on two occasions to check on progress, between May and when purdah commenced. That was not to influence him regarding the particular conduct, but to encourage him to look at this issue as thoroughly as possible.
Sir Ross found that the Griggs compensation scheme had serious shortcomings, as has been expressed fully in this debate, and that it did not achieve the stated purpose of delivering fair and reasonable compensation offers. Assessments of direct and consequential loss were too adversarial and legalistic, which was unfair and unreasonable for the customers it was designed to support. Sir Ross also found several other inconsistencies, along with a general lack of clarity underpinning the scheme, while the bank’s failure to communicate with customers in a transparent manner caused further unnecessary confusion.
Sir Ross found that some elements of the compensation scheme were good. For example, Lloyds provided generous legal assistance and wrote off some customer debts, as well as paying substantial distress and inconvenience redress. Nevertheless, the overriding conclusions were hugely disappointing, and Sir Ross has made it clear that Lloyds has more work to do to achieve the stated aims of its original compensation scheme.
The most substantial of Sir Ross’s recommendations is that customer claims for direct and consequential loss must be reassessed, and Lloyds is working with customers and relevant parties to agree the details of this process. I know that representatives of Lloyds have been mentioned in this debate, and I have been given assurances that they are eager to get on with things. That could be through the new Business Banking Resolution Service, which has been referred to in today’s debate, or through an equivalent scheme that is committed to achieving the same rigorous outcomes. Either way, it is pretty clear to me that these cases must be considered by an independent body in a transparent manner.
There has been work on this issue by the all-party parliamentary group on fair business, with support from Heather Buchanan, who was mentioned earlier, and the SME Alliance. I also know that Sir Ross Cranston himself is engaged in this process, which must continue, and must be thorough and rigorous.
Sir Ross has also recommended that Lloyds make payments to cover the debts of customers who repaid or refinanced loans, as well as releasing customers from certain aspects of their settlement agreements. It is vital that Lloyds now implements the recommendations as quickly as possible and continues to support customers as they navigate this process. I will follow progress closely and I expect to be regularly updated; I have made that clear.
I turn now to some of the points made by hon. Members throughout the debate this afternoon. The hon. Member for Gower (Tonia Antoniazzi), who is no longer in her place, asked whether all reviews should be tested against Sir Ross’s methodology. I will just say this: I think that all banks have a responsibility to reflect on the findings of the Cranston review and consider whether their own redress schemes achieved fair and reasonable outcomes for customers. Obviously, people have different interpretations, but the Cranston review is a wake-up call to banks to examine whether the appropriate transparent processes have been followed. That should happen now.
John Glen
I will just make my next point, then I will give way to my hon. Friend.
My hon. Friend the Member for Thirsk and Malton asked about the appropriateness of the Financial Conduct Authority carrying out a review under the senior managers and certification regime. As he will know, the FCA is operationally independent of Government and it is for the FCA to consider whether there is sufficient evidence for such an investigation.
I know that we have spoken previously about Dame Linda Dobbs’s investigation, which has been ongoing for a considerable amount of time. That really needs to come to a conclusion; we need to see the results of that investigation. However, I cannot say more than that, because it is a matter for the FCA to consider. Now I am very happy to give way to my hon. Friend the Member for Beckenham (Bob Stewart).
Bob Stewart
I thank the Minister for giving way; he is an honourable and decent man. However, what shocks me most about all of this is that some banks are not acting decently and honourably. That really worries me; they should do that naturally. They are a bastion of our society, just as business is.
John Glen
My hon. Friend makes a powerful point, which goes to the core of this matter. The Cranston review points to the fact that we now have a higher bar of expectations in terms of how these redress schemes should be operated in a transparent way. He has spoken in this debate and previously about the distress that has been caused to his constituents, and many other Members have also made points during this debate.
The wider banking industry has a responsibility to reflect on the review’s findings and act accordingly, so I welcome the banking industry’s commitment to creating a new scheme to address unresolved historic complaints from small and medium-sized enterprises that have not been through a formal independent process, and to address future complaints made by slightly larger SMEs that are just outside the remit of the Financial Ombudsman Service.
John Glen
I will in a moment.
The aforementioned Business Banking Resolution Service opened to expressions of interest last November, ahead of its full launch later this year. Meanwhile, the expansion of the FOS last April means that over 99% of all SMEs now have access to fair, free and fast dispute resolution.
The hon. Member for Strangford (Jim Shannon) asked me to give way; I am happy to do so, but I want to refer to the points that he made. He referred to the eligibility of the BBRS. It is not for me to determine the eligibility of the BBRS, but his points about the prioritisation of cases will have been heard very clearly by those who have set up that service, and I urge the BBRS to reflect on his contribution to this debate.
The BBRS and the expansion of the FOS build on several initiatives that the Government have introduced, including the senior managers certification regime, which will hold key individuals at banks to account for the decisions that they make, including decisions that could impact on their SME customers. The industry has also made changes. For example, all major lenders are signatories of the standards of lending practice, ensuring that banks treat their customers in a fair and reasonable way. I hope that these steps, together with the work carried out this year to address historic SME disputes, will bring unresolved disputes to a close and prevent the same circumstances from occurring again.
I will conclude by saying that over the past year Sir Ross has taken considerable time to discuss sensitive and often distressing matters with customers; he has had 49 meetings with 62 customers, alongside his adopting a detailed and forensic approach to the cases he has reviewed, so I thank him for his efforts.
I welcome the commitment of Lloyds to implementing the recommendations of the Cranston review, and I will follow progress closely. I note the points made by the hon. Member for Glasgow Central (Alison Thewliss) and others, and I will reflect on them carefully.
The establishment of the Business Banking Resolution Service provides a further means of redress, and I look forward to seeing it bring closure to many long-running disputes. I am confident that we can continue to build on the good work that industry, small business representatives, regulators and Government have begun to rebuild trust, so that small businesses can access the finance they need to prosper and grow.
Mr Philip Hollobone (in the Chair)
I call Kevin Hollinrake to sum up the debate.
Bilateral Loan to Ireland
John Glen Excerpts(4 years, 10 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 3 February, in line with the agreed repayment schedule, HM Treasury received a total payment of £404,714,183.56 from Ireland. This comprises the repayment of £403,370,000 in principal and £1,344,183.56 in accrued interest.
As required under the Loans to Ireland Act 2010, HM Treasury laid a statutory report to Parliament on 3 October 2019 covering the period from 1 April to 30 September 2019. The report set out details of future payments up to the final repayment on 26 March 2021. The Government continue to expect the loan to be repaid in full and on time.
https://www.gov.uk/government/collections/bilateral-loan-to-ireland
The next statutory report will cover the period from 1 October 2019 to 31 March 2020. HM Treasury will report fully on all repayments received during this period in the report.
[HCWS89]
Counter-Terrorism Asset Freezing Regime
John Glen Excerpts(4 years, 10 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 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 July 2019 to 30 September 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.
It can also be viewed online at: http://www.parliament. uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-02-04/HCWS88/.
Tables set out the key asset-freezing activity in the UK during the quarter.
Counter-terrorist asset freezing regime Q3 2019 (TAFA Q3 2019 Table.pdf).
[HCWS88]
Draft Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019
John Glen Excerpts(4 years, 10 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019.
It is a pleasure to serve under your chairmanship, Mr Sharma.
The draft order, which is being introduced under the Public Bodies Act 2011, will abolish the office of public works loan commissioners and transfer their functions, interests in land, and all other rights, liabilities and property to Her Majesty’s Treasury. The role of the Public Works Loan Board as a lender to local authorities is not affected by the draft order, which will rather ensure continuity of such lending by providing ongoing improvements in efficiency and accountability.
The Committee may be aware that the PWLB was formalised in 1817 via an Act of Parliament. It has supported England, Scotland and Wales through major historical events such as the Napoleonic wars, the formation of Trafalgar Square and our recovery after the two world wars, and through construction projects relating to vital infrastructure—projects for public utility and sanitary improvements, housing development and harbour maintenance. PWLB loans have supported employment opportunities and improved quality of life for successive generations.
Today, the PWLB is a statutory body of up to 12 independent commissioners. It issues loans to local authorities and other specified bodies from the national loans fund, and operates within a policy framework set by Her Majesty’s Treasury, while daily lending functions are carried out by the UK Debt Management Office. However, since the introduction of the prudential regime in 2004, which devolved borrowing decisions to local authorities, the commissioners retain a merely ceremonial role, carried out so that central Government lending complies with statute, rather than serving any practical purpose. Recruiting for the commissioner roles in that context has, inevitably, become more challenging.
If the PWLB is not quorate, it cannot lend or collect repayments. The result would be to freeze central Government lending, which would have a significant impact on local authority budgets and financing plans and jeopardise essential capital projects. Acute concerns about that will continue while PWLB governance remains outside the Treasury’s jurisdiction. This draft instrument will place that vital lending function on a more secure footing, so that we continue to provide a foundation for local authorities to commit to value-for-money long-term capital investment initiatives, and so reinforce the Government’s vision for levelling up.
As is usual for this type of legislation, the draft order has been put before the Secondary Legislation Scrutiny Committee, the Joint Committee on Statutory Instruments and the Treasury Committee for scrutiny. I met the Chair-elect of the Treasury Committee to inform him of this statutory instrument debate. None of the Committees requested the enhanced scrutiny procedure available under the Act.
I hope that the whole Committee will join me in thanking the public works loan commissioners—often ex-finance officers of local authorities—for the services they render, entirely voluntarily, for the benefit of the citizens of this country. I commend the instrument to the Committee.
John Glen
I am keen to respond to the points made by the hon. Members for Stalybridge and Hyde, and for Glenrothes. I stress, as I did in my opening remarks, that the order removes a purely ceremonial role. Although we are removing a function, it is one that does not exist in a meaningful sense, in terms of arbitrating on individual loan decisions.
The issue of commercial property speculation was raised. Local authority borrowing and spending decisions are made at a local level with reference to the Chartered Institute of Public Finance and Accountancy’s prudential code and the Ministry of Housing, Communities and Local Government’s statutory guidance. Those bodies revised the guidance in 2018, which makes it clear to local authorities that if they borrow more than or in advance of their needs solely to generate a profit, they are not acting in accordance with the prudential framework. MHCLG is reviewing the impact of the revisions to the prudential framework. When local authorities borrow, they must have regard to it to ensure that their borrowing is sensible and affordable.
Borrowing and capital spending decisions are devolved to local councils, but it is expected that they should not take on disproportionate levels of financial risk. PWLB finance continues to play a critical role in helping local authorities to transform services, but they cannot use that provision for day-to-day spending, which must be balanced off by the accounting officers each year.
The hon. Member for Stalybridge and Hyde asked about the interest rate rise before Christmas. I am sorry about the apparent lack of answer to any question he may have asked. The Government raised rates to slow borrowing, because of the statutory lending limit; they also raised that limit by £10 billion, to ensure that lending remained available. Let me stress that that is managed by the Debt Management Office; the rates are set daily against benchmark gilt prices, and should be seen against the spending round provision for local government. The forecast is for a 4.4% increase in real terms this coming year—the largest increase in spending power since 2010. I should also mention the additional grant funding available for adults and children in social care announced in the spending review.
John Penrose (Weston-super-Mare) (Con)
Could I press the Minister a little more on his answer about the interest rate rise? Since there is concern in the Treasury and elsewhere in Government about borrowing to invest in commercial property, as he mentioned in his reply letter to the Chair of the Treasury Committee, and as he just laid out, is he at all concerned that raising the interest rate from 1.8% to 2.8% may have a depressing effect on local authority investment in non-commercial property—that is, in genuine capital expenditure? As he rightly laid out, the Public Works Loan Board was originally constructed to enable that investment.
John Glen
All these matters are subject to ongoing review. There is no evidence that the rate is depleting the ability of local authorities to borrow to invest in the sorts of projects that the Government, CIPFA and MHCLG would deem appropriate, but as I indicated, the subject of this SI is much narrower than that. The wider issue is a separate matter, which is always under review. I would be happy to engage with my hon. Friend on any issues that he wants to raise from his experience of his local authority.
John Penrose
Since the Minister kindly makes that offer, the Treasury has raised the interest by what must be roughly 35%, from 1.8% to 2.8%. Surely that must have an impact on the amount of borrowing that local authorities are willing to do for what are presumably much-needed capital projects. Does the Minister have any assessment of the likely impact on demand for that kind of genuinely needed loan?
John Glen
It is helpful to put this in context. The rate was a function of the prevailing gilt rates last year, and the change brought it back to the level of the previous year, so we should not see this as a great leap in interest rate that will have a major effect. It is questionable whether the advantageous window offered by the relationship to the historically very low gilt rate was creating a different sort of behaviour. Again, that is outside the scope of my comments. I am happy to look at these matters, which are under ongoing review.
Let me turn to the hon. Member for Glenrothes’s remarks. He expressed general concern about any Government Minister taking control of anything, because he has no confidence in the Government. This is not a matter of Government Ministers overruling local authorities; the change is a reform of governance, with no practical effect on local authorities. It is based on the prudential code; decisions on borrowing and spending are devolved, and that continues. The Government consulted on this in 2017, and found widespread support for it. I am told that when the commissioners have met annually to sign off the annual report, they have said that they were keen for this SI to pass. The SI is quite complicated because it makes many references to primary legislation, and was delayed because of the events of recent years.
Peter Grant
I am interested to hear the Minister say that there is no practical effect on local authorities. The Government’s explanatory memorandum claims that the process will become more effective for local authorities. Is that not a practical effect? Does the Minister intend to reply to my question about whose policies will be implemented more effectively?
John Glen
The process is more effective in so far as the ceremonial role, which did not meaningfully alter any decisions on the ground, is transferred to the Treasury. There, we can ensure that we have a quorate body meeting to oversee the borrowing, but it will not make any different arbitration decisions, because the existing group of commissioners do not make those decisions. I am sorry that there has been a misunderstanding, but the order is not a power grab by the Treasury.
Transferring the powers of the public works loans commissioners to the Treasury will place that crucial function on a secure platform, enabling the continuity of lending for essential local capital projects. Those investments are often fundamental to quality of life and economic development, and by passing the SI, we will enhance the robustness and resilience of the lending facility, thereby supporting local authorities in such endeavours. I hope that the Committee has found the sitting informative and will join me in supporting the Order.
Question put.
Oral Answers to Questions
John Glen Excerpts(4 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Marsha De Cordova (Battersea) (Lab)
The Economic Secretary to the Treasury (John Glen)
In September, the Chancellor announced a new £500 million youth investment fund to build and refurbish youth centres and deliver high-quality services to young people across the country. That will include £250 million of capital investment, which is expected to deliver 60 new youth centres, 360 refurbished facilities and more than 100 mobile units for harder-to-reach areas.
Marsha De Cordova
Over the past decade, spending on youth services has been cut by more than £1 billion. In constituencies such as mine and across London, the number of youth clubs has almost halved. Will the Chancellor finally own up to the devastating effect that austerity has had on young people in my constituency and commit to funding a proper statutory youth service in his upcoming Budget?
John Glen
What I can promise the hon. Lady is that the Government are committed to funding local government with a settlement, which was announced before the election, of an additional 4.4% in real-terms increase that will give local authorities that additional spending power alongside the youth investment fund announcement that I mentioned earlier.
Mr Steve Baker (Wycombe) (Con)
Will my hon. Friend take steps to ensure that young people in Wycombe are not disadvantaged by excessively coarse aggregate measures of deprivation, which can obscure real need in constituencies such as mine?
Christian Matheson (City of Chester) (Lab)
Mr Virendra Sharma (Ealing, Southall) (Lab)
The Economic Secretary to the Treasury (John Glen)
The Government are always willing to work with the City and interested parties to consider how we can advance investment across all those sectors, and I would be happy to discuss such matters with the hon. Gentleman.
James Wild (North West Norfolk) (Con)
Katherine Fletcher (South Ribble) (Con)
John Glen
I welcome my hon. Friend to her place. I know she has great experience as an SME leader. The Government recognise that SMEs are the backbone of the economy. We have international trade adviser networks giving peer-to-peer support to encourage more exports. The Government’s export strategy, launched in August 2018, lays the foundations of how to extend that. I hope she will be able to make use of it during her time in the House.
Karl Turner (Kingston upon Hull East) (Lab)
The “back of a cigarette packet” policy to increase road duty by more than 700% for motor homes and camper vans is reminiscent of the caravan tax of 2013, which I think was invented by the Chancellor’s predecessor George Osborne. That would have decimated manufacturing industry in Hull. Will the Chancellor meet me, colleagues and those in the industry, who are very concerned about this policy, so that they can explain directly to him how disastrous this policy will be for manufacturing industry in Hull?