Banking Sector Failures

John Glen Excerpts

Thursday 12th July 2018 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Hanson. I start by acknowledging the work of the all-party group and by thanking my hon. Friend the Member for Stirling (Stephen Kerr) and the hon. Member for East Lothian (Martin Whitfield) who secured this important debate. Members have spoken with conviction and passion about some banks behaving in an appalling fashion. I recognise that there are outstanding cases that have not been resolved to the satisfaction of their constituents. I will address some of the issues that need resolution by Government in my later remarks. First, I want to examine specific points raised by Members and then I shall go through what I have done since the previous debate and what I see happening to try to address the work of the APPG. Hopefully, that will give the House some clarity today.

The hon. Members for East Lothian and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) referred to bank closures. It would not be right for us to have a debate on banking without addressing that important issue. I am aware that that is a concern for many Members. Obviously, closures are commercial decisions for the banks, taken by the management without intervention from the Government.

[Drew Hendry]

The Minister mentions commercial issues for the banks, but surely ownership of the bank, certainly such a large majority ownership, plays some part in the commercial process. Would it not have been correct for the UK Government to use the fact that they largely own the bank to make a decision to protect the people it is supposed to serve?

[John Glen]

I thank the hon. Gentleman for that intervention, but I will take the opportunity to correct him. The Government do not have a 70% shareholding. We have a 62.4% shareholding. We do not have control of the day-to-day running of the bank, in the same way as the Scottish Government do not have control of Prestwick Glasgow Airport, yet they have a complete shareholding in it. We need to be real. There is a difference between ownership and day-to-day control. I want to address the practical issues because our constituents want to know what is being done to deal with these challenges. Before I go into that, I want to acknowledge that in previous debates I was challenged by Members from constituencies in Scotland. I will visit Scotland for four or five days at the end of August during the recess to address specifically the issues around rural banking. I went to look at the mobile banking units of one of the banks in Derbyshire in the previous recess, and I take very seriously the concerns about how effectively they function in terms of support for disabled people.

[Peter Dowd]

What sort of message does it send to banks when all these closures are happening and in 2016 the Government decide to cut, for example, the banking levy from £3 billion to £1.3 billion, sequentially, year on year? The Minister can try to duck the issue, but he gives a bung to the banks while they close their branches, and that is not acceptable.

[John Glen]

I want to try to address our constituents’ concerns about bank closures and what the Government are doing to see that their services are provided. The Post Office and the banking industry have a commercial agreement that enables 99% of the UK’s personal and 95% of the UK’s business customers to carry out their day-to-day banking. I am concerned about the effectiveness of that arrangement, so I am determined that public awareness of those services should be greater. I am pleased that UK Finance and the Post Office have responded to my call for further action, particularly when the last bank in town closes, to make sure that the transfer of responsibility—

[Drew Hendry]

Will the Minister give way?

[John Glen]

I will not keep giving way—I need to finish what I am saying. I will give way in a moment. Let me just finish this point.

The Government also support the industry’s access to banking standards, overseen by the independent Lending Standards Board, which commits banks to better communicate with customers and those who need more help when a bank closes. I am not seeking to duck any issue and I look forward to further engagement on this matter.

[Drew Hendry]

I appreciate the Minister’s giving way, and I appreciate that the issue is sensitive for many of us in rural constituencies. If the position is that the UK Government do not brook any interference or intervening in commercial decisions, how can it be the case that the Minister is listing a number of interventions that he is about to make in a commercial situation?

[John Glen]

I was making it clear that, as a Minister, I do not make the operational day-to-day decisions about which individual branches should close. My responsibility is to see that consumers have access to the services they need, and I have done that through brokering the arrangement between UK Finance, which represents the banks, and the Post Office, which provides services when closures take place.

The hon. Member for East Lothian mentioned insolvency practitioners.

[Kevin Hollinrake]

The Minister is being very generous in giving way. He talks about the issues around bank closures. One of the things that banks are doing to substitute for bank availability is moving us all online, so we are transacting more online through apps and the like. Colleagues have written on behalf of constituents to the all-party group to tell us about authorised payments and online fraud. Yet the banks themselves and the Financial Ombudsman Service are attributing gross negligence to the customer, despite the fact that they have gone to some lengths to try to prevent fraud. For example, the person on the other end of the phone knows their password, their maiden name—a degree of information that would not make that giving away of information gross negligence, yet they are being disadvantaged, despite the fact that the banks have pushed them online.

[John Glen]

I am grateful to my hon. Friend for that intervention. The Payment Systems Regulator is doing a live piece of work to look at scamming and will report in September. It looks very much at culpability in such cases and I hope it will come up with a clear resolution that will give the public a better understanding.

If I may, given the luxury of additional time, Mr Hanson, I am going to try and reply to the points raised and then I will come on to substantive points. Insolvency practitioners are regulated by one of five recognised professional bodies. Legislation in 2015 introduced binding statutory objectives on these bodies, and the Insolvency Service has more sanctions available to it to deter and deal with poor conduct or performance. The insolvency code of ethics, raised through the Joint Insolvency Committee, is also expected to be revised and updated later this year, but I will be happy to enter into dialogue with the hon. Member for East Lothian about the specific issues and concerns that he has.

[Martin Whitfield]

On that point, does the Minister accept that there is an inherent conflict of interest in the situation whereby we have a bank, what I will call a limited company, and individual shareholders? We have the bank instructing the professionals who then deal with the company, and that less than virtuous circle leads to an almost inherent conflict of interest for professional groups: the lawyers, the accountants and the insolvency practitioners.

[John Glen]

I am happy to look carefully at the issues and the respective responsibilities and interaction between them that the hon. Gentleman raises. I fully accept the sensible point he makes.

I want to return to the case raised by my hon. Friend the Member for Stirling. Several specific cases were raised and my hon. Friend spoke passionately about his constituent’s case, which is illustrative of many of the experiences that sadly occur. Following my meeting, I received a letter from Ross McEwan in May that said that his complaints handling team would be happy to discuss constituency cases with Members. I encourage all Members to do so. I want to put this on the record. I particularly encourage my hon. Friend the Member for Stirling to raise his constituency case with the team. I am keen to understand what sort of response he gets and how satisfactory the process is.

As to the comments of the hon. Member for Bootle (Peter Dowd) about the sale of RBS shares, I am not one to enter into unnecessary partisanship in such discussions, because the issues are important, and I generally welcome the tone of the debate, but he must acknowledge that when the shares were purchased by the Government for £5.02 in 2008 it was not a rational economic choice. It was necessary for the Brown Government to secure the banking system. Therefore, to point out the difference in price, after the Government had taken advice from those who are stewards of the Government’s interest, based on value for money, is not really rational. Most consumers would not have purchased shares at the time in question; it was for the good of the nation.

[Peter Dowd]

Okay, so if we push the bank aside and forget that, how does the Minister explain the loss to the taxpayer in the sale of the Post Office, which was another billion or two pounds—or is that irrelevant as well? How does he explain the reduction of 26% in corporation tax for banks and other corporations, to 19%, when people in the Gallery cannot get a penny out of the Government?

[John Glen]

I am glad that the hon. Gentleman has conceded the point on RBS. I want to focus on banks, and I was responding specifically on the matter of RBS.

I want to set out what the Government have done to address the issues that came to the fore during the financial crisis, because the regulatory framework and what has evolved over the past 10 years is a foundation for some of the outstanding challenges that we need to resolve. Since the crisis, the Government have reformed the UK system of financial regulation for the benefit of the industry and the people who rely on it. We have bolstered standards across the sector and taken strides to restore public trust in financial services. I acknowledge that there is more work to be done, and I shall come specifically to the issues raised in the report of the all-party group, and in other work. We have regulators armed with comprehensive powers and responsibilities co-operating to identify and address risks across the financial sector. The Financial Stability Board has praised the UK for its successful transition to a new regulatory regime, and the International Monetary Fund has applauded the UK’s more resilient system. We have implemented reforms to improve individual accountability in the financial services sector, and that includes the introduction of the senior managers and certification regime, which promotes individual responsibility.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) set out a list of individuals about whom he has outstanding concerns; and it must be right to hold people to account. Where evidence exists for individuals having behaved criminally or in a way that needs further analysis, it must be brought forward. I understand that the shadow cast over the issue by outstanding cases needs to be resolved by the regulator. However, the SMCR promotes individual responsibility, holding senior managers to account for misconduct that occurs on their watch. It ensures that individuals at all levels can be held to appropriate standards of conduct. Both those things were key recommendations of the post-crisis Parliamentary Commission on Banking Standards. The SMCR was implemented for all banks, building societies, credit unions and Prudential Regulation Authority-designated investment firms in 2016. The regime will be extended to cover insurance firms from December 2018, and all other Financial Conduct Authority-regulated firms in December 2019.

I want now to talk about the core issue of SME lending. Despite significant improvements to the system at large, I am acutely aware that concerns remain about misconduct within the sector.

[Kevin Hollinrake]

The senior managers regime is important, but it will not be effective unless the regulators or law enforcement agencies investigate, speak to victims, find out exactly what has gone on, establish the evidence and take prosecutions forward where guilt is demonstrated.

[John Glen]

I agree, and will discuss the implications of that.

Many of the concerns that are raised relate to small businesses—sometimes microbusinesses, and sometimes individuals who have been working hard, with a perfectly solid relationship with their bank. Those businesses form the backbone of our economy, as several hon. Members have said this afternoon, and there has been justified anger, both within Parliament and beyond, about Global Restructuring Group at RBS, HBOS Reading and the mis-selling of interest rate hedging products. The case of GRG, and other cases from the crisis period, are unacceptable and I will continue to push for action. I shall explain what is happening.

I mentioned at the Backbench Business debate in May that the chief executive of RBS had committed to modifying the GRG compensation scheme. RBS will set up an independent appeal process for consequential loss claims. I acknowledge that the hon. Member for Inverness, Nairn, Badenoch and Strathspey mentioned that in his speech. I shall discuss with Sir William Blackburne how that process will operate when we meet next week. I understand the concerns about the need for it to work effectively. As has been mentioned, the assessment of consequential loss is a tricky issue, and I need to be sure that the process will be expedited as well as possible.

Treasury officials receive regular updates from RBS on the compensation scheme, and I am glad that progress is being made on direct loss claims, with a further 200 complaints closed and a further £4 million paid out since the last debate in May.

[Kevin Hollinrake]

No one suggests that Sir William Blackburne at RBS or Professor Griggs at Lloyds are not decent people, trying to do the right thing, but is not the concern the fact that the compensation schemes are internal? It is not enough for justice to be done; it must be seen to be done.

--- Later in debate ---

[John Glen]

I am happy to keep taking interventions, but I am getting to the points that are raised. I would like some flow in what I am trying to say.

I remind hon. Members that what happened at HBOS Reading was criminal behaviour—beyond unacceptable. It is right and just that six people have been convicted, and that they are serving more than 47 years in prison. In March 2017, following the conclusion of the criminal investigation, Lloyds set aside £100 million for compensation payments to 64 victims, and Russel Griggs was hired to review individual cases. Professor Griggs’s recent letter to the Treasury Committee set out that 170 offers have been made to affected directors, ranging from less than £100,00 to more than £5 million. In addition, Lloyds Banking Group has appointed Dame Linda Dobbs as an independent legal expert to consider whether issues relating to HBOS Reading were investigated and appropriately reported to authorities at the time by Lloyds Banking Group, following its acquisition of HBOS.

The FCA continues to conduct investigations into both RBS GRG and HBOS Reading. It cannot be the case—I made this point when I met Andrew Bailey, the chief executive of the FCA—that we allow those institutions to arbitrate on outcomes when there are significant outstanding and unresolved issues. I was pleased to hear that the FCA is likely to conclude whether there is any basis for enforcement action in the matter of GRG by the end of this month, in line with the indication that I gave on 10 May. I look forward to the conclusion of that investigation and the investigation of misconduct at HBOS Reading.

My hon. Friend the Member for Thirsk and Malton and others were right to say that these matters will not go away. In a characteristically passionate speech, my hon. Friend the Member for Beckenham (Bob Stewart) set the expectation that the matter should be resolved. I have been in this job for nearly seven months and have responded to three or four debates on the topic; I expect there will be more, because more needs to be done. We understand how important it is that SMEs have access to the dispute resolution with banks that they need.

I am glad that there are four pieces of work looking at that matter, as I mentioned at the report’s launch yesterday evening. The FCA is currently consulting on expanding eligibility for the Financial Ombudsman Service. I acknowledge the points made and the concerns about resourcing and sufficiency in that regard; they will need to be addressed. Richard Lloyd is reporting today on his independent review into the workings of the Financial Ombudsman Service, which was stimulated by the excellent work of the journalists for “Dispatches”. That review includes several recommendations, and the FOS intends to publish an update on the progress made by the end of the year.

UK Finance is also reviewing the access of SMEs to dispute resolution. There is a lot of expectation that UK Finance, as the representative of the four big banks, will respond thoroughly to some—I hope, all—of those issues. We need to find binding and enduring solutions to the issues that have been raised. Last night, the APPG published its work into the options for an independent financial services dispute mechanism. Those four strands of work will come together in the autumn, and the Government will consider them in the round.

I also want to respond to the point raised by several hon. Members, in particular the hon. Member for Thirsk and Malton, and say that the Government are determined to ensure that financial markets work effectively for SMEs and to enable competition in the market. Since the Government set up the Prudential Regulation Authority in 2013, it has authorised 16 new UK banks, but I acknowledge that those banks are nowhere near challenging the four biggest banks in scale and size. There is work to be done to examine how that can change, so there is greater competition in the sector.

On lending specifically, the British Business Bank’s programmes support more than £4.6 billion of finance to more than 70,000 smaller businesses through programmes such as the ENABLE guarantee, which encourages banks to increase their lending to SMEs by helping to reduce the amount of capital that banks are required to hold against such lending.

I acknowledge the work of the regulators in seeking to ensure that the banking system is stronger, safer, and better placed to support the wider economy than ever before. Some of the Government’s actions are leading to that outcome. I am aware, however, of the outstanding concerns that hon. Members have expressed. I look forward to responding publicly to the various pieces of work that address dispute resolution for SMEs in the autumn. Given that the report was published only yesterday, and that there are some significant ongoing parallel strands of work that are nearly completed, it is reasonable for me to wait to do so. I hope that will move the debate forward to a resolution that we and our constituents can have greater confidence in.

We need a banking sector in this country that enables lending, prosperity and growth in our economy, and when things go wrong we need to know that the resolution process will not be random, complicated and legally tortuous. Where we have legitimate examples of behaviour by banks that involves, or involved, malicious proactive interventions that were not justified on economic grounds, they need to be examined until they are resolved, so we can move forward with a more reliable system of regulating this vital sector of our economy.

Pensions Cold Calling Ban

John Glen Excerpts

Thursday 12th July 2018 Written Statements

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

I have today laid before Parliament a ministerial statement to set out Government progress on the ban on pensions cold calling, as required under the Financial Guidance and Claims Act 2018.

Pensions cold calling is an important and complex issue. Pensions scams can have devastating consequences and cold calling is the most common method used to initiate pensions scams, so the Government have taken the time to ensure the ban works for consumers. The Government will imminently publish a consultation seeking views on a set of draft regulations to ban pensions cold calling. Once we have considered all responses to the consultation, in the autumn we intend to lay regulations under the affirmative procedure and subject to parliamentary approval bring the regulations into force as soon as possible thereafter.

[HCWS854]

JHA Opt-in Decision: Assignment of Claims

John Glen Excerpts

Monday 9th July 2018 Written Statements

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

The Government have decided not to opt in (under the UK’s JHA opt-in protocol) to the proposal for a regulation on the law applicable to the third-party effects of assignments of claims.

In the proposed regulation, the competence for the EU to act stems from Article 81 (2) of the Treaty on the Functioning of the European Union. As such, the entire regulation represents justice and home affairs obligations, thereby triggering the UK’s opt-in.

The proposal applies a general rule that the law of the country where the assignor has their habitual residence governs the third-party effects of the assignment of claims (“law of the habitual claim”), but carves out three exceptions to the above rule, applying the law of the assigned claim to (i) the assignment of cash credited to a bank account; (ii) the assignment of claims arising from certain types of derivatives; and (iii) in certain circumstances to securitised entities. This is different to current market practice in significant parts of UK financial services, where the law governing a claim is determined by contractual agreement (“law of the assigned claim”).

The Government have concluded that it is in the UK’s interest not to opt in to this regulation. Its provisions would have significant unintended consequences for financial services market practices in the UK. It would create uncertainty for financial services transactions, could require changes to business as usual functions, and introduces an applicable law test that may contradict existing applicable law provisions such as those relating to securities.

Until the UK leaves the EU it remains a full and participating member. We will continue to work with the EU institutions, with the aim of ensuring that UK objectives are preserved as the negotiations progress on any compromise text. The Government will also continue to consider the application of the UK’s right to opt in to, or opt out of, forthcoming EU legislation in the area of justice and home affairs on a case by case basis.

[HCWS836]

UK's Counter-terrorist Asset Freezing Regime

John Glen Excerpts

Monday 9th July 2018 Written Statements

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

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to prepare a quarterly report regarding its exercise of the powers conferred on it by part 1 of TAFA 2010. This written statement satisfies that requirement for the period 1 January 2018 to 31 March 2018.

This report also covers the UK’s implementation of the UN’s ISIL (Daesh) and al-Qaeda 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 (Daesh) and al-Qaeda (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-Qaeda and ISIL (Daesh) listings. The first designation under the regime was made during this quarter, and is recorded in the fifth column of the annexed table.

The annexed tables set out the key asset-freezing activity in the UK during the quarter.

The recently passed Sanctions and Anti-Money Laundering Act will help ensure that UK counterterrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies to consider utilising, while also meeting the UK’s international obligations.

Under the Act, 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/2018-07-09/HCWS838/.

[HCWS838]

Draft Financial Services And Markets Act 2000 (Regulated Activities) (Amendment) Order 2018 Draft Electronic Presentment Of Instruments (Evidence Of Payment And Compensation For Loss) Regulations 2018

John Glen Excerpts

Wednesday 4th July 2018 General Committees

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

I beg to move,

That the Committee has considered the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2018.

[The Chair]

With this it will be convenient to consider the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.

[John Glen]

It is a pleasure to serve under your chairmanship again, Sir Henry. I am pleased to introduce two statutory instruments today, both of which will help to improve the way in which financial firms in the UK can operate and deliver efficient services that meet the needs of firms and consumers. The Government are determined to ensure that our laws keep pace with developments in market practice to ensure that consumers are appropriately protected, while securing the continued international competitiveness of UK markets.

The order amends the Financial Services and Markets Act 2000 to address a gap in the regulatory treatment of alternative finance investment bonds, covering sukuk or Islamic equivalent bonds. The gap arose because of changes in taxation applicable to debt traded on multilateral trading facilities made in the Finance Act 2018. Those changes took effect on 1 April this year, and we intend to close the gap as quickly as possible in the interests of clarity and consistency. It is stated Government policy to provide a level playing field for Islamic finance instruments. That means that although sukuk are not debt instruments, they are deemed to be debt-like for UK tax and regulatory purposes.

That approach has served the UK well, with the UK being recognised as the leading western centre for Islamic finance, and London being a global venue for Islamic capital market activity. To date, more than $50 billion has been raised from sukuk listed on the London stock exchange. The instrument adds two additional types of financial trading venues—so-called multilateral trading facilities and organised trading facilities—to the list of permitted venues for alternative finance investment bonds. Conventional bonds can already be traded in the same venues. The order also amends the Financial Services and Markets Act so that a person administering a benchmark, as specified in the order, will be regarded as carrying on the activity by way of business. That is a minor, technical amendment, and is the final part of the legislation needed to complete the implementation of the EU benchmarks regulation into UK law.

The Joint Committee on Statutory Instruments reported the instrument for

“an unusual use of the enabling power.”

The Joint Committee raised concerns about the order’s coming into force immediately rather than 21 days afterwards. The Government treat the Joint Committee’s reports very seriously and give them full consideration. However, the Treasury has looked carefully at this matter and decided that an expedited approach was necessary for several reasons. First, the London stock exchange and UK-based advisers have warned that the continued failure to update the legislation for alternative finance investments bonds in regulation is causing issuers to look elsewhere. Secondly, the changes do not create any new cost for business, as the regulatory framework for alternative finance investment bonds has been in place since 2007.

I recognise the concerns raised by the Joint Committee that reasonable time should be provided for anyone to familiarise themselves with the changes made by the order, and to take steps to ensure compliance to avoid potential criminal liability. However, the criminal offence of carrying on a regulated activity without permission applies only to those people who are not already exempt or authorised by the regulators.

Instruments of such a nature are very sophisticated and highly unlikely to be traded in that manner by anyone without a significant level of expertise in financial services—in other words, firms already authorised by the Financial Conduct Authority. For those firms, carrying on an activity for which they are not authorised is contravention of a regulatory requirement, not an offence. The commercial reality is that it is a minor regulatory adjustment, rather than one that creates a new opportunity for criminal liability. In such circumstances, given that industry is eager to welcome the changes and the regulator foresees minimal impact from the amendments’ entering into force immediately, a longer waiting period was felt to be unnecessary and potentially even harmful to the markets.

I recognise fully, however, the concerns of the Joint Committee. I acknowledge that in this instance the Treasury could have done more to assure the House that its procedures are awarded due respect by the Government. The Treasury has taken on board the comments of the Joint Committee and will take steps to make improvements in future.

I now turn to the second statutory instrument: the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018. Its purpose is to ensure that the electronic clearing of cheques has no detrimental impact on cheque users. Cheques continue to form a key part of the British payments landscape and, although one cannot deny that their use has declined over the years, cheques are still important for smaller charities, voluntary organisations and certain members of our society, often the most vulnerable. To illustrate the continued importance of cheques, I inform the Committee that in the first quarter of this year more than 65 million cheques were cleared, with a value in excess of £80 billion—an average of almost 1 million cheques cleared per working day.

In the existing anachronistic process of paper cheques being physically transported around the country, a cheque takes six weekdays to clear fully and for recipients to be certain that the money is theirs. For that reason, in 2015 Parliament legislated to allow UK banks and building societies to accept receipt of cheques and similar instruments by electronic image. That innovation, now being delivered through the image clearing system, cuts down clearing times to the next weekday by sending a digital image of the cheque for clearing. Consumers, charities and businesses will therefore receive their funds more quickly. Cheque imaging will also facilitate further innovation in the industry—by enabling customers to pay cheques through their mobile banking app, for example.

I turn to the detail of the draft regulations, which provide for two measures to ensure that the electronic clearing of cheques has no detrimental impact on cheque users. The legislation seeks to protect customers as the image clearing system roll-out intensifies over the second half of the year. The first measure concerns the use of cheques as evidence of payment. In the existing model, customers may request from their bank a copy of the paper cheque that they wrote and that may be used as evidence of payment. To ensure that that right remains available, the measure will ensure that a copy of the cheque, along with some additional information, will be provided to the writer of the cheque on his or her request, and that copy has the same evidential value as a paper cheque.

The second measure concerns compensation. In cases of fraud or error, the rules for compensation are set out in scheme rules by the Cheque and Credit Clearing Company. No legislation, however, stipulates the circumstances in which customers must be compensated, or by whom. To prevent any harm to consumers from a fundamental change to cheque processing, the Government consider it necessary to legislate to ensure that cheque users are not left out of pocket if they incur a loss.

The second measure therefore provides that when a customer incurs a loss under the image clearing system, and prescribed conditions are met, including compensation not already having been received, the bank of the customer receiving the cheque must pay compensation. The Government believe that the existing industry-led approach works well. Indeed, the optimal solution is that the legislation need never be used because the scheme rules continue to effectively resolve losses from fraud or error.

In conclusion, the draft statutory instruments make necessary, albeit uncontroversial, changes to ensure that our financial services remain fit for purpose and work for the benefit of UK consumers. I sincerely hope that Members will join me in supporting the measures.

--- Later in debate ---

[John Glen]

I am grateful for the observations from the respective Front Benchers. I take seriously the observation of Lord Tunnicliffe, in the other place, on the adequacy of the explanatory notes. The Treasury always endeavours to make its explanatory notes as clear as possible, but I recognise the confusion and uncertainty caused. I will examine that and see what improvements can be made.

I welcome the support of both Front-Bench spokespeople for the draft orders. The gap and the delay are a matter of regret from the Treasury’s point of view. It would have been preferable to introduce the draft orders earlier, thereby avoiding a gap in the regulation and taxation of alternative finance investment bonds. On this occasion, I have to concede that the Government fell short of the standard we wish to set. I will do all that I can to ensure that that is not repeated.

I am pleased that the hon. Member for Stalybridge and Hyde acknowledged the leadership that the Government showed in 2014 by the issuance of a sovereign sukuk of £200 million; we look forward to trying to develop that further in the future. I welcome the support of the hon. Member for Glasgow East for the improvements to the image clearing system. With respect to the future protection of the use of cheques, there are no plans at all to curtail their use. A consultation is ongoing about the use of cash. On whether people should be encouraged to use images of cheques rather than physical ones, I think that customer demand and banking innovation will lead the way.

There has been a significant transition in the last three years. Given the advance of open banking and FinTech, we are seeing more and more products and opportunities enabling people to behave differently with their financial products, and I believe that that will lead the way. However, I take seriously the concerns expressed about vulnerable consumers and the need to ensure that they have adequate provision to make the transactions they need to. I hope that I have addressed the substantive points raised and that the draft orders will now be passed.

Question put and agreed to.

draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018

Resolved,

That the Committee has considered the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.—(John Glen.)

Oral Answers to Questions

John Glen Excerpts

Tuesday 3rd July 2018 Commons Chamber

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

The Government have a number of policies in place to support the development of low-carbon technology, including battery storage technologies. Those include the carbon price support mechanism, which encourages decarbonisation of the power sector; the Government’s smart systems and flexibility plan; and the Faraday challenge fund.

[Sir Henry Bellingham]

I am very grateful to the Minister for that reply. Is he aware of the huge investment in the offshore wind sector along the Norfolk and Lincolnshire coast, where more than 1,000 individual turbines are in place, with the prospect of many more to come? The key breakthrough that is required is enhanced battery storage technology, which will enable wind-generated electricity to be put through the grid on days when the wind is not blowing. What more is he going to do to try to incentivise further breakthroughs on that?

[John Glen]

I am grateful for that question. My hon. Friend is correct; we are maintaining our position as a global leader in offshore wind. But the combination of that with support for the battery storage sector is important, and we will be supporting it through the capacity market, which is helping to bring down costs.

[Mr Jim Cunningham (Coventry South) (Lab)]

As the Minister will be aware, Jaguar Land Rover is in my constituency and it is developing batteries. What discussions has he had with Jaguar Land Rover about tax incentives in that area?

[John Glen]

I have not personally had any such discussions, but the Exchequer Secretary will have done. We are supporting that business, and many others up and down the country, through the comprehensive industrial strategy that we are rolling out in different sectors.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

10. What recent discussions he has had with the Secretary of State for Education on changes in the level of funding per pupil in schools since 2010.

--- Later in debate ---

[Craig Mackinlay (South Thanet) (Con)]

13. What steps he is taking to invest in infrastructure in Kent.

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

The Government are committed to ensuring that every part of the country has a modern and efficient infrastructure. In Kent, the extent of superfast broadband has risen from 33% to 95% since 2010, and the South East local enterprise partnership has secured £590 million for 30 transport schemes. Work has recently begun on a £105 million upgrade to junction 10a of the M20.

[Craig Mackinlay]

Given that Kent is on the frontline of EU border trade and that local plans involve the potential of more than 100,000 new homes over the next 15 years, will my hon. Friend consider investing in the dualling of the A2 and the A256 to improve traffic flows and resilience in east Kent?

[John Glen]

My hon. Friend makes a very sensible point. The dualling of the A2 near Dover was raised as an issue in Highways England’s route strategy for Kent and is being considered alongside other investments. The A256 is part of the indicative major road network and the Department will be publishing the final network by the end of the year. If it is included, it will be a matter for the local authority, working with the subnational transport bodies, to determine whether to bid into the fund.

[Ian Austin (Dudley North) (Lab)]

rose—

--- Later in debate ---

[John Glen]

I am very sorry but I do not recognise the hon. Gentleman’s characterisation of the Government’s intentions. We have actually rolled out a comprehensive strategy across the country in terms of the northern powerhouse and the midlands engine with the systematic devolution of decision making and resources to enable growth throughout the country.

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

14. What assessment his Department has made of the effect on economic growth of levels of (a) car sales and (b) investment in the car industry.

--- Later in debate ---

[Gareth Thomas (Harrow West) (Lab/Co-op)]

T6. In its report published today, which was commissioned by the Co-op party, the New Economics Foundation identifies lack of access to finance as a significant inhibitor in the growth of the co-op sector. While I am grateful to the Economic Secretary to the Treasury for his interest in this area, I wonder what steps the Treasury might now take to tackle that problem.

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

I held a workshop with representatives of various credit unions this week, and one with community development financial institutions last week. I have convened a working group from the financial inclusion taskforce, which will meet in September to consider urgently expanding access to credit options on better terms than the high-cost ones that exist in the market. We are doing all that we can to incentivise growth in that sector.

[Gareth Johnson (Dartford) (Con)]

Dartford has seen over 1,000 new homes built in and around the town during the past 12 months, which is more than anywhere in Kent and one of the highest figures in the country. Does the Minister agree that investment in infrastructure needs to complement those new homes, not wait for several years?

--- Later in debate ---

[Jeremy Quin (Horsham) (Con)]

What is my hon. Friend’s reaction to the FCA report on doorstep lending, and does it go far enough?

[John Glen]

The report is a welcome step forward, and I note the provision that is made for further steps if the proposed measures do not have an effect. I will be meeting Andrew Bailey tomorrow morning to discuss it further.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Over 1,600 people work at the Jaguar Land Rover engine plant in Wolverhampton, and the car industry has serious concerns about the Government’s plans to leave the customs union. Will the Chancellor guarantee that, when he goes to Chequers later this week, he will only sign up to a customs arrangement that preserves just-in-time manufacturing and integrated European supply chains?

--- Later in debate ---

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

The all-party parliamentary group on fair business banking is undertaking an important body of work on dispute resolution between banks and business. We will give it a parliamentary launch next week. Once the Minister has had time to digest the contents of that report, will he meet us to see how we can take the recommendations forward?

[John Glen]

I eagerly await the report’s launch next Wednesday. I will be happy to meet the all-party group and make a judgment about the best outcome on that issue, along with three other streams of work, in the autumn.

[Helen Goodman (Bishop Auckland) (Lab)]

Ending tax secrecy in the overseas territories will bring in £10 billion a year. Will the Chancellor organise a lunch for my right hon. Friend the Member for Barking (Dame Margaret Hodge), the right hon. Member for Sutton Coldfield (Mr Mitchell) and the entire Labour Whips Office, who were instrumental in securing this change?

Senior Managers and Certification Regime

John Glen Excerpts

Tuesday 3rd July 2018 Written Statements

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

The senior managers and certification regime (SM&CR) will come into force for financial services firms regulated by the Financial Conduct Authority only (also known as solo-regulated firms) from 9 December 2019.

The SM&CR is aimed at changing behaviours and culture in the financial services sector. It ensures that senior individuals in firms are approved by the relevant regulator, have a statement of responsibilities outlining what they are accountable for, and can be held personally responsible for misconduct. It also ensures that a code of conduct is set out for all financial services staff, and that employees in roles where they could do significant harm to consumers or to the UK’s financial stability are approved annually by their firm.

The SM&CR was first introduced for banks and building societies through the Financial Services (Banking Reform) Act 2013 and has applied to banks, building societies, credit unions, investment firms and UK branches of foreign banks since March 2016. The Government also legislated in the Bank of England and Financial Services Act 2016 to extend the SM&CR to all financial services firms. The Government recently announced the SM&CR would apply to insurance firms from 10 December 2018. The application to solo-regulated firms is the final stage in the extension of the SM&CR.

HM Treasury will make commencement regulations to bring the regime into force for solo-regulated firms.

[HCWS823]

Justice and Home Affairs Opt-in Decision

John Glen Excerpts

Monday 2nd July 2018 Written Statements

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

The proposed EU directive on credit purchasers, credit servicers and the recovery of collateral contains, among other things, provisions on a new EU mechanism for out-of-court collateral enforcement. The directive is part of a broader package of EU measures designed to reduce the levels of non-performing loans (NPLs) in the EU, as NPLs decrease profitability of banks, often leaving them in a weak position from which to provide finance to the wider economy in support of growth and jobs.

The Government have decided that it is in the UK’s interest not to opt in to the Justice and Home Affairs obligations within this directive as the provisions introduce an unnecessary level of administration to the UK’s existing collateral enforcement mechanisms, which are sufficiently robust and fit for purpose.

The directive states that where member states establish collateral enforcement mechanisms “by means of appropriation”, the rights of creditors “shall be governed by the applicable laws in each member state”. The Government’s view is that this provision addresses situations in which conflicts of laws points arise, in which case it is an applicable law provision and therefore includes JHA content.

The directive similarly governs applicable law if a borrower and lender from two different EU member states cannot agree on the appointment of a valuer—with the appointment of the valuer falling on the court within one of those member states.

The Government remain supportive of the European Commission’s broader efforts to reduce levels of NPLs in the EU, supporting solutions that are proportionate and targeted.

[HCWS814]

United Kingdom Debt Management Office Business Plan

John Glen Excerpts

Thursday 28th June 2018 Written Statements

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

The United Kingdom Debt Management Office (DMO) has today published its business plan for the financial year 2018-19. Copies have been deposited in the Libraries of both Houses and are available on the DMO’s website, www.dmo.gov.uk.

[HCWS810]

Financial Services

John Glen Excerpts

Tuesday 5th June 2018 Written Statements

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

The Government have sold just over £2.5 billion-worth of Government-owned RBS shares, as part of the Government’s policy to return the bank to private ownership: 925 million shares (representing approximately 7.7% of the bank) were sold at a price of 271p per share, reducing the Government’s shareholding to 62.4%. The sale commenced on Monday 4 June when markets closed and concluded this morning, Tuesday 5 June, before markets opened.

This sale follows the progress RBS has made in addressing major legacy issues and is a further step in the Government’s plan to return RBS in full to private ownership.

The Government received advice from UK Government Investments (UKGI) that selling shares through an accelerated book-build represented value for money for the taxpayer. The proceeds of this sale will go towards reducing our national debt.

It remains the Government’s objective to return the bank fully to private ownership, and further sales will be made when it represents value for money to do so and market conditions allow. This is in the best interests of the taxpayer and the wider UK economy.

[HCWS734]