(6 years, 8 months ago)
Commons ChamberUrgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
(Urgent Question): Will the Government make a statement on the additional costs of staying in the EU customs union after 2020 and provide an updated estimate of the total costs of the current draft of the withdrawal agreement?
Every arm of Government is working at pace to firm up and put in place all necessary arrangements to ensure that we are ready to leave and chart our own course as global Britain. The Government will continue to update Parliament on the progress of the negotiations, and the Prime Minister will update the House shortly in this regard in a post-Council statement.
In respect of the customs union, common rules will remain in place throughout the implementation period to give businesses and citizens critical certainty. This will mean that businesses can trade on the same terms as now until the end of 2020. As the Prime Minister has said, a further idea has emerged—and it is an idea at this stage—to create an option to extend the implementation period for a matter of months, and it would only be a matter of months. But as the Prime Minister has made clear, this is not expected to be used, because we are working to ensure that we have a future relationship in place by the end of December 2020.
As the House will appreciate, the length and cost of any extension to the implementation period are subject to negotiations. Throughout the implementation period, we will continue to build our new relationship, one which will see the UK leave the single market and the customs union to forge our own path and pursue an independent trade policy while protecting jobs and supporting growth.
During the progression of our exit negotiations, we reached a financial settlement with the EU that did two things—honoured our commitments made during our membership and ensured the fairest possible deal for UK taxpayers. In December, we estimated the size of the settlement to be between £35 billion to £39 billion, using reasonable assumptions and publicly available data. In April, the National Audit Office confirmed that this was reasonable.
The Government are committed to upholding our parliamentary democracy through honouring the result of the referendum and remaining fully transparent with Parliament on the deal that is reached, in advance of the meaningful vote.
The Treasury should do some calculations, because it would be an act of great rashness to agree to extend our period when we would be in another seven-year financial period for the EU, with all the consequences that might bring. It could cost £15 billion or more for a year and we would probably have to accept liabilities that might extend for the whole seven-year financing period. Why wouldn’t the EU front-load its expenses when we were still in the thing, and why wouldn’t it expect us to meet the forward commitments, as it says it wants us to do as and when we leave under the existing seven-year period?
We are desperately in need of more money for our schools, our hospitals, universal credit and for our defence—[Interruption.] We desperately need money so that we can honour our tax-cutting pledges which we all made in our 2017 manifesto—[Interruption.]
Our economy is being deliberately slowed by a fiscal and monetary squeeze that we need to lift. We need tax cuts to raise people’s take-home pay so that they have more spending power. All this is possible if we do not give £39 billion to the EU, and all this will be even more possible if we do not pledge another £15 billion or £20 billion for some time never, if we are now going to give in yet again. When will the Government stand up to the EU, when will the Government say that they want a free trade agreement and they do not see the need to pay for it, and when will the Government rule out signing a withdrawal agreement that is a surrender document that we cannot afford?
I am grateful to my right hon. Friend for a number of Budget representations on that point. What I can confirm is that, when the sum of £35 billion to £39 billion was agreed, it was agreed on three principles: the UK would not make its payments sooner than it would otherwise have done; it would be based on the actual rather than the forecast; and it would mean that we would include all benefits as a member state. I recognise the wide range of concerns in the House, including those raised by my right hon. Friend, but we are at a delicate stage of the negotiations and the Prime Minister will be speaking to the House shortly.
The right hon. Member for Wokingham (John Redwood) has some brass neck. He spent eight years being a cheerleader for austerity and he comes to the House today and says that; it is unbelievable. Amid the Tory quarrelling, the Prime Minister’s negotiations appear to succumb to a new failure every day. She has stood staring at the menu for two years while the Cabinet devours itself. It now seems that it may take a bit longer for her to make up her mind, demanding that the EU give further time in relation to the transition period. What we cannot fathom is how the Government are unable to negotiate our exit within the agreed period, begging instead to make it longer.
Humiliatingly, I have to say, we hear that 95% of the agreement is done, as though that is supposed to reassure us. Perhaps I may remind the Government that 95% of the Titanic’s journey was completed successfully. Meanwhile, the Government have gone from discussing a backstop to discussing a backstop to a backstop, to requesting an extension to the transition. These do not signal a Government who are about to emerge victoriously.
Let me ask a couple of questions, if this 95% deal is done. First, on the EU’s trade policy, during the transition, the common external tariff and customs regime will continue to apply to the UK, but third countries will have no legal obligation to continue to treat the UK as if it were a member state. Therefore, what trilateral discussions have the Government had with both the EU and third country partners, such as Mexico, South Korea, Switzerland and all the other countries with which the EU has preferential trading agreements in place, to ensure that the UK will continue to benefit from these arrangements during the transition period? Secondly, what progress have the Government made towards acceding to agreements facilitating trade, such as the pan-Euro Mediterranean convention that facilitates diagonal cumulation of origin, during the transition period and in any deal thereafter?
These matters, along with the question of the wider trade in goods, are easily resolvable with the transition period that has already been agreed. If the Government had got their act together, there would not be talk of additional time. The only thing that is costing the Government is this useless Government.
It is difficult to discern the precise questions there, but I thank the hon. Gentleman for his comments. The Government are in a negotiation and there are a number of issues that are not yet resolved. With respect to the final state around our future freedom to trade, those are matters that will be reported on to this House before there is a meaningful vote. So he needs to be patient a little longer as we move through that last 5% and deal with those matters.
I am very concerned about the Government’s plans because, essentially, they mean our staying in a customs union in which we will have no say on the rules for a prolonged period, at the very moment that the global economy is facing some significant risks. Can my hon. Friend explain how this is in the UK’s national interest?
I have set forward the Government’s position with respect to the negotiation and the idea about a modest extension in terms of months. It will be for the Secretary of State and the Prime Minister to update the House sooner, but I acknowledge my right hon. Friend’s point with respect to the opportunities that exist beyond the EU in terms of finding a settlement that gives us the freedom to develop our trading relationships.
I was going to start my question by thanking the Chancellor for coming and answering questions on the cost of Brexit, but it is not the Chancellor who is here and I am afraid that the Economic Secretary is not doing a very good job of answering the questions on the cost. Can he tell us please: in the event of no agreement on staying in the customs union and the single market, what will be the loss in productivity to businesses in the UK and in Northern Ireland specifically and how many redundancies does he expect to see in Northern Ireland and in the UK? What is the loss cost to the UK economy of the EU citizens who have chosen not to come here or who have chosen to leave as a direct result of the Brexit vote? Lastly, if he truly believes that we would be better off as a result of the UK leaving the EU without being in the customs union or the single market, can he tell us what his models say about how much better off each of us will be?
No, I cannot give the hon. Lady a cash figure for every member of the United Kingdom, but what I can say is that the Government and the Treasury are determined to make preparations for all eventualities. That is why we are preparing 70 statutory instruments to take through this House in the event of a no deal. The EU should be very clear that we are going to be ready for all eventualities while being committed to negotiating the best possible outcome, as directed by the British people two years ago.
Of course, it is the policy of the party opposite for us to remain in the customs union forever. That is worth bearing in mind. Will my hon. Friend give a bit of detail on what work HMRC has done, in the case that we are in the customs union but outside the EU, on who determines things such as trade preferences and who runs trade defences on behalf of this country in those years?
I can confirm to my right hon. Friend that these are matters with which the Government are engaged intensively in the negotiations at the moment. We are also working towards securing as much autonomy as possible for the British Government in the future. That is the mandate that we have been given by the British people.
The Minister told the House a moment ago that the Government expect the negotiations on the future relationship to be concluded by December 2020. However, when the Government published their backstop proposal for Northern Ireland, they said that they expected those negotiations to be concluded at the latest by December 2021. Which of those two dates represents Government policy?
Government policy is that we have a backstop arrangement in place to fulfil our obligations and we are in negotiation over the timings of that. The Prime Minister will be coming to the House later today and the right hon. Gentleman will have an opportunity to clarify with her the answer to that question.
Can my hon. Friend inform me why he thinks that there is any incentive for the EU to give us a good deal if they think that by dragging their heels they can drag us into being obliged to pay extra money to them?
There is no expectation that this Government will seek to pay more money to the EU. We are in negotiation, as has been set out. We have made considerable progress. We have a small number of items to resolve, but the intention is to get the best possible deal for the British taxpayer in the national interest.
Will the Minister break it gently to the right hon. Member for Wokingham (John Redwood) that, if we stay in the customs union and the single market—and, quite frankly, if we remain in the European Union—we will save our constituents that £81 billion that will be lost to them otherwise? That is not my calculation, but the Minister’s—the Treasury’s own calculations and forecasts from last December say that our constituents will be £81 billion worse off if we leave on the WTO terms of the right hon. Gentleman.
What businesses in my constituency want is certainty and reassurance that the border will be as frictionless as possible. This is key to many sectors of prosperity in the north-west. Will the Minister confirm that the costs involved in temporary ongoing membership of a customs union will dramatically be outweighed by the benefits to business?
The Government have to reconcile the decision of the British people to leave the EU with, as my hon. Friend says, the need to make sure that the cost to business is as little as possible. That is why it is absolutely imperative that, when we secure the final outcome of the negotiations, it is good for business, good for the economy and good for jobs.
Could the Minister set out the extra cost to UK GDP of leaving the customs union, and the extra cost to businesses in Wokingham, in particular, of the hard Brexit favoured by the right hon. Member for Wokingham (John Redwood)?
I am sure that my hon. Friend, who is doing an excellent job today, is, like me, an avid reader of the Conservative manifesto, which states that the withdrawal agreement and future relationship will be negotiated side by side. Ninety-five per cent. of the withdrawal agreement has been completed, which is great news. How much of the future relationship agreement has been done?
I understand that the Minister’s natural courtesy inclines him to look in the direction of the person who is asking him a question, but it is helpful if he faces the House. It is not a serious sin; I am just trying to aid and counsel him in the discharge of his duties.
The Government’s own statistics show that leaving with no deal would put unemployment in the north-east up to 20%. What is their calculation of the effect on unemployment in the north-east of leaving the customs union?
There are a range of assumptions around the implications of different scenarios. The Government seek to ensure that we minimise the downsides and maximise the upsides in the agreement that we come to. I recognise that significant industries in the north-east rely on certainty in that relationship, and that is why it is very important that we get it right.
This modest extension that is only a plan is going to cost £15.6 billion. How will the Minister explain that in Southend, Salisbury and Stockport? Could we not use the money slightly better?
Could I ask what the purpose of any such extension might be? Is it to replace the Irish backstop, or is it in addition to that?
At the moment, this is an idea that has been raised. In terms of the detail of it and where it fits within negotiations, clearly the Prime Minister will be best placed to answer. I say to the right hon. Gentleman that one of the enduring principles of our negotiations is to ensure that we treat the whole United Kingdom as a single united entity. That is an enduring principle that is guiding us through these negotiations.
Succinctness as exemplified, legendarily, by the hon. Member for North East Somerset (Mr Rees- Mogg).
Will my hon. Friend say whether, if we stayed in the customs union, any revenues that came from customs would be considered to be own resources?
The Minister is doing his best to accentuate the positive, as the song goes, but he knows that the cost of Brexit is already being paid by every family and every business in this country: higher prices in the shops, a staffing crisis in the NHS and a hit to the public finances of £26 billion a year, before Brexit has even happened. Can I ask him to resist the jingoism and fantasy maths of the English nationalists in the Conservative party and remember that staying in a customs union is a red line for those of us in the Labour party? The value of not returning to a hard border—
Is the Minister aware that many people on the Government Benches and in the country think that £39 billion is not worth paying, let alone any more?
Thousands of people across Merseyside, including my constituents, are employed in the automotive and aerospace sectors. Our membership of the customs union is vital for supporting jobs and investment in our regional economy. What assessment has the Treasury made of the effect of leaving the customs union on those sectors? Does the Minister agree that only staying in the customs union will ensure the future of those sectors?
I think we can agree that any extension to the transition period will be costly—£15 billion, £16 billion or whatever it is—but the problem is that we will have no MEPs to represent us, no say and no influence on any legislation introduced during that period. Does my hon. Friend agree that there should be no taxation without representation?
There seem to be a number of questions that the Minister is not able to answer. Is his boss available, or is he also in “the killing zone”?
The extension to the transition period is designed to replace the backstop to the backstop. Given that the Irish Government and Her Majesty’s Government have both said that they are not going to build the hard border, who is?
In January, the Prime Minister promised ahead of the so-called meaningful vote that there would be a full economic impact assessment of the exit deal. Can the Minister guarantee that that will happen? How much time will MPs have to consider the deal before we have to vote on its credibility or the lack of it?
When looking at the customs union, would it not also be wise to look at the significant benefits of being in a trading bloc of 500 million people that has delivered wealth through some 40 FTAs with some 70 countries—agreements that the Government have already said they wish to adopt if we are able to, post Brexit?
Last October, I asked the Chancellor in the Treasury Committee whether the benefits of feasible future trade deals outweighed the costs of leaving the single market and the customs union. He could not give me a clear response. Is the Minister any closer to giving a clear response today?
Is the Minister finding withdrawal from the European Union as easy and cost-free as some of those on the Government Benches behind him suggested it would be?
Will the Minister confirm that the head of HMRC estimates that the cost for British business of leaving the European Union customs union would be £20 billion a year?
A lot has been said this afternoon about the strategic cost of Brexit, but every day thousands of civil servants are dedicating their working lives to working to the Prime Minister’s direction, yet the Prime Minister is sacrificing the interests of the country to try to heal the divisions in her party among those on the Conservative Benches. When are the Government going to get a grip and stop wasting taxpayers’ money on delivering the impossible?
The Chancellor has made money available across-Government to help us through this process. I would acknowledge the massive contribution made by our civil service to help across many Departments of Government. The Prime Minister is committed to securing the best deal for the nation.
Leaving the customs union will cost us billions, but it is also costing dear now. Does the Minister not agree with me that, with violent crime rising, the Home Office could have done with the extra money to pay for an extra 4,500 police officers, instead of £500 million for extra customs and border officials to prepare to leave the customs union?
Will the Minister advise the patients of the Golden Jubilee Hospital in Clydebank in my constituency how patient they have got to be to have medicine regulation while Recardio is taking out its health clinical trials for new heart medicines?
The truth is that this is typical crackpottery by the Brexit extremists on the Conservative Benches, who seem to be running the show over there at the moment. Will the Minister tell us what the effect will be on the aerospace sector and on Airbus next to my constituency of leaving and being outside the customs union, as opposed to remaining in and protecting those jobs?
Experts have found that Wales will be hit disproportionately hard, with people and communities up and down Wales hit hardest if the UK leaves the customs union and the single market. Is the Minister prepared to make that sacrifice?
The Minister has been asked five times to identify the figures for unemployment if we leave the customs union, so let us make it easier for him: will unemployment go up or will it go down?
The Minister looks as though he wishes he was somewhere else, and he has referred most of our questions to the Prime Minister, for which I am sure she is grateful. He must be able to answer this question: does he stand by the Treasury forecast that this country will be worse off outside the customs union, the single market and the EU?
What I stand by is the desire of the Government to find the best possible solution for the United Kingdom—that maximises the advantages to the UK economy of the growth in economies outside the EU. There is a range of assumptions to a range of forecasts, and the Treasury always goes into considerable depth in setting those out clearly.
Manufacturers in my constituency need certainty, yet in recent weeks we have had a backstop, a backstop to the backstop and now an extended transition. Is not the truth that the Government’s chaotic approach to these negotiations is putting jobs at risk?
Does the Minister not accept that any firm whose operations span European supply chains will be worse off if we do not have a customs union?
(6 years, 8 months ago)
Written StatementsHM Treasury has today provided a further report to Parliament in relation to the bilateral loan to Ireland as required under the Loans to Ireland Act 2010. The report relates to the period from 1 April 2018 to 30 September 2018.
A written ministerial statement on the previous statutory report regarding the loan to Ireland was issued to Parliament on 24 April 2018, Official Report, column 21WS.
[HCWS1008]
(6 years, 8 months ago)
Written StatementsI can today confirm that I have laid a Treasury Minute informing the House of the contingent liability that HM Treasury has taken on in authorising the sale of a portfolio of Bradford & Bingley (B&B) and NRAM loans acquired during the financial crisis under the last Labour Government.
On this occasion, due to the sensitivities surrounding the commercial negotiation of this sale, it has not been possible to notify Parliament of the particulars of the liability in advance of the sale announcement.
The contingent liability includes certain market standard time and value capped warranties and indemnities confirming regulatory, legislative and contractual compliance. The maximum contingent liability arising from these warranties and indemnities is approximately £49 million. There are further remote fundamental market-standard warranties which are capped at £983 million.
As part of the transaction, UK Asset Resolution (UKAR), the holding company for B&B and NRAM, also terminated interest rate swaps, which hedged the risk of changes in interest rates, held against these mortgage loans. These swaps were taken out by B&B and Northern Rock more than 10 years ago when the loans were issued, in line with good risk management practice. Due to the fall in long term interest rates, there is a substantial cost for terminating the swaps.
The net impacts of the sale and the termination of the swaps on a selection of fiscal metrics are as follows:
Public Sector Net Debt is reduced by £449 million in 2018-19;
Public Sector Net Borrowing is increased by a total of £100 million by 2022-23; and
Public Sector Net Financial Liabilities is reduced by £83 million in 2018-19.
UKAR will incur an accounting loss of £180 million on the transaction in 2018-19. UKAR is expected to make an overall profit in 2018-19.
The net present value of the assets if held to maturity was estimated by UKAR’s advisers to be £741 million using Green Book assumptions. UKAR received £943 million in exchange for the assets.
I will update the House of any further changes to B&B and NRAM as necessary.
[HCWS1009]
(6 years, 8 months ago)
Written StatementsThe Government have decided not to opt in to a provision in the proposed EU regulation on an enabling framework for sovereign bond backed securities that aims to remove unwarranted regulatory obstacles to the market-led development of sovereign bond backed securities (SBBS), which currently do not yet exist in practice. This is primarily a matter for member states in the euro area whose Government bonds would be included in the scope of the product and therefore whose national debt markets would be affected. The proposal is currently stalled due to significant opposition from member states and industry.
Article 17 of the proposed regulation requires that where member states have chosen to lay down rules for criminal sanctions, they shall ensure that information can be shared between competent authorities in the EU. As the provision requires co-operation involving law enforcement bodies, the Government believe these are JHA obligations and therefore our JHA opt-in is triggered.
The Government have decided not to opt in to these provisions as there are no significant benefits to be gained from doing so. The obligation to share information will only fall on member states who have a relevant criminal sanctions regime. The Government have no intention to introduce a criminal sanctions regime in a way that would lead to this regulation imposing an obligation on the UK or on our competent authorities.
[HCWS1004]
(6 years, 8 months ago)
Written StatementsUnder 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 April 2018 to 30 June 2018.
This report also covers the UK’s implementation of the UN’s ISIL (Daesh) 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 UN’s 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 (Daesh) 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.
A new EU asset freezing regime under EU Regulation 2016/1686 was implemented on 22 September 2016. This permits the EU to make autonomous Al-Qaida and ISIL (Daesh) listings.
The attached tables set out the key asset-freezing activity in the UK during the quarter.
The recently passed Sanctions and Anti-Money Laundering Act 2018 (SAMLA) will help ensure that UK counter-terrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies to consider utilising, while also meeting the UK’s international obligations.
Under SAMLA, a designation could be made where there are reasonable grounds to suspect that the person or group is or has been involved in a defined terrorist activity and that designation is appropriate. This approach is in line with the UK’s current approach under UN and EU sanctions and would be balanced by procedural protections such as the ability of designated persons to challenge the Government in court.
Attachments can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2018-10-15/HCWS1003/.
[HCWS1003]
(6 years, 8 months ago)
General CommitteesI beg to move,
That the Committee has considered the draft Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018.
It is a pleasure to serve under your chairmanship, Sir David. Since the UK’s 2016 referendum decision to leave the EU, Her Majesty’s Treasury has undertaken a significant amount of work on the withdrawal negotiations and in preparing for the range of potential negotiation outcomes. The best outcome is for the UK to leave with a good deal, and we have put forward a serious and credible proposal for the future relationship. Although we remain confident of agreement later this autumn, in the meantime we must and will continue the work of preparing for no deal.
As the Department responsible for financial services, the Treasury has undertaken particularly intensive work to ensure that there will continue to be a functioning legislative and regulatory regime for financial services in a scenario in which the UK leaves the EU without a deal or an implementation period. An essential part of that work involves using powers delegated to Ministers under the European Union (Withdrawal) Act 2018 to fix deficiencies in applicable EU law that will be transferred directly to the UK statute book at the point of exit. The approach taken in the Act is to maintain existing legislation at the point of exit to provide continuity.
Although the fundamental elements of the current financial services legislation will remain the same after exit, that legislation still needs to be amended to ensure that it will work effectively once the UK has left the EU. To achieve that, I am delighted to say that the Treasury is in the process of laying approximately 70 statutory instruments ahead of exit day. A key decision for my Department in approaching that work is how to divide responsibility for the huge body of financial services legislation that the Act brings to the statute book.
An important component of that legislation is level 2 legislation—technical standards, which run to 7,000 to 8,000 pages. The responsibility for developing technical standards currently lies with the European supervisory authorities, and they are adopted by the European Commission. As required by EU law, they do not take policy decisions; they set out at a granular level the requirements that firms need to meet to implement policy set out in higher EU legislation. Common examples of technical standards include those that set out the process for firms to provide supervisory information to regulators, including the specific form templates that they should use.
The 2018 Act will transfer those technical standards into UK law at the point of exit in the event that we do not reach an agreement with the EU on an implementation period. Many of them will be deficient and will need to be fixed by the appropriate body or regulator. The Government propose to allocate responsibility for them consistently with the UK’s existing regulatory framework, as approved by Parliament in successive pieces of legislation.
The Financial Services and Markets Act 2000—the key piece of framework legislation for regulation of financial services in the UK—delegates responsibility to the Prudential Regulation Authority and the Financial Conduct Authority for making the detailed rules that apply to firms in order to operationalise the framework that Parliament has set in legislation. On the same basis, the Government propose to transfer responsibility for technical standards from the European supervisory authorities to the Bank of England, the PRA, the FCA and the Payment Systems Regulator. That transfer will be made through statutory instruments to amend EU regulations in relation to each sector of the financial services industry. They will amend each mandate to make technical standards to give power to the appropriate regulator; for example, the SI to amend the capital requirements regulation will transfer the relevant technical standards to the PRA. Each SI doing that will be subject to parliamentary approval through the affirmative resolution procedure.
The SI that we are discussing today amends the FSMA and other relevant Acts to set out the procedure that the regulators will use when they are given the power to make technical standards by the relevant sectoral SIs. That approach is consistent with the FSMA framework, and recognises the fact that it is the UK regulators that have the necessary expertise and resources to maintain standards after the UK’s exit from the EU. That is particularly true given the important role the UK regulators have played in the EU to develop those standards, through their membership of the boards and working groups of the European supervisory authorities.
I am listening to the Minister with interest. He is talking just about financial services. Has any estimation been made across Government Departments of how many years of SIs we are likely to have post Brexit to tie everything up?
I cannot speak for other Departments; I can set out only what I am responsible for in the Treasury. Other Ministers will introduce SIs and that will be a matter for the scrutiny of the House. I do not have a holistic answer today. I will investigate, and if possible I will write to the hon. Lady.
The SI will also sub-delegate the section 8 deficiency-fixing power in the European Union (Withdrawal) Act to enable the regulators to make the necessary corrections to the technical standards, as well as to regulator rules made under FSMA, so all those rules will operate effectively from day one of exit. The same constraints that apply to Ministers when acting under that power would apply to the regulators. It could be used only to make changes to correct deficiencies in EU law, and would be subject to a two-year time limit. To ensure that the regulators fixed deficiencies in technical standards in line with the fixes Parliament will approve in onshoring SIs, the SI will require the Treasury to approve the deficiency fixes the regulators propose to make.
In advance of laying the SI, the Treasury published the instrument in draft, along with an explanatory policy note, in April 2018, in order to maximise transparency to Parliament and industry. We have engaged stakeholders on these issues and will continue to do so, and we are publishing advance drafts of our onshoring SIs throughout the autumn—I think some were published in the last few days. The regulators are also committed to a fully transparent process for fixing deficiencies in technical standards and their own FSMA rules. The regulators plan to issue consultations on their proposed deficiency fixes. The first of those has been launched today by the FCA, and the Bank of England will follow shortly.
In conclusion, the SI will be essential for ensuring that EU technical standards for financial services continue to work effectively in the UK from day one of exit. UK regulators operating within the statutory framework set by Parliament in FSMA are best placed to ensure that the technical standards are fit for purpose as we prepare to withdraw from the EU and in the period following exit. They will exercise that function in an open and transparent way, with their ongoing responsibility for technical standards made subject to the statutory requirements for consultation as set out in FSMA. I hope that all colleagues will join me in supporting the regulations, which I commend to the Committee.
It is a pleasure to serve on the Committee under your chairmanship, Sir David. I am grateful to the Minister for the explanation that he provided.
As the Minister mentioned, the SI is intended, as I understand it, to enable regulators, particularly the Bank of England, the Prudential Regulation Authority, the Payment Systems Regulator and the FCA, to remedy any deficiencies in binding technical standards, so that they can operate effectively from the point of the UK exiting the EU. The SI also, as I understand it, and as stated in the explanatory notes, but not necessarily reflected in the Minister’s remarks, enables authorities to have ongoing responsibility for making technical standards required under retained EU law in financial services and amending them so that they remain fit for purpose in the future. It is not just about exit day. As I understand it, it is about a potentially much longer period, at least as expressed in the explanatory notes and my reading of the SI.
The regulators’ powers are subject to the constraints in the European Union (Withdrawal) Act, as the Minister explained. They are limited to addressing deficiencies and dealing with any failure of UK law to operate effectively after exit, and that power is time limited under the withdrawal Act.
We first have to question why we have ended up here. It is deeply worrying that the Government feel that they have to go down this path because of the possibility of a no-deal Brexit, which the Brexit Secretary now recklessly describes as offering countervailing opportunities. I am not sure about the Minister, but I have yet to find somebody working in financial and related professional services who can find any countervailing opportunities from a no-deal Brexit. Maybe he has and it would be great to hear of it, if so.
Perhaps a couple of hedges but not many beyond that, I would expect. We could be pushed in this direction by the Government’s dogmatic rejection of a customs union with the EU and their inability to accept the reality.
As a result of that disturbing situation, it is right that those in Government who do want to act responsibly provide us with some kind of assurance of regulatory continuity, hence this SI, but I would say from the beginning that there is a misunderstanding in these proposals: the idea that technical, level 2, standards are non-political.
For two years I was a Member of the European Parliament and negotiated for the Socialists and Democrats a number of level 2 measures, relating to a raft of post-crisis financial services legislation: MAD/MAR, EMIR, CARRP, CSDR and last, but certainly not least, MiFID II. Parliamentarians were deeply involved in negotiations on those level 2 measures, which addressed a massive range of different issues. Of course, those negotiations were with the European Commission as well as regulators, mainly ESMA, in the case of the negotiations I was involved with.
The regulations seem to suggest that there would be public consultation only on changes and no more extensive engagements. That ignores the fact that so-called technical standards can emasculate the intent of legislative proposals at a stroke. One good example of that would be around the new regime in MiFID II for regulating commodities trading, where there is a lot of evidence, as Members will know, that having virtually non-regulated commodities markets had led to spikes in the cost of commodities, which had then led to serious problems in many countries in the global south, including potential famines.
Parliamentarians believed they had got to a situation and agreed at so-called level 1—primary legislation level—that we would have a new regulatory regime that would impose position limits on different types of commodities. That would mean we would not have that kind of speculation pushing up prices again, because we would not have individual traders controlling huge parts of these really important markets, and manipulating them just for financial gain. But the technical standards were really weak initially. We had a big fight and got them back to a much better position—that was through a political process, not a technical one. It would be interesting to hear the Minister’s thoughts on whether we are really considering these level 2 measures to the extent that they require. Of course, we as parliamentarians do not want to be poring over level 3, which is the real technical nitty-gritty. That would not be sensible but level 2 measures surely require more scrutiny than we are offered here.
I would like the Minister to respond to three questions. First, at EU level there is a strong institutional aid to the promotion of financial stability in the form of Finance Watch, which is funded by the EU. We lack any such body in the UK. That is significant, given where we are today, 10 years since the fall of Lehman Brothers. I hope the Minister can reflect on how the political imperative of ensuring financial stability will be ensured, or otherwise, by these arrangements.
It is interesting to look at the language and narrative that Government have given in relation to these proposals and contrast that with some of what has come from EU level. I quote from the report by Irish MEP Brian Hayes just before the summer in the European Parliament. It stated:
“In the absence of a transition period, the Commission and the European supervisory authorities must be prepared to protect financial stability.”
That was the first value that he isolated, yet we tend to find that a bit of an afterthought in Government communications on this topic.
Secondly, I am very concerned whether the regulators, particularly the PRA and FCA, have the requisite capacity. That is related to the point made earlier about whether parliamentarians have the capacity to deal with the huge volume of SIs. Of course, it is the PRA and FCA that would have to deal with the arrangements for level 2 legislation. What assessment has been undertaken by the Government of their readiness to accomplish that task? I say that having looked at the document that has just been released by the FCA, snappily entitled “Brexit: proposed changes to the Handbook and Binding Technical Standards—first consultation”, which is 781 pages long. Admittedly, quite a lot of that is a new revised handbook, but it is a very big task that we are giving to our regulatory authorities. It is not clear that they really have the requisite capacity to deal with that task. For example, if we look at some of the new burdens that might be applied to the FCA, the document states that credit rating agencies that are currently registered with the European Securities and Markets Authority and that wish to register with the FCA will need to send the information by exit day—that is information on all credit ratings issued and not withdrawn. We are talking about a lot of information that will have to be transferred to the FCA. Will it be able to cope with that?
The last question I have is about regulatory co-ordination. From my reading of the SI and the explanatory memorandum, these arrangements are not just about the exit point but about ongoing arrangements that are intended to ensure that binding technical standards will remain effective. It is not clear how co-ordination will be ensured between what occurs on the UK side and on the EU side. We could say it would be a function of a no-deal Brexit, which the SI is intended to deal with, but I am concerned by some of the suggestions. For example, the FCA document suggests that we should just remove binding technical standards, such as requirements to co-operate in
“supervisory activities, for on-site verifications, and investigations and exchange of information between competent authorities”.
That seems to be the assumption underlying what a no-deal Brexit would look like. I hope the Government will further consider what future regulatory co-ordination could look like at the same time as we are staring down the barrel of no deal.
As an old friend, it is a pleasure to serve under your chairmanship, Sir David. I suspect this the first of an avalanche of statutory instruments that will keep you and other Chairs very busy over the coming years. The Minister could not say how many SIs would be generated.
I will come to the right hon. Member for North Durham later. I will do my best to deal with the serious points raised. It is worth reminding the Committee that the Government are working flat out in financial services, which I am responsible for, to secure a deal. Today, we are discussing the contingency arrangements for no deal. Obviously, there are a range of views, as expressed, about the desirability of no deal, but this is about doing what is prudent—essential, really—to have a functioning regulatory regime in place.
To refer back to the comments of the hon. Member for Rotherham, the Government expect to lay about 800 SIs before Parliament in time for exit. Some have already been laid before Parliament. I acknowledge the question from the right hon Member for North Durham about the numbers in this area, and will seek to clarify that as soon as I can. On that point, this is a live piece of work, and we are looking at how SIs should be aggregated appropriately. We are in live consultation, so I may not be able to give an accurate number.
I am happy to answer any parliamentary question. I think we said there are about 70 SIs, but that will not be fully accurate.
The hon. Member for Oxford East asked, at the macro level, whether financial stability will be protected. The statutory objectives of the regulators for financial stability will not change. They are enduring. A tripartite system was set up as a consequence of the crash. I think there is broad cross-party agreement on the need for that to continue, and it will.
The hon. Lady asked about holding regulators to account. Parliament will be involved in every aspect of the process to onshore EU financial services regulations, so all the changes the Treasury proposes to level 1 legislation and delegated Acts will be put before Parliament for it to approve. Any transfer of responsibility to the regulators, including any transfer of powers to make technical standards, will be put before Parliament for it to approve through affirmative-procedure SIs.
The Treasury is working closely with the Bank of England, the PRA, the FCA and the PSR on how to fix deficiencies, including in the technical standards that we propose should become the responsibility of regulators. As was said, the Treasury will be required to approve all the deficiency fixes proposed by the regulators to ensure they are consistent with the deficiency fixes that Parliament will be asked to approve in onshoring.
The Minister is saying that there will be a change, to the extent that level 2 arrangements will be determined by the regulators. That is a shift away from arrangements at EU level, where parliamentarians—albeit European parliamentarians—are involved in negotiations about level 2 arrangements with the Commission and the regulator. That is a change. As I understand it, we are shifting to level 2 arrangements being uniquely the preserve of regulators, albeit with oversight from the Treasury, compared with a process where there is negotiation, in which parliamentarians are involved.
We are seeking to give responsibility to the most appropriate body. The regulators are doing what they do. Frankly, some binding technical standards will not be suitably scrutinised or carried out within the Treasury. I refer back to the point I made about tier 1—or tier 2. Binding technical standards are sort of tier 3 within tier 2—it is a bit complicated—but basically, Parliament will have scrutiny over fundamental change, and the consequential changes that flow from that will be delegated to the appropriate body.
I think the hon. Lady asked whether this is about more than fixing deficiencies for exit. The withdrawal Act provides for the transfer of functions where necessary. Binding technical standards will need to be maintained by an appropriate body. After exit, that will be the UK regulators.
On what the hon. Lady said about her role as a Member of the European Parliament, it is absolutely right to say that we will have more to do because we will not have that scrutiny. As I understand it, MEPs can veto some binding technical standards proposals, but the UK FSMA framework of 2000 does not work in that way. Parliament has delegated technical rules to UK regulators, which is a difference.
The draft regulations set out the procedure where responsibility for future binding technical standards is transferred to regulators by other SIs. All those SIs will be scrutinised individually by separate Committees—I will probably be sat here introducing them—and subject to approval by Parliament under the affirmative procedure.
I turn to the Treasury’s authority over regulatory changes. It is appropriate that the Treasury approves all the deficiency fixes that the regulators propose, and Ministers will be accountable to Parliament for that. On the responsibility for binding technical standards that regulators will take on post-exit, the Treasury will need to approve future changes to those technical standards and will be able to veto a proposal for the two reasons set out in the draft regulations: if it appears the proposal would
“have implications for public funds”,
or if it would
“prejudice…negotiations for an international agreement”.
I cannot anticipate what they are, but all I know is that I would be subject to parliamentary scrutiny on that.
Then the regulators would have to explain why not, and I would have to explain and justify that. They are not licensed to innovate through this onshoring process. They are not given that discretion. We talk about correcting deficiencies, which is quite a technical term, but it means that where the legislation currently refers to EU institutions and EU bodies, technical wording needs to be changed to make it legally effective. It is not about innovating in terms of doing the sorts of significant changes that my hon. Friend the Member for Basildon and Billericay is suggesting that I take on board.
They have been given the responsibility where their technical expertise is formed and known, and where their role currently is to deal with this stuff. It is not exclusively about a language change, but I am just trying to give an indication of the lack of policy innovation that is going on here.
Let us see if we can get some clarity. The Minister is saying that recommendations will be made by the regulatory authorities to him as the Treasury Minister, but he can overrule that, if that will cost him money or it will cost him in a trade deal.
That is not good enough, because I could lay anything. Let us be honest: the Minister could write anything and place it in the House of Commons Library, but if Members of this elected House do not have an ability to question or change it, is not that a deficiency in the process? Otherwise, it gives the Minister the power to decide what is deficient or not. Afterwards, he can produce a report for the Select Committee or place it in the Library, but actually we have no influence at all as Members of Parliament.
I just draw the Committee’s attention back to the purpose of this, which is to onshore, to ensure that we have a regulatory regime in place for a no-deal scenario. This is not about seeking to give additional powers to change in any way the policy framework that is set by the primary legislation that we have debated in the House. We are in the realm, I think, of constructing hypothetical scenarios of fixes that produce some meaningful change, which they would not be licensed to do in the first place, and saying that those would not be subject to scrutiny. They will be laid before Parliament, but it would not get to that point, because they are not licensed to do the sorts of things that the right hon. Gentleman suggests that they would do.
The purpose of this process and this statutory instrument is to provide the framework to onshore the binding technical standards that are needed. Turning to my hon. Friend’s point, I will ensure that the FCA is aware of the issues that have been raised—I am sure it already is. I am told that this summer, it launched a call for input to seek feedback for consumers and firms, which closed on 20 September. Next time I see Andrew Bailey—I see him regularly; I saw him just last week—I will ask him to consider that.
I will come on to the other points and the broader principles. Some of the considerations about where we will be in the future are subject to the deal that we end up with. Again, I do not want to be drawn into hypotheticals at this point. I will come back to my hon. Friend’s point in a minute.
The hon. Member for Oxford East raised a number of other issues about resourcing. The right hon. Member for North Durham also raised this, in terms of the regulators having enough resource. In my travels to Indonesia, Malaysia and Japan over the summer, I have seen that UK regulators are highly regarded and among the most important and most respected in the world. They have the resource and expertise, and the Government are confident that they are ready and able to do what has been asked of them. The hon. Member for Glasgow Central was also concerned about this point. I have had no indications from my conversations with the PSR, the PRA or the FCA that there is a resourcing issue. If that changes, I am sure they will be very keen to come and talk to me about it.
Nobody is questioning their expertise. The concern is more about whether we have enough people with the expertise. What assessment has the Minister done of that?
Given the relationship that the Treasury has with the different regulators, it is for them to raise concerns with me with respect to the resourcing. All parties are intimately involved in a dialogue around the construction of the process. It is not done unto them by me or the Treasury. In terms of the adequacy of the resources, at the moment I have no concerns about that—it is matter that they would need to raise with me.
The Minister says he has no concerns about it, but he does not know what the cost is. If he does not know what the cost is, I am not surprised that he does not have any concerns about it. I would also question the leaders of those organisations. If they have taken on responsibilities without knowing what costs are going to come down the line, that is foolish on their part, I would argue.
All I can say is that the lines of communication are open between the FCA, the PRA, the PSR, myself and the officials. We are pretty open and clear. If there were concerns going through this process, which started several months ago, about the availability of resources, I am sure they would have been raised.
In my experience as a Minister dealing with the Treasury, if responsibilities are taken on and then money is asked for afterwards, there is a likelihood that it will not be given. The estimated costs should have been set out in the explanatory notes, as they usually are. It is foolish to think of going along to the Treasury later with a begging bowl and trying to get money out of it—blood out of a stone comes to mind.
I note the right hon. Gentleman’s point and I will now move on to the issue of supervisory co-operation and the continuance of that, as raised by the hon. Member for Oxford East. While it is true that we will be outside the EU’s framework, we want supervisory competition to continue. I am sure that the hon. Lady knows that there exists a high level of co-operation across many countries outside the EU framework, and our regulators stand ready to do this. A point was made about optimism for the future. The Chancellor set out some great opportunities in the Mansion House speech that we will have with global financial partnerships. The regulators will be deeply involved in that.
I turn now to the points made by my hon. Friend the Member for Basildon and Billericay and acknowledge the quality of his articles in the Investors Chronicle. I look forward to reading his book. The powers in the European Union (Withdrawal) Act 2018 deal only with fixing deficiencies at the point of exit, as he will know. Wider changes need to be considered at a later date, but I think he has put on the record some meaningful analysis of the implications of the regulations for the characterisation of risk around unit trusts versus investment trusts. I have heard that, as have my officials, and we will come back on that.
I thank the Minister. All I have asked him to do is look at this and be conscious of it; I do not expect immediate answers now. Most of us, whether Brexiteer or remainer, would prefer a good trade deal that favoured both sides; trade deals tend to be good. Is the Minister able to confirm now—although I would be happy for somebody to do so afterwards—whether this bit of regulation, which is causing so much angst over here, will remain in force within the Chequers agreement? In which case, we have further battles to wage.
Candidly, at the level we are at at the moment, in seeking a strong bilateral arrangement to determine the future dynamics of dialogue between the EU and the UK supervisory bodies, I cannot answer with that degree of specificity. I take the point and will seek to come back to him as soon as I can.
I am grateful to the Minister for giving way; he has been very generous. I have enormous respect for the hon. Member for Basildon and Billericay but, surely, it is important that whenever we talk about specific regulations we ground our discussion in an overall commitment not to seek to undercut EU-level regulation. Of course, there will be innovation and change, including at EU level. I would be surprised if these discussions are not happening in other European countries. I accept that the nature of the market is different in different European nations. But we have had this around many other regulations before. The danger is that we could end up with the mentality of a bonfire of regulation, which will overall have much more of an impact, because there are concerns that Brexit could be used as a means to undercut regulations generally. That is much more of a concern for industry than any specific regulation, in my experience anyway.
I will take on that point, while also responding to the hon. Member for Glasgow Central, who made the same point about watering down of EU regulation. There is no provision to water down in the Act the regulations that we are seeking to onshore. The wider point has been made about the future direction. On that, again, I can be reassuring. We do not want to define ourselves as a nation by regulatory arbitrage.
I also acknowledge, as my hon. Friend the Member for Basildon and Billericay pointed out, that the financial services have ongoing issues with legislation that has been onshored while we have been members of the EU. They are not about reckless setting aside of prudential regulations. They are in areas, perhaps, on which there is greater emphasis in our UK financial services, as my hon. Friend mentioned, these are things that do not exist in other jurisdictions.
Those are matters that a future framework would at least give us a mechanism to examine and then there would be an understanding, if we achieve what we seek—reciprocal responses from both the sovereign regulatory supervisory bodies. But we are not starting from a point where we are seeking to deregulate.
On the point the hon. Member for Glasgow Central made about UK regulators losing influence, I visited Edinburgh and Glasgow over the recess and acknowledge the growing financial services hub that exists there. The UK is a major financial centre and UK regulators are major players in global forums for financial regulation. There are global colleges for supervision for banks, for example, where we are key players. Although I recognise that the context will be different, this is not the time for UK regulators to adopt a more detached role from international leadership in some of these areas.
Reference was made to the BBC report of the comment I made at the Lords Select Committee this morning about jobs. Throughout the last nine months that I have been doing this, I have been in frequent contact with firms about jobs lost. I was referring to a comment made by Sam Woods, the deputy governor of the Bank of England, about the contingency arrangements. In my opinion, it was not news; I was just reflecting what had been said by somebody else. Of course, contingency arrangements have been made, but I have seen no expectation or desire to move significant tranches of jobs to the EU beyond that. A deal would clearly arrest that fear. We have set out clear proposals on a future ambitious relationship with the EU. We hope that that will transpire, and we expect it to take place.
The other point was about rule-taking. We are not proposing that UK regulators will have to work within a framework, other than the UK Parliament framework. There would be parliamentary scrutiny of any significant changes that we wished to make, and we will set those changes in primary legislation.
The right hon. Member for North Durham made a point about the impact assessment. The regulations would have no cost to business, as they deal with the transfer of responsibility from the Treasury to the appropriate regulators. As a whole, the regulations will significantly reduce costs to business in a no-deal situation. That is the whole point--to ensure that the effects of the transition are minimised in an undesirable situation.
Through our dialogue with firms and trade bodies, we have attempted to minimise the disruption to firms, but it is inevitable that some preparation will be needed. The Government have committed to providing the UK regulators with the power to phase in regulatory requirements that will change as a result of exit, which will mitigate the cost to firms. Due to the wide scope of the changes needed and the broad set of firms affected, however, it has not been possible to accurately quantify the actual costs to firms—I concede that—but these regulations will reduce the cost to business in a no-deal scenario. That is undoubtedly their purpose.
I would always hesitate to speak for my right hon. Friend the Member for North Durham, but I believe his question was actually about the cost to Government and the considerable amount of civil service time that is being eaten up by the process.
With respect to that, we have prepared a narrative on the impact assessment, and I believe there is a conversation going on with the appropriate Committee to determine that, but we have not concluded that assessment. Obviously, it is necessary to move quickly to secure all these statutory instruments before the end of March. That has been our objective.
For clarity, is the Minister saying that we need to pass 800 statutory instruments before March? I thought he meant before the whole process was concluded.
I need to write to the hon. Lady about the distribution of the 800 statutory instruments. As I understand it, 800 statutory instruments will be required across Government through the exit process.
I hope that I have dealt with the points that have been raised. I am sincerely sorry about those points that I have not dealt with, and I will write to hon. Members. I hope that it is clear that we have had full scrutiny of this statutory instrument, and that the Committee will now approve it.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018.
(6 years, 8 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
It is a pleasure to serve under your chairmanship, Mr Robertson. This has been the fourth such debate since I was appointed on 9 January. In each of those debates we have had a number of passionate contributions from Members across the Chamber. Today has been the same. We have had 10 speeches, each of which has contained compelling evidence of a situation where banks have failed small businesses. We must be honest and true to the reality of the experiences of the many people who have come to the House today to challenge me, as the Government’s representative in this area, over what can be done to achieve proper redress.
I pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for his campaigning on the matter and to my hon. Friend the Member for Hazel Grove (Mr Wragg), who set out powerfully the case that justice needs to be blind, that it needs to be done and that it needs to be seen to be done.
My deliberations will reach a conclusion imminently; I have not been putting the matter off. As has been discussed, a series of pieces of work are being undertaken, two of which will report in the next few weeks, and I will then make a judgment about the best way forward. Financial sector fraud has had a severe impact on SMEs—we heard today about several individual cases in which lives have been destroyed and families ruined. This is not a subject that I treat lightly; I have been very focused on it over the past nine months.
The Minister is a decent and honourable man. Will he please, please concentrate very hard on getting redress for the people who have lost so much money and so much of their lifestyle?
I am very grateful to my hon. and gallant Friend for his contributions, which I shall address in a moment. I will also set out some of the changes that have taken place, but let me say from the outset that the cases that have been raised today all demonstrate that, whatever mechanisms we have implemented—from the tripartite regulation of banks and the financial system to the redress schemes of recent years—the banks need to deal with the very real legacy of this issue. Simon Walker’s review for UK Finance must listen to what has been said today about that legacy, which will not go away unless the banks face up to and take responsibility for what happened in the past.
Tackling fraud is a Government priority. I want to reflect on a new theme raised today: access to justice and the mechanisms by which it is delivered. The decision to investigate a crime rests solely with law enforcement; I cannot make it myself. Like any Member of Parliament, I can refer a crime to the relevant chief constable, but they will take account of available resources and the likely eventual outcome. It is the chief officer of the local force who is ultimately responsible for such operational decisions, and it is the responsibility of police and crime commissioners to set the budget for local forces, which the chief officer must take into account. Forces can apply for special grant funding to help meet the cost of unexpected events, but I know from conversations with my hon. Friend the Member for Thirsk and Malton that there is sometimes a gap between the costs covered and the actual costs accrued. These are real matters that need to be addressed.
The point is not whether the funds can be squeezed out of current budgets—police budgets are under huge stress at the moment. This is not a one-off; it is a long-standing issue about criminal activity by the banks, and resources need to be available to deal specifically with it.
The Minister rightly mentions resources, which are always tight, but does he see a potential opportunity here? HBOS has not yet been fined for its scandalous abuses of 2007 and 2008, which tore apart many businesses. Would it be appropriate to use that fine to pump-prime a crime agency to deal with these issues? That agency could then be self-funding, because it would constantly be levying fines for abuses.
We clearly need to find an effective mechanism to deal appropriately with the scale of the unaddressed challenges, and I will look at all options for that.
The City of London police have secured funding from the Home Office police reform and transformation fund to provide training for 600 investigators across police forces. There is also now a national register of fraud specialists; I acknowledge that the sentiment in this Chamber is that that is insufficient, but I should point out that it exists.
The regulatory framework has changed considerably since the events of the crash 10 years ago. I will not go through the whole history, but we have now established a network of robust and specialised financial regulatory bodies, each with a clear mandate and a set of responsibilities. However, I understand the concern about the reach of those bodies to deal with outstanding historical matters that our constituents are still raising with us. As part of that network, the Financial Conduct Authority is focused on ensuring that the conduct of firms and the interests of consumers are placed at the heart of the regulatory system and given the priority they deserve. That statutory objective will continue to guide the FCA’s work as it ensures that the highest possible standards are applied to the sector.
On SME lending, I am acutely aware that concerns remain about past cases of misconduct, the effects of which are still being felt today. There has been a great deal of justified anger within Parliament and beyond about cases such as those of the RBS Global Restructuring Group, HBOS Reading and the mis-selling of interest rate hedging products. I have been clear that the inappropriate treatment of SMEs by RBS GRG was unacceptable; I have made that point personally to the chief executive of RBS. The issues surrounding RBS GRG are firmly on my radar in the Treasury and I continue to work on the matter. The case of HBOS involved criminal activity, and it was right that those responsible were brought to justice. RBS and Lloyds, which now owns HBOS, have rightly set up compensation schemes for businesses affected by GRG and HBOS Reading.
My hon. Friend the Member for Stirling (Stephen Kerr) and other Members raised gagging clauses and the need for transparency. I am very sensitive to the pattern of settlements being offered that are effectively gagging clauses, such as in the case of Mr Shabir that the hon. Member for Cardiff Central (Jo Stevens) raised. That does not seem an honourable way of dealing with legitimate complaints, so I will examine the matter carefully before I report back.
I am glad that to say that in response to direct loss claims relating to the GRG scheme, 978 outcome letters have been sent to customers and £15 million has so far been paid out in redress, on top of £115 million in complex fees. Offers have been also made to more than 90% of customers within the scope of the HBOS Reading review, and more than 85% of customers have accepted.
I am acutely conscious of time, but I think that it is important that I give a succinct update of what I will be doing over the next few weeks. I firmly believe that by increasing the emphasis on individual accountability, the senior managers and certification regime will prove hugely important in improving conduct standards in the financial services sector and allowing regulators to deal effectively with cases such as that of RBS GRG. The regime will be extended to the insurance sector in December and solo-regulated businesses will come in next year.
I look forward to Simon Walker’s review because it will allow me to reach a conclusion about what needs to happen. The Government have done a lot of work, but I accept that more is required. I have spoken to Andrew Bailey, to the retired High Court judge Sir William Blackburne, to Ross McEwan, to the chief executive of Lloyds, to the chief executive of the Financial Ombudsman Service and to UK Finance, and I have met members of the all-party group. I am keen to give my hon. Friend the Member for Hazel Grove the opportunity to reply, but let me confirm that there will be action and that I will come back in a matter of weeks.
(6 years, 8 months ago)
Ministerial CorrectionsBritish families are currently spending considerably more than their disposable income and, as a consequence, debt levels in relation to income are rising back to crisis levels. At the same time, France and Germany have big savings surpluses. Which is the most sustainable of the two options?
What is sustainable is that real household disposable income is up by 4.6% since 2010. I acknowledge that there are those who are experiencing challenges, and that is why I have set out the measures the Government are taking and are determined to take to assist those in a vulnerable position.
[Official Report, 11 September 2018, Vol. 646, c. 586.]
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 the right hon. Member for Twickenham (Sir Vince Cable).
The correct response should have been:
What is sustainable is that real household disposable income is up by 3.4% since 2010. I acknowledge that there are those who are experiencing challenges, and that is why I have set out the measures the Government are taking and are determined to take to assist those in a vulnerable position.
(6 years, 9 months ago)
Commons ChamberThe Government are taking a proactive approach to supporting boroughs and enabling them to manage their money well and help those in problem debt. We reformed consumer credit regulation in 2014, and I am now working on setting up a single financial guidance body to help those who are in difficulties.
One in eight workers is living in poverty, and the average worker is earning £25 a week less than they were 10 years ago. Many of my constituents who are working all the hours they can find still have to come to my office for food bank referrals and debt advice. Does the Minister accept that the rhetoric is talking down the people who are working as much as they can but still living in poverty?
No, I am sorry; I would not accept that. I accept that this Government are committed to doing all they can for hard-working people. That is why we have raised the national living wage, which means £600 for those who are working full time. I am sure that the hon. Lady would also want to welcome the wage data that have come out today.
According to the Money Advice Service, the proportion of people in Greenwich and Woolwich who are over-indebted is higher than both the UK and the London averages. I know from my advice surgery that a significant amount of that is down to the behaviour of rip-off lenders. What more will the Government do to clamp down on predatory lending?
The primary responsibility for rogue lending lies with the Financial Conduct Authority, and its report at the end of May brought in a number of measures, including a cap on rent to own. I accept that more can be done, and that is why I am working hard with my colleague, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman), on the financial inclusion forum to look at the expansion of alternative affordable forms of credit for the poorest in our society.
May I urge the Minister to take firm action against people who exploit the most vulnerable in our society? I refer particularly to loan sharks, payday lenders, rent-to-own outfits such as BrightHouse, rip-off bank overdraft fees and exploitative doorstep lenders. Will he be firm, to ensure that we protect the most vulnerable?
I am happy to give my hon. Friend that assurance. I have deep conversations on this matter with the Financial Conduct Authority regularly. I also met representatives of Scotcash and the credit unions over the recess to see what alternative supplies of affordable credit are available.
Under Labour, household debt rose in every year bar one, but the Office for National Statistics now shows that, since 2010, the number of children in workless households has fallen by a staggering 637,000. Does that not demonstrate the huge contrast between the economic achievements of this Government and the track record of the Labour party?
British families are currently spending considerably more than their disposable income and, as a consequence, debt levels in relation to income are rising back to crisis levels. At the same time, France and Germany have big savings surpluses. Which is the most sustainable of the two options?
What is sustainable is that real household disposable income is up by 4.6% since 2010. I acknowledge that there are those who are experiencing challenges, and that is why I have set out the measures the Government are taking and are determined to take to assist those in a vulnerable position.[Official Report, 9 October 2018, Vol. 647, c. 1MC.]
The way to combat poverty and generate prosperity is to create jobs and raise wages. In that context, is it not welcome that a combination of the massive increase in the minimum wage and the rise in the personal allowance since 2010 have increased the net wages of someone working on the minimum wage by 39% when CPI during that period has been only 19%?
My hon. Friend is on top of the figures, as always, and sets out the positive story that this Government have to tell, but there is no room for complacency. This Government are committed to getting as many people back into work as possible, and we welcome the current record figures.
There are different profiles of debt across the country, which is why the Government are committed to making interventions through the Financial Inclusion Forum to expand affordable credit and to assist those who are in difficulty. There is no room for complacency, and the Government are committed to assisting where necessary.
Does the Minister share my view that one of the best ways of helping hard-working families is to enable them to keep more of the money they earn by keeping taxes low? Will he confirm that this Government will continue to keep taxes as low as possible for working people?
This Government may say that they are taking action on household debt, but the fact is that they rely on that excessive debt for economic growth. The Office for Budget Responsibility says that nine tenths of all GDP growth last year is attributable to household consumption, which is being fuelled by unsustainable levels of debt. Instead, we should raise investment, both public and private, which in the UK is well below the average for a developed country. We have plans to do that, but will we see any such proposals from the Government in the forthcoming Budget?
The Chancellor has set out in successive Budgets our commitment to invest in this economy with the national productivity plan. We must recognise that we need affordable investment, and we have found out over the past 24 hours that the Opposition’s plans are confused. If £500 billion is just a down payment and the start of the investment, where will it end? Is that affordable?
Let us have some facts. The OBR predicts that unsecured household debt will reach 47% of income by 2021. The last peak was 45% in 2007. Families are using credit to pay for essential items. The people who are going to food banks are often in work, because work is not paying. What is the Treasury going to do? Will Ministers admit that austerity has created this mess?
The Government are creating the conditions for growth and raising the national living wage. When I visited Glasgow just a few weeks ago, it was encouraging to see the constructive way that the 1st Class Credit Union and Sharon MacPherson of Scotcash are working with the poorest to help them when they are in difficulty.
I am really pleased that the Chancellor said that he will consider visiting a local pub. Will he consider coming to the Community Food Initiatives North East food bank in my constituency, which has today called for more food because its shelves are empty? If he was to come and visit a food bank such as CFINE’s, he would find out at first hand the effect that Tory UK Government policies are having on individuals up and down the country. The Minister cannot stand there and say that employment is up when the reality is that people are poorer than ever.
Green finance is a key Government priority. The Chancellor recently announced the creation of a new green finance institute to ensure that our world-leading green finance expertise is available to UK and international firms. This was the first recommendation of the green finance taskforce, and further responses from the Government will come in due course.
I commend my hon. Friend for the action that the Government have already taken in this area, but does he agree that we should encourage green investment to support new technologies, especially in the energy sector, to help develop devices that can bring down household bills, make us more efficient, waste less energy and cut down on our greenhouse emissions? That is the subject of my ten-minute rule Bill tomorrow.
I agree with my hon. Friend. It is absolutely the case that every household and small business will have those advantages by 2020 through the supply of smart meters. According to data from a leading energy supplier, we are already seeing energy efficiency savings of around 4% on annual consumption.
The Minister will know from the UN that by 2050 there will be more plastic in the sea than fish, so will he ensure that the Chancellor brings forward a Budget with a comprehensive fiscal strategy that ensures that plastic producers pay 100% of the recycling and that targets tax on plastics according to their recyclability?
Absolutely. Only two hours ago, the Department for Work and Pensions published its consultation response on pension trustees’ duties, which clearly sets out the Government’s intention to raise the profile of financially material climate change factors in investment decisions.
One of the first things I did was to encourage the FCA to bring forward that paper, and I would be very happy to meet those involved in Macmillan care again to discuss their concerns following its publication in July.
The Economic Secretary to the Treasury saw at first hand when he visited East Renfrewshire a couple of weeks ago how small businesses are utilising FinTech to become more efficient and agile. What are the Government doing to help more small and medium-sized enterprises, such as First Floors in Giffnock, which he visited, to understand and take advantage of the opportunities FinTech presents?
My hon. Friend is absolutely right. It was a privilege to meet David Hepburn at First Floors and see the value of new products. The Government are committed to stimulating more investment in FinTech, and it was a privilege to visit FinTech Scotland, which is doing a lot, too. We have invested a considerable amount to increase the numbers of people who are taking this step to innovate in finance, and with open banking we will see more.
A recent Treasury Committee report on household finances found that arrears to local authorities are growing, and there is an overzealous pursuit of those arrears by bailiffs. The same goes for some central Government Departments. What will the Treasury do urgently to ensure that people are not penalised, and vulnerable households are not criminalised, by the Government?
We have made several interventions since we responded in 2014 with bailiff law reform. I have spoken to the Ministry of Justice, and we continue to look carefully at the matter. We have arrangements in place through the Her Majesty’s Revenue and Customs time to pay scheme, and the Cabinet Office has its fairness group as well.
Next year, we move into a post-Brexit economy with new global trading opportunities for UK economic growth. Will the Chancellor update the House on his commitment to investing further in the Royal Navy, which is a vital tool for maintaining safe seas and oceans, so that trade coming out of north-east and other ports can be sustained and can underwrite economic growth?
(6 years, 11 months ago)
General CommitteesI beg to move,
That the Committee has considered the draft Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018.
It is a pleasure to serve under your chairmanship, Mr Davies.
From 1 January 2019, the ring-fencing regime will require the structural separation of core retail banking from investment banking for UK banks with retail deposits of more than £25 billion. Ring-fencing was the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, which the Government accepted and legislated for via the Financial Services (Banking Reform) Act 2013. It will support financial stability by insulating retail ring-fenced banks’ core services, whose continuous provision is essential to the economy—retail and small business deposits and payment services—from shocks originating elsewhere in the global financial system. It means that banks that provide those essential services become simpler and more resolvable, so core services can keep running even if a ring-fenced bank or its group fails.
As well as ensuring that UK taxpayers are not on the hook for bank failures, ring-fencing should mean fewer and less severe financial crises in future, which will benefit the whole economy. Details of the regime are set out in secondary legislation passed in 2014. As part of restructuring to comply with the ring-fencing regime, banking groups may be required to move some accounts from one legal entity to another—for example, they may need to move a retail depositor’s account into a new ring-fenced bank. However, some of the holders of those bank accounts are subject to financial sanctions that prohibit the movement of any funds that said account holders own, hold or control. The conflict with financial sanctions regimes means that at present some banking groups are unable to comply fully with the ring-fencing legislation.
The order resolves the otherwise conflicting requirements between a ring-fencing regime and financial sanction regimes by amending the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014. It amends the definition of a “core deposit” so that accounts whose account holders are or have been subject to financial sanctions, as defined in section 143(4) of the Policing and Crime Act 2017, at any time in the past six months, are no longer included in the definition. That means that banking groups will not be required to move retail accounts whose holders are subject to financial sanctions into ring-fenced banks. Banking groups will have six months from the removal of sanctions to remove retail accounts of those account holders previously subject to sanctions inside the ring fence.
The order will ensure that banking groups that cannot otherwise comply fully with the ring-fencing regime owing to sanctions legislation are not deemed non-compliant under the ring-fencing legislation. The amendment does not alter the location and height of the ring fence and nor does it alter the timetable for ring-fencing: banks in scope must be ring-fenced by 1 January 2019. Together with the Prudential Regulation Authority and the Financial Conduct Authority, we are monitoring their progress closely.
I am grateful for the opportunity to discuss the order, and for the points made by the hon. Members for Stalybridge and Hyde and for Glasgow Central. We have engaged with the Prudential Regulation Authority and the Financial Conduct Authority on the wording and the extent of the order, which proposes to amend the ring-fencing legislation, and feedback has been positive.
The six-month timeframe was chosen to ensure that banks have enough time to make the necessary transfer; it was the result of a practical conversation with the regulators. The hon. Member for Glasgow Central asked why we are waiting until 2021 to review the instrument. That leaves enough time for the PRA and the Treasury to identify potential issues and consult on any changes.
Some wider points were raised when we were in Committee in this room previously. I acknowledge that there are ongoing concerns about various aspects of the sanctions and anti-money-laundering regime. They are without the scope of this conversation, but I am happy to address any specific concerns by letter; that would be more appropriate than to try to answer them conclusively now. I hope I have satisfied Opposition Members, and I commend the order to the Committee.
Question put and agreed to.