Funeral Plan Industry

John Glen Excerpts

Thursday 26th May 2022 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mrs Cummins. I thank hon. Members who contributed to the debate: the hon. Members for Putney (Fleur Anderson) and for Gordon (Richard Thomson), the right hon. Member for North Durham (Mr Jones), and of course my hon. Friend the Member for Telford (Lucy Allan), who has professional experience in this domain and used her accountancy and forensic skills to examine some of the issues relating to Safe Hands. They are very relevant to some of the things we need to discuss this afternoon. I know she cares deeply about these matters, and I will try to attend to the points that have been made during the debate.

That people care so much about funerals is not particularly surprising. No one needs to explain to me the important role they play in celebrating the marking of a life and helping bereaved families and friends say goodbye to their loved ones. I have said previously that no one nearing the end of their life, or their families, should be consumed by money worries relating to the cost of their funeral. The hon. Member for Putney raised a number of issues about the broader nature of support for funeral provision. I will probably not be able to attend to them this afternoon, but I note those points and I will try to secure an answer for her.

Safe Hands’s going into administration will naturally be very upsetting for its customers and their families, and those consumers will, of course, be anxious to know who will look into the behaviour of the company and its directors. A number of points have been raised about that, particularly by the right hon. Member for North Durham. Within three months of any administration, the administrator must report to the Insolvency Service on the conduct of the directors prior to the company’s failure. In addition to the Adjournment debate and some of the points made during that debate two Thursdays ago, more points have today been made, helpfully putting on the record some of the concerns about those behaviours. When that administration process has concluded, those matters will obviously be there to be taken up. I understand that, where there is misconduct that shows people to be unfit to be a director, they may be disqualified from acting as a director for up to 15 years where that is in the public interest. Separate criminal investigations may also be undertaken in any administration where evidence of criminality is uncovered. However, it is only right that at this stage we await the outcome of the administration process.

As hon. Members will be aware, and as has been mentioned this afternoon, Dignity, one of the UK’s largest funeral plan providers, stepped in to provide funerals for Safe Hands customers, following the firm’s entering administration. I have met with Dignity myself, in the Treasury, and I know that my hon. Friend the Member for Telford has met with Dignity as well. I am very pleased that Dignity has now agreed to do that—at no additional cost to plan holders—for a further six months.

Although the Financial Conduct Authority does not yet regulate funeral plan providers, it is currently going above and beyond its legal duties by helping to support the industry and administrators as they look to find a longer-term solution for Safe Hands customers. I am hopeful that customers will not need to wait too much longer before they see further progress on a longer-term approach. The example of Safe Hands clearly demonstrated the need for a better-regulated funeral plan market, because although the sector provides a valuable service, we must ensure that the situation that has developed for Safe Hands customers is not repeated. That was the purpose of the work that has been done.

[Lucy Allan]

The Minister is making very important points, so I am grateful to him for giving way. He is talking about the Safe Hands plan holders and arrangements for them. A question that has come up today is what provision will be made for the plan holders who will be within unregulated products after 29 July, because it does appear likely that a significant number of plan holders will be holding a plan that is not backed by any form of compensation scheme or regulation.

[John Glen]

Going forward, people either are regulated—those who are going on the journey into regulation by the end of July go under FCA regulation, and it will be keeping an eye on their selling practices—or become an appointed representative of a bigger, regulated firm, which keeps an eye on them, and then the FCA keeps an eye on it. Many firms, most firms—I think it is in the order of 67 firms—are going through the journey into regulation. There will be smaller firms that decide not to go on that regulatory journey, and either they will become authorised under the appointed representative regime or they will wind down, and return the funds to their customers.

Those are the two options. The FCA is working with the industry to smooth that journey. The House passed a statutory instrument to ease that process of transition. But those are the options available. Of course, we are midway through that journey, but what this afternoon’s debate has shown is the imperative of the industry working to sort out some of the issues that have been laid bare by the Safe Hands experience. I think Safe Hands is an exception, but it is a pretty awful experience for those customers. My belief is that this process of regulation will give clarity to the situation, going forward, in terms of who is regulated, how they are regulated and what being under regulation, either as an appointed representative or directly from the FCA, means. The FCA will be responsible for communicating that.

[Mr Kevan Jones]

I thank the Minister for his explanation. My fear and, I think, that of the hon. Member for Telford (Lucy Allan) is that there may well be other companies like Safe Hands out there that will not go down either of those routes, so I am interested to know what the timescale will be on that. In relation to Safe Hands, he talked about the administrators. What powers does the FCA have if it finds, in those smaller companies, clear scams? I would use the word “scams”, because that is what I think Safe Hands clearly was. What powers does the FCA have then to force the closure of those schemes?

[John Glen]

As I said, it is difficult to be precise in all circumstances because every situation is different. The purpose of giving the FCA that authority is that it has the powers to fine, regulate and insist on certain levels of transparency. Ultimately, if firms that go into regulation do not align with those expectations, the FCA has the power to wind down those firms—in extremis. At this point we are at the start of the journey. The conversations I have had with Dignity—

[Mr Jones]

Will the Minister give way?

[John Glen]

I will certainly give way to the right hon. Gentleman in a moment. Dignity has set up processes to ensure that they continue to comply with those regulations. Those firms that do not choose to be regulated, or do not choose to go under the appointed representative regime, will be obligated to wind down those plans and return those funds. Forgive me; I cannot give absolute clarity on the detail of that process, but I am happy to engage with the right hon. Member for North Durham beyond this Chamber to give him more clarity.

[Mr Jones]

I appreciate that the Minister has been very helpful with what he has described. However, my fear is that some of those small companies may keep trading and taking money off people when we know that they are not being regulated. Are we going to get to a date beyond which, to sell a funeral plan, a company has to either be covered by the FCA or go down the route just described? That will then give assurance to customers that at least there is some protection. I am not going to ask the Minister what that date is, but we do need some indication.

[John Glen]

My understanding is that the intention is for that process to commence at the end of July. In terms of the transition and the guidance to customers, I would need to refer to the FCA on that. I shall write to the FCA and make that letter available to the House of Commons, so that people can be clear about what the situation is.

Among the questions that the hon. Member for Erith and Thamesmead asked me was one about the Government’s actions to this point. We have taken action and we did legislate to bring providers and intermediaries within the regulatory remit of the FCA. That means that from 29 July, funeral plan providers will be subject to robust and enforceable standards on the sale of their plans. In future, consumers will have greater clarity and understanding of what is covered by their funeral plans, and will not be exposed to misleading or high-pressure sales tactics—an issue raised by the right hon. Member for North Durham. For the first time, funeral plan customers will also be able to take advantage of a redress scheme provided by the Financial Ombudsman Service, and benefit from the protection of the financial services compensation scheme. That reflects the point about this being a financial services product, raised by the hon. Member for Gordon. Indeed, we have seen a massive growth in that over the period between 2016 to 2019—a growth of, I think, 175%.

That is why we are doing it. We want to ensure that there is proper regulation that is meaningful and give consumers real assurance around what protections exist. It is also about proportionate regulation. Across my brief as Economic Secretary, I want to be able to boost competition and protect consumers. That is exactly as it should be. That is what drives me in the other areas of regulation that I am looking at, such as buy now, pay later. At the same time, the Government very much recognise the impact of the change that regulation represents for providers. That is why we introduced a transition period before the new rules came into effect—to give businesses the chance to prepare and adapt.

A key priority has been to minimise any disruption to customers resulting from the transition to regulation. The FCA has therefore said that providers who decide not to obtain authorisation, or cannot obtain it, should either wind down before the regulation comes into force or transfer their plans to a provider that will operate under the new rules. The Government recently laid a supplementary statutory instrument to make such transfers easier. That is in line with my responses to earlier interventions—I am glad my speech is in line with my head.

We are aware, of course, that when we bring a sector into regulation for the first time, some providers may be unable to meet the authorisation threshold. That point has been raised with me in representations from my right hon. Friend the Member for South Holland and The Deepings (Sir John Hayes) and representatives of the industry. The inability to meet those new standards due to issues with conduct, business models or trust arrangements does not mean that the regulation is at fault. Rather, the regulation is acting as a cleansing agent, weeding out unsustainable practices and preventing future consumer detriment.

Some Members have asked whether the Government are likely to compensate Safe Hands’s customers. I do not think it would be appropriate for us to set the precedent or expectation that the Government will use taxpayers’ money to compensate consumers for the misconduct of unregulated firms. The Government’s role is instead to ensure that appropriate regulation is in place to guard against such failures. However, the action of Dignity to take a lead as one of the biggest industry players, to make provision for an initial six months and develop a transition option for those who unfortunately are victims of the Safe Hands situation, is very welcome, and I call on others in the industry to follow Dignity’s example. We do not anticipate that there is something else on the scale of Safe Hands out there; we can never be sure—I do not have a crystal ball. Nevertheless, it is incumbent on the industry to continue to work with the regulator to find enduring solutions for as many people as possible.

There is no doubt in my mind that, by acting to protect consumers through a robust regulatory framework, we are doing the right thing. There was a consensus across the House: it was not just this Government, but Members from the Scottish National party and the official Opposition, who called for this action three or four years ago. A well-regulated market will also promote effective competition and do the right thing by consumers over the long term. As I have said, Safe Hands customers have been assured that they will be covered for at least another six months, and I implore others in the industry—other market participants—to take further action to protect consumers of firms that will not become authorised. Taking such action is good for consumers, but also for the reputation of the funeral plans sector. To that end, the Government and the FCA will continue to work closely with each other and the sector to ensure that the shift to regulation is as smooth as possible. That is what funeral customers deserve, and it is what they have a right to expect.

I will reflect on this debate, and if there are any matters that I feel I have not adequately dealt with, I will write to Members and publish a copy of that letter for the House to see.

[Lucy Allan]

I am very grateful to all Members who have attended today’s debate. I know we are competing with the platinum jubilee address to Her Majesty; in fact, the Member who has just sat down in the main Chamber, the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier), is the Member who secured the Adjournment debate on this topic two weeks ago. There are many Members from across this House who would have wanted to be here, making some of the points that have been so ably made by other colleagues.

I am particularly grateful to the right hon. Member for North Durham (Mr Jones). He spoke about the abuse of trust, and a day of reckoning coming for those people who engage in these types of activities. He is absolutely right: financial misconduct is something we cannot tolerate when it targets the most vulnerable in our society.

I also pay tribute to the hon. Member for Putney (Fleur Anderson), because I met somebody the other day who told me that she is almost as good as her predecessor. [Laughter.] That is a very fine compliment to her, because I worked closely with her predecessor for many years. The hon. Lady was absolutely right to talk about dignified funerals: that is a vital issue, and I am pleased that she has also highlighted the issues of anxiety, worry, stress, and all the other things that happen in this market where these selling techniques are used. Both the hon. Member for Putney and the right hon. Member for North Durham talked about people wanting to do the right thing, and we as parliamentarians are here to promote that, support those people and ensure that those who do the right thing do not get penalised by people seeking to exploit them. That is why this debate has been so important.

I am grateful that the hon. Member for Gordon (Richard Thomson) talked about people who are selling peace of mind, because that is exactly where things have been going wrong. We all crave peace of mind, and if somebody is going to sell it to me in a bottle, I am going to pay for it. Taking money from people by creating fears and then not delivering on promises is a disgraceful abuse.

I am grateful to the Minister for everything he has said today, and have absolute confidence that this is something that will stay in his in-tray—somewhere in the middle of his in-tray, perhaps—and continue to have his close attention. The FCA is doing a great job, although it needs to recognise that it was maybe a bit slow to the party. These things have happened on the FCA’s watch.

[John Glen]

I would respectfully say that in the end, this has to be the responsibility of Government, because we mandated the FCA to do this. The Government must take responsibility, not the FCA, but my hon. Friend is absolutely right that it is now incumbent on the FCA to get this right, and I believe it will.

[Lucy Allan]

I thank the Minister for that point. The FCA always talks about things being within or without its perimeter, and I sometimes wonder how a savings product targeted at the most vulnerable could ever have been without its perimeter. I agree that it was the Government—and, in fact, the Minister—who made sure that this issue came within the FCA’s auspices, and it is now working constructively with industry players and Members of Parliament, which is extremely important. I will continue to champion the interests of vulnerable people whose vulnerabilities have been exploited, and I know many others will join me in doing so. Mrs Cummins, thank you very much.

Question put and agreed to.

Resolved,

That this House has considered the funeral plan industry.

DRAFT ALTERNATIVE FINANCE (INCOME TAX, CAPITAL GAINS TAX AND CORPORATION TAX) ORDER 2022

John Glen Excerpts

Tuesday 17th May 2022 General Committees

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

I beg to move,

That the Committee has considered the draft Alternative Finance (Income Tax, Capital Gains Tax and Corporation Tax) Order 2022.

May I say what a pleasure it is to serve under your chairmanship, Sir Edward? The draft order before the Committee widens the scope of the alternative finance arrangements provisions so that certain alternative finance arrangements can receive equal tax treatment to conventional arrangements of the same kind. The United Kingdom has established itself as a leading centre for Islamic finance, and the Government took steps to further build on this last year when we issued our second sukuk, the Islamic equivalent of a bond, at more than double the size of the first. The development of Islamic finance products in the United Kingdom is a welcome sign and demonstrates our position as a world leader in this regard.

It is important that our tax rules are reviewed and updated to reflect market developments and ensure a level playing field for alternative and conventional finance products. We already have alternative finance tax provisions that set out rules on the tax treatment of Sharia-compliant financial arrangements, which allow finance to be provided without payment of interest. The provisions allow for returns made by the finance provider to be treated as if they were interest for tax purposes when certain conditions have been met. However, home purchase plans provided by firms that do not fall within the existing statutory definition of a financial institution, and alternative finance arrangements facilitated by peer-to-peer platforms, are not currently within scope of the provisions. Home purchase plans are a Sharia-compliant method of obtaining property finance in a way that ensures no interest is charged. Currently, Financial Conduct Authority-regulated providers of such products are not defined as financial institutions, and their customers are not able to access the alternative finance rules. They therefore face less favourable tax treatment for the purposes of income tax, capital gains tax and corporation tax than providers that are already defined as financial institutions.

Lenders and borrowers entering certain finance arrangements through Sharia-compliant peer-to-peer platforms also face less favourable tax treatment, which means that home purchase plans provided by FCA-regulated providers, and certain alternative finance arrangements facilitated by an FCA-regulated peer-to-peer platform, are on an unequal tax footing with similar products provided by financial institutions and conventional peer-to-peer lending. The changes made by the draft order will allow both of those types of firms to access the alternative finance arrangements provisions for the purposes of income tax, capital gains tax and corporation tax.

Amending the rules to allow home purchase plans from FCA-regulated providers to fall within the alternative finance provisions will bring parity between conventional financial institutions and non-bank providers, and bringing Sharia-compliant peer-to-peer arrangements within the scope of the rules will encourage investors and operators to enter the Islamic finance market, allowing the Islamic community, especially small businesses, to benefit. It will also contribute towards offering a level playing field for Islamic finance and conventional finance.

When consulting on the draft order, further issues arising from the developing market have been brought to the attention of the Government. They relate to stamp duty land tax rules for Sharia-compliant peer-to-peer lending, and to the individual savings account regulations that may exclude certain arrangements from innovative finance ISAs. I am always grateful to those who bring such matters to the Government’s attention, and those points are being assessed.

These changes reflect developments within the Sharia-compliant market and will allow the industry to continue to thrive and grow, maintaining the UK’s position as a global hub for Islamic finance. I hope colleagues will join me in supporting this order, and I commend it to the Committee.

--- Later in debate ---

[John Glen]

I very much welcome the support of the hon. Members for Hampstead and Kilburn and for Glenrothes. They raised three issues: the treatment of ISAs, student loans—notwithstanding your injunction not to address that point too explicitly, Sir Edward, I will refer to it briefly—and stamp duty land tax with respect to fintech.

First, I pay tribute to the hon. Member for Bradford West, who engaged with the consultation as chair of the all-party parliamentary group on Islamic finance. She was very supportive of this order and the changes. There were respondents to the consultation who requested an extension to the stamp duty land tax exemptions for regulated entities in the Islamic fintech industry, such as peer-to-peer platforms. Officials did not consider it feasible to implement those changes in this statutory instrument, and they and I are exploring the issue further through alternative means.

The Government want to ensure that higher education remains accessible to those with the desire and ability to benefit from it. We are currently considering whether alternative student finance could be delivered as we take forward the lifelong loan entitlement. The consultation on the detail and scope of the LLE closed on Friday 6 May, and the Government are currently considering the responses. A further update on alternative student finance will be provided when the Government issue their response to the LLE consultation.

I think that I have mentioned the non-inclusion of the stamp duty land tax. The issue of ISAs, which was raised by the hon. Member for Glenrothes, has also been brought to the attention of my officials. It is likely that the ISA regulations will require some minor amendments to ensure that alternative finance arrangements can qualify for inclusion in innovative finance ISAs. The changes required will be included in the forthcoming technical changes to the ISA regulations. I think that deals with the substantive points that have been raised. As I said, I welcome Opposition Members’ support.

This alternative finance order will enable home purchase plans provided by regulated firms that do not fall within the existing statutory definition of that financial institution, and alternative finance arrangements facilitated by regulated peer-to-peer platforms, to receive equal tax treatment for the purposes of income tax, capital gains tax and corporation tax. I sincerely believe that this order will help to level the playing field for those products and will aid the Islamic finance industry to move forward in the UK, and continue to develop, to cement our reputation as global leaders in this area. I hope that the Committee has found this afternoon’s session informative and will now be able to support it.

Question put and agreed to.

Oral Answers to Questions

John Glen Excerpts

Tuesday 17th May 2022 Commons Chamber

[Giles Watling (Clacton) (Con)]

3. What steps he is taking to encourage cryptocurrency companies to operate in the UK.

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

At Fintech Week on 4 April, I set out our firm ambition to make Britain a global hub for cryptoasset technology, and I announced a number of actions that will support that. That includes committing to consult on a future regulatory regime for cryptoassets later this year; legislating to bring stablecoins into payments regulation; and exploring ways of enhancing the competitiveness of the UK tax system to encourage further development in this sphere.

[Giles Watling]

I thank my hon. Friend for his answer. Will he commit to working with the cryptocurrency sector and the UK Cryptoasset Business Council to make sure that the UK’s future regulatory parameter can instil a global advantage, ensuring that our economy remains ahead of the curve?

[John Glen]

Yes, absolutely, and my officials are meeting the Cryptoasset Business Council later this week. We want to take a dynamic approach to industry engagement. Lots of similar organisations have spawned over the last few months, and I and my officials will work very closely with them as we lead this global leadership aspiration.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The cryptocurrency market is expanding rapidly, but what are the Government doing to ensure that the wider public are aware of the wild swings that exist in the market? Yes, profits can be made, but so can significant losses, as the past few months have demonstrated.

[John Glen]

We watch these things very carefully. That is why, in January this year, we announced that certain cryptoassets will be brought within the scope of financial promotions regulation. I am very aware of the Financial Conduct Authority’s advice, which shows that only one in 10 cryptoholders are aware that they can lose all their money. We need to get that number up.

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

4. What steps his Department is taking to tackle economic crime.

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

Money obtained through corruption or criminality is not welcome in the UK. The Government are taking concerted action to combat that threat by investing £400 million over this spending review period, with the kleptocracy cell in the National Crime Agency targeting sanctions evasion and corrupt Russian assets hidden in the UK. The Government have taken far-reaching steps to improve corporate transparency, including through recent and forthcoming primary legislation announced in the Queen’s Speech last week.

[Kevin Hollinrake]

I thank the Minister for that answer. NatWest and HSBC have been hit with big fines for facilitating money laundering, and Danske Bank will probably see a fine of £2 billion for £200 billion of money laundering. This is seen not as a deterrent, but as a cost of doing business for these big banks. Does he agree that the only way that we will tackle this is through criminal prosecutions both at a corporate level and of senior managers? Does he support the calls to that effect in the economic crime manifesto by the all-party groups on fair business banking and on anti-corruption and responsible tax, and will he support such measures in the economic crime Bill?

[John Glen]

I thank my hon. Friend for his question. I think he is the House’s foremost observer of banks’ behaviour, but he also knows that this is an extremely complex area of law. The Government have asked the Law Commission to undertake an in-depth review of laws around corporate criminal liability for economic crime and to make recommendations. My understanding is that the Law Commission will make an announcement on this subject imminently, and we will look at that very carefully.

[Chris Elmore (Ogmore) (Lab)]

One of the key complaints from any of my constituents who are victims of economic crime is about the inability to reach out to Action Fraud, and if they do, they get no response. I urge the Minister—plead with him, in fact—to reform the work of Action Fraud and perhaps even bring about a new body in any new legislation to ensure that constituents get some sort of answer and, importantly, some form of support from the authorities of the UK state.

[John Glen]

This is a criticism that I hear. I am very happy to meet the hon. Gentleman to discuss it further, examine the experience of his constituents and look at what we can do constructively to move things further in the right direction.

[Kelly Tolhurst (Rochester and Strood) (Con)]

Following clarity from my hon. Friend to UK Finance on how banks should interpret the money laundering regulations, a number of banks continue to close existing pooled client accounts of long-established, reputable boat-broking businesses. That is now stopping those businesses trading. What further assurance can he give to banks regarding these low-risk businesses?

[John Glen]

I thank my hon. Friend for her question. As she will know from the letter that I sent her this morning and from our conversation with industry representatives together a few months ago, this is quite a challenging issue to resolve. I cannot direct the banks to open, and keep open, these accounts, but I will continue to engage with her and with UK Finance to see whether more progress can be made in the coming weeks.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

The Government have lost £4.3 billion of taxpayers’ money through fraudulent covid schemes. Now we learn that a large chunk of that money is going into the hands of terrorists, organised crime gangs and drug dealers. Will the Minister reassure me that he is taking the reports seriously and update the House on the total number of investigations the Government are undertaking that relate to covid fraud?

[John Glen]

I can absolutely reassure the hon. Lady that the Government take the issue very seriously. That is why at previous fiscal events the Chancellor has invested £100 million in a taskforce to deal with it. When we designed a number of the interventions, protecting taxpayers was a real consideration. It is also the case that we needed to act swiftly to assist those businesses and if we had not made some of those interventions at the time, many businesses would have gone under. We continue to engage carefully on the matter.

[Alison Thewliss (Glasgow Central) (SNP)]

We on the SNP Benches welcome the economic crime and corporate transparency Bill, and given the scale of the problem that the Tories have presided over, it is long overdue. What discussions has the Minister had with colleagues in the Department for Business, Energy and Industrial Strategy about making Companies House an anti-money-laundering supervisor in its own right finally to lock out the fraudsters, the kleptocrats and their dirty money from Companies House once and for all?

[John Glen]

The hon. Lady is absolutely right to highlight Companies House reform as a major area that we are working on. The Government forwarded more than £60 million to start that work, which has now been accelerated. Alongside the register of overseas entities and beneficial ownership, the increased transparency of those assets will be very welcome.

[John Penrose (Weston-super-Mare) (Con)]

5. What assessment he has made of the effects of high marginal deduction rates on work incentives for people who are (a) key workers, (b) on below average incomes and (c) on above average incomes.

--- Later in debate ---

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

8. What recent steps he has taken to progress the Government’s access to cash strategy.

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

The Government recognise the importance of access to cash in the daily lives of millions of people across the UK. In the Queen’s Speech, the Government announced that we will legislate to protect access to cash in the financial services and markets Bill, which will be brought forward soon, when parliamentary time allows. We consulted on legislative approaches last year and will publish a summary of responses to the consultation this week.

[Margaret Ferrier]

If we look at the demographic of people who are most likely to be reliant on access to cash, we see that in large part it is those who are vulnerable or on low incomes. If someone is down to their last £10, they cannot afford a withdrawal fee at an ATM. Will the Government look to make all ATMs free to use for the customer by working with banks and ATM providers to reform the interchange fee, so that the system accounts for varying demographics, geography and demand in a way that it currently does not?

[John Glen]

As I said, the Government’s response will be revealed in the legislation. When I visited the hon. Member’s constituency not so long ago, I saw that the use of hubs—banks working together to provide access to cash—is key. There are 72,000 cash access points and 430,000 cashback locations across the UK. A coherent response that addresses the hon. Member’s points will be made in the legislation.

[Anna Firth (Southend West) (Con)]

9. What fiscal steps he has taken to support investment in UK infrastructure.

--- Later in debate ---

[Stephen Hammond (Wimbledon) (Con)]

There was widespread welcome for last week’s announcement that the Government will introduce a financial services and markets Bill. Can my right hon. Friend confirm that the intention of that Bill will be to ensure that future regulation is proportionate, that the regulator is publicly accountable and that we intend to maintain the international competitiveness of this great industry?

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

Absolutely I can. I note the observations of some economists yesterday; we will have an obligation on regulators to take account of competitiveness and of where we are in the global context.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

T5. Compared with April 2020, our energy bills are now 75% more expensive and petrol is 50% more expensive. If the Chancellor thought an extra £20 a week was needed for universal credit two years ago, surely he agrees it must be reinstated as a matter of urgency?

--- Later in debate ---

[Stella Creasy (Walthamstow) (Lab/Co-op)]

One group of companies doing well out of the cost of living crisis is the buy now, pay later lenders, with Klarna now valued higher than Barclays or Lloyds. One in 12 of their customers are using buy now, pay later credit to pay for toiletries and basic food products. Will the Chancellor, who was boasting about our consumer credit profile earlier, name the date when our constituents can finally make good on the promise that was made in this House over 18 months ago to give people protection from these legal loan sharks and access to the Financial Ombudsman Service?

[John Glen]

I cannot give the date, but it will be very soon.

[Dan Jarvis (Barnsley Central) (Lab)]

My experience over the past four years or so has proved without doubt that truly levelling up South Yorkshire and the wider north will require transformative levels of investment. Does the Chief Secretary agree, and if so, does he truly believe that the investment is there to meet the huge challenge that we undoubtedly face?

Safe Hands Funeral Plans

John Glen Excerpts

Thursday 12th May 2022 Commons Chamber

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

I thank the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) for securing this important and timely debate on an incredibly emotive subject. I thank colleagues on both sides of the House for their contributions, including the hon. Members for Glenrothes (Peter Grant) and for Llanelli (Nia Griffith). I will specifically address the points raised by my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard), and I thank my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) for raising his constituent’s case.

I take this opportunity to remember our former colleague Sir David Amess. He was a friend to many of us here today, and he cared very much about helping people manage the financial impact of funerals. I thank hon. Members who have campaigned over the past few years in support of regulation. I recall conversations with Neil Gray, the former hon. Member for Airdrie and Shotts, who first tabled a private Member’s Bill to this effect in 2016.

Finally, I am grateful to hon. Members here today for the points they have raised. I think I will be able to address many of those points, and I will write to them on anything that I do not address.

As has been said, funerals are painful experiences, but they can also provide people with a degree of mental closure, because they help us to adjust to the reality of the loss of a loved one. We are all very much agreed that at such a moment mourners should be able to focus on their memories of their loved one and on their own emotions; no one should be consumed by money worries. Clearly, therefore, Safe Hands’ entering administration, as the hon. Lady accurately set out, is very distressing for its customers and their families. Obviously, she mentions eloquently the case of Mr Hughes and what he has experienced in recent weeks. Our thoughts should be with those who have recently lost someone close to them and now find themselves affected by Safe Hands’ failure. As has been mentioned, Dignity, one of the UK’s largest funeral plan providers, has stepped in to provide funerals on behalf of Safe Hands’ customers in the immediate period after the firm entered into administration. I echo the hon. Lady’s words in expressing gratitude that it has stepped up to the mark and agreed to do that for a further six months. I regret the fact that her constituent does not have clarity on exactly where that leaves him, but of course Safe Hands will be entering the administration process and that will need to be concluded before wider issues can be looked at. I met people from Dignity yesterday, along with my Treasury officials, and they reiterated their commitment for the next six months. It has been very welcome to see a funeral plan provider taking that responsibility for protecting the sector’s customers and upholding the industry’s reputation.

I had the privilege of meeting my right hon. Friend the Member for South Holland and The Deepings (Sir John Hayes), and members of the all-party group and of the industry a few weeks ago to discuss what was happening with this difficult case. Although the Financial Conduct Authority does not yet regulate funeral plan providers, it is supporting the industry and administrators as they look to find a longer-term solution for Safe Hands’ customers. I am very hopeful that customers will not need to wait too much longer before they see further progress on this longer-term approach. However, I strongly believe that what has happened to Safe Hands is clear evidence of the pressing need for a better-regulated funeral plan market that will provide customers with the stability they need at such a difficult time and will allow us, as Members of Parliament with constituents who have been affected by Safe Hands’ demise, the reassurance and confidence that we can see them not worry in future.

Although the sector provides a valuable service, there is still some distance to travel when it comes to ensuring that all funeral plan customers are shielded from harm. Indeed, major reports and work carried out by the Treasury and the FCA revealed examples of consumer detriment in the sector. As a result, last year, we legislated to bring providers and intermediaries within the regulatory remit of the FCA. That change means that from 29 July funeral plan providers will be subject to robust and enforceable standards for the first time. These standards will benefit consumers in a number of ways, for instance, by giving them clarity about what is covered by their plans, and ending high-pressure and misleading sales tactics. In addition, for the first time funeral plan customers will be able to access a redress scheme, which will be provided by the Financial Ombudsman Service. Ultimately, we believe a well-regulated market will promote effective competition and drive better long-term consumer outcomes. I recognise that this industry does have an important role to play; the demise of Safe Hands will be dealt with through the administration process and there may well then be further examination of what happened, but my determination is that we will get this regulation right and provide security to the industry. The vast majority of firms in the industry are doing the right thing at the moment and I am clear that once they have adjusted to that new regime, we will have confidence going forward.

The Government recognise that the new regulation presents a major change for providers, which is why we introduced an 18-month transition period before the new rules came into effect. That has given businesses time to take the right steps to familiarise themselves with the new requirements and prepare to adopt them.

We of course recognise that it is paramount that we minimise any disruption to customers as a result of the changes, which is why the FCA has said that providers that decide not to or cannot obtain authorisation should transfer their plans to a provider that will operate under the new rules. Alternatively, businesses should wind down in an orderly way before the regulation comes into force.

On that note, Members may be aware that last month the Government made a supplementary statutory instrument that will make it easier for funeral plan providers that seek to exit the market to transfer their existing funeral plan to a regulated funeral plan provider. I discussed that change with Dignity yesterday, and it welcomed it. It should ease the process for the relatively small number of people who find themselves subject to a plan the provider of which will not go into regulation: they will be able to port their plan to one of the bigger industry providers.

When we bring a sector into regulation for the first time, there is clearly a possibility that some providers will be unable to meet the authorisation threshold. In addition, the process may reveal that some businesses are unable to deliver on promises they have made to their customers.

[Peter Grant]

The Minister is understandably focusing on the new regulatory regime—I think he is aware of some of my concerns about the adequacy of the FCA as currently set up—but there should have been other regulation. Who should have been regulating the activities of the trust? Who should have prevented it from engaging in wildly speculative, insecure investments, directly against the promises that were made? Safe Hands Plans Ltd’s first two years of accounts contained demonstrably and obviously false statements, which were never picked up on by Companies House. Who should have been regulating that? Does the Minister accept that regardless of the changes to the regulation of funeral plan companies, there appear to have been serious regulatory failures elsewhere, again?

[John Glen]

The hon. Gentleman makes his points somewhat speculatively, but expresses some valid specific concerns about the journey that Safe Hands went on. Other investigations cannot take place until the administration process is concluded. The driver for the regulations that we are to introduce was the fear among Members from all parties a few years ago. The important thing is to give reassurance going forward. There will be a day of reckoning for the directors of Safe Hands, who will have to account for what happened, but the administration process must happen first. I cannot say any more on that, but the hon. Gentleman’s relevant points are noted.

I must stress that an inability to meet the new standards of regulation—because of issues with conduct, business models or trust arrangements—does not mean that the regulation is at fault; rather, by bringing the sector into regulation, we expose unsustainable practices that, left unchecked, could ultimately worsen and impact more consumers. As the famous adage says, sunlight is the best disinfectant. In this instance, by regulating we will turn the spotlight on businesses that operate with unworkable models, and will prevent consumer harm.

My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) asked about the low-interest loan scheme that we have been piloting with South Manchester Credit Union. I hope to visit Manchester in the week after next. My hon. Friend is absolutely right that there is a wider agenda in terms of affordable credit, and I am still very much committed to developing that instrument and making it widely available, alongside making other interventions in respect of credit unions that we can talk about when the financial services and markets Bill comes to the House shortly.

It is right that the Government act to protect consumers, many of whom will be elderly or vulnerable, with a robust, proportionate regulatory framework. In addition, a well-regulated market will promote effective competition and drive better long-term outcomes for consumers. As I have said, Safe Hands customers can be assured that they will be covered for at least another six months. I encourage other providers and market participants to take further action, as Dignity has done, to protect consumers of firms that will not become authorised.

I assure the House that the Government and the Financial Conduct Authority continue to work closely with each other and with the sector—I have mentioned those two meetings that I have personally held, and meetings that my officials have held, with industry representatives—to ensure that that shift to regulation is as smooth as possible. I take account of the several valid points raised this afternoon. We all have a moral obligation to ensure that funeral plan customers and their loved ones receive the certainty that they need and deserve.

Question put and agreed to.

Public Works Loan Board Lending Limit

John Glen Excerpts

Wednesday 11th May 2022 Written Statements

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

The Public Works Loan Board (PWLB) is a HM Treasury lending facility to local government. The PWLB passes on central Government’s lower cost of borrowing to local authorities to support their delivery of housing, local infrastructure, service delivery and local regeneration. It also helps local authorities to manage their cash flow in a predictable and cost-effective way.

Today, I wish to announce an important step the Government are taking regarding the ongoing effective management of the PWLB.

I will shortly commence section 112 of the Finance Act 2020, amending the National Loans Act 1968 to increase the overall PWLB lending limit from its current level of £95 billion to £115 billion. This will allow the PWLB to make an additional £20 billion of advances to local authorities across England, Scotland, and Wales, continuing to fund essential local projects that will support the delivery of local infrastructure, housing, and service delivery.

The lending limit was previously raised from £85 billion to £95 billion in October 2019. Heightened local authority lending, as highlighted in reports produced by the Public Accounts Committee (PAC) and National Audit Office (NAO), has driven the need to implement this further increase. The ongoing increase in lending largely reflects local authorities’ continued investment in their capital programmes and the expansion of their delivery of services through capital expenditure. The PWLB provides critical support for local authorities through accessible, low-cost lending, and it is important that this access is maintained. I note the action taken by my right hon. Friend the Secretary of State for Levelling Up, Housing and Communities to address instances of excessive risk, which will safeguard the proper and proportionate borrowing and investment provided by the PWLB.

The PWLB remains the best source of accessible, low-cost borrowing for local government. By extending the overall lending limit, the Government are strengthening their commitment to supporting local government delivery of key local priorities.

[HCWS13]

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2022

John Glen Excerpts

Monday 25th April 2022 General Committees

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

I beg to move,

That the Committee has considered the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2022 (S.I. 2022, No. 393).

It is a pleasure to serve under your chairship this afternoon, Mr Hosie.

The Government recognise the threat that economic crime poses to the UK and our international partners, and are committed to combating money laundering and terrorist financing. Illicit finance causes significant social and economic costs through its links to serious and organised crime. It is a threat to our national security, and risks damaging our international reputation as a fair, open, rules-based economy. It also undermines the integrity and stability of our financial sector, and can reduce opportunities for legitimate business in the UK. That is why we are taking significant action to combat economic crime through the economic crime levy and the Economic Crime (Transparency and Enforcement) Act 2022, and by progressing the Government’s landmark economic crime plan. We are also working closely with the private sector and our international partners to improve the investigation of economic crime, strengthen international standards on corporate transparency, and crack down on illicit financial flows.

The money laundering regulations support our overall efforts. As the UK’s core legislative framework for tackling money laundering and terrorist financing, they set out various measures that businesses must take to protect the UK from illicit financial flows. Under the regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries, which are countries identified as having strategic deficiencies in their anti-money laundering and counter-terrorism financing regimes that could pose a significant threat to the UK’s financial system.

This statutory instrument amends the money laundering regulations to update the UK’s list of high-risk third countries to mirror lists published by the Financial Action Task Force, the global standard-setter for anti-money laundering and counter-terrorism financing. The UK’s high-risk third countries list will now include the United Arab Emirates, and will no longer include Zimbabwe. In March 2022, the UAE was listed by the FATF, and Zimbabwe was removed, having completed its FATF action plan to address the key deficiencies in its anti-money laundering and terrorist financing regimes.

As the Financial Action Task Force carries out its periodic reviews and regularly updates its public lists of jurisdictions with strategic deficiencies, we also need to update our own. Updating our list shows that we are responsive to the latest economic crime threats, and ensures that the UK remains at the forefront of global standards on anti-money laundering and terrorist financing. This amendment will enable the money laundering regulations to continue to work as effectively as possible to protect the UK financial system. It is crucial for protecting UK businesses and the financial system from money launderers and terrorist financers. I therefore hope that colleagues will join me in supporting this legislation.

--- Later in debate ---

[John Glen]

I will endeavour to address the points made by the hon. Member for Hampstead and Kilburn, but I will turn first to the two points made by my right hon. Friend the Member for Scarborough and Whitby, the first of which was on the nature of the regulator’s engagement with small entities—he cited his own in North Yorkshire. The new chief executive of the Financial Conduct Authority, who was appointed in October 2020, is undertaking a transformation programme at the FCA that is designed to interrogate risks more effectively and to target compliance activity more proportionately. A lot of progress has been made, but clearly there is more to be done. I will be happy to take up any individual examples that my right hon. Friend raises formally.

My right hon. Friend also raised the issue of PEPs—politically exposed persons—and the frustrations that occur when colleagues are prevented from accessing financial services products, as well as the consequences of not resolving that issue. There is a framework for light-touch, proportionate and appropriate interrogation of such risks, although sometimes those processes are not always executed properly. I have taken that up on two occasions over the last few years, and there has been an incremental step change each time, although the situation is not yet perfect. Again, I will be happy to take that up that issue.

The hon. Member for Hampstead and Kilburn raised three points—on the UAE, Zimbabwe and Russia—which I will take in turn. On the listing of the UAE, she recognises the history. At the March 2022 FATF plenary, the FATF concluded that the UAE should be added to the list of jurisdictions with significant weaknesses in its counter-illicit finance regimes, but recognised that the UAE had made significant progress. A lot of FATF assessments are not black and white, as many of the countries are on a journey, but in my experience the FATF is pretty rigorous in its assessments and pretty unashamed in intervening, regardless of any lobbying. I am clear that the process is rigorous and thorough.

The UAE expressed its high-level political commitment to making further reforms in a number of areas in order to exit the FATF list. The UK is working closely with the UAE to address those weaknesses in the UK-UAE partnership in order to tackle illicit finance. By aligning the UK’s approach to that of the FATF, the UK is in line with international standards. The identification of countries is underpinned by the FATF’s consistent technical methodology and robust assessment processes. On occasion, other countries’ representatives have challenged those processes, asking me, “Would the UK intervene?”; we do not. As a key, leading member of the FATF—one of its 39 countries—we stand by its methodology.

The hon. Member for Hampstead and Kilburn asked a number of questions about the history of the relationship with the UAE, and cited Spotlight on Corruption and other organisations, such as Transparency International. We look carefully at what they have to say. I cannot answer her questions about the specifics of the UAE-UK relationship historically, but I will write to her if I can find any more information.

The hon. Lady made a number of assertions about the FATF and where the UK is. I recognise the politics of the matter, and the movements that the Government have made in this Session and hope to make in future. I draw her attention to the mutual evaluation report of the UK’s system in December 2018, which cited the progress needed on the register of overseas beneficial ownership and Companies House reform. A large amount of money—£63 million—was allocated to work on Companies House reform at the last spending review, and the legislation is coming to make good on that. I do not accept all that the hon. Lady said, but I welcome the steps that have been taken in these difficult times, and that will continue to be taken to accelerate and to meet the conditions set out in that report. Overall, that FATF analysis of the UK was extremely complementary—one of the best reports it has ever done—and we should be proud of our progress.

On Zimbabwe, I acknowledge and am grateful for the hon. Lady’s assent to what I am proposing today. Clearly, there is an ongoing piece of work with every country. Countries move through the journey, from being a cause for concern to not a cause for concern; this measure is the consequence of that. She asked why Russia has not been added to the high-risk third countries list. The UK’s HRTC list mirrors those identified by the FATF in its public documents as having poor anti-money laundering and counter-terrorist financing controls. I certainly grasp the optics of where Russia is—that it is not on the list—but by aligning our approach FATF we remain in line with international standards. The identification of high-risk countries is underpinned by that consistent, objective methodology and robust assessment process.

It is important not to look at the UK’s list of high-risk jurisdictions in isolation. The money laundering regulations require enhanced scrutiny in a range of situations that present a high risk of money laundering, and Russia will be included in that. Regardless of listing, firms have to make nuanced risk assessments of business relationships and transactions. The UK’s national risk assessment on money laundering and terrorist financing publicly identified Russia as high risk. We will continue to work with our allies, including the FATF, the EU and the US on these matters, ensuring the continuation of a co-ordinated and targeted response to Russia’s invasion of Ukraine that protects the international financial system as a consequence.

I have addressed the three countries that the hon. Lady mentioned. It is the Government’s view that this amendment will ensure that UK legislation remains up to date and continues to protect the financial system from the threats posed by jurisdictions with inadequate money laundering and terrorist financing systems. The amendment enables the UK to remain in line with international standards on anti-money laundering and terrorist financing, allowing it to continue to play its full part in the fight against economic crime. I hope the Committee has found my observations somewhat illuminating, and supports the regulations.

Question put and agreed to.

Financial Services Update

John Glen Excerpts

Tuesday 29th March 2022 Written Statements

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

I can today inform the House of the disposal of approximately £1.2 billion worth of Government-owned NatWest Group plc—formerly Royal Bank of Scotland, RBS—shares, representing approximately 4.91% of the company, by way of a directed buyback transaction.

Approximately £1.2 billion worth of shares were sold to NatWest in a single bilateral transaction on 28 March 2022.

The Government remaining shareholding represents approximately 48.1% of voting rights in the company, meaning that for the first time since the financial crisis NatWest is no longer under majority public ownership.

Rationale

It is Government policy that where a Government asset no longer serves a public policy purpose the Government may choose to sell that asset, subject to being able to achieve value for money. This frees up public resource which can be deployed to achieve other public policy objectives.

The Government are committed to returning NatWest to full private ownership, given that the original policy objective for the intervention in NatWest—to preserve financial and economic stability at a time of crisis—has long been achieved. The Government only conducts sales of NatWest shares when it represents value for money to do so and market conditions allow. This sale represents a landmark for Government in exiting the assets acquired as a result of the 2007 to 2008 financial crisis, as it takes the Government’s shareholding below 50%.

Format and timing

The Government, supported by advice from UK Government Investments, concluded that selling shares to NatWest, in a single bilateral transaction, represented value for money.

Share buybacks are a common practice undertaken by companies looking to efficiently deploy their excess capital. On 6 February 2019, NatWest obtained shareholder authority to purchase shares held by Government at market price. This authority was renewed at subsequent NatWest annual general meetings in April 2019, April 2020 and April 2021.

This is the fifth large block sale of NatWest shares undertaken by the Government, following previous disposals in August 2015, June 2018, March 2021 and May 2021. This is the second sale of shares via an off-market share sale directly to the company.

The sale concluded on 28 March 2022, with NatWest purchasing a limited number of its Government owned shares. A total of approximately 550 million shares, approximately 4.91% of the bank, were sold at the 25 March 2022 closing price of 220.5p per share. The reduction in the Government’s shareholding is less than the percentage sold following the cancellation of shares by NatWest. Following this transaction the Government shareholding stands at approximately 48.1%.

Details of the sale are summarised below:

Midas Financial Solutions Collapse

John Glen Excerpts

Tuesday 22nd March 2022 Westminster Hall

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

It is a privilege to serve under your chairmanship, Mr Stringer, and I join others in congratulating the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing today’s debate.

Before I get into the matter at hand, I want to acknowledge the role that my opposite number, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), has played over the past six years in championing the case of her constituent, Nazanin Zaghari-Ratcliffe. We all have constituents in need, but the hon. Lady’s consistent advocacy has been very effective, and I want to pay tribute to her publicly.

In acknowledging that this is an extremely challenging case, which has caused great misery to many investors who were misled, I recognise, too, the broader context of a financial services sector that is a great success in this country. However, the debate and the points made in it have raised a number of issues that I want to respond to specifically. If hon. Members are patient, I will get into the mechanics of the authorised representative regime, how it is working and what lessons we learn from this.

Fraud is a crime that damages trust between individuals and across society—I would say it casts a shadow across the economy—and tackling it is a priority for the Government. Our efforts are focused on reducing vulnerabilities, catching the criminals responsible and supporting the victims of these despicable crimes. As the hon. Member for Strangford (Jim Shannon) said in his welcome remarks, those crimes cause considerable distress to individuals and have a catastrophic effect on families and communities.

We are working closely with industry regulators and consumer groups to consider additional legislative and non-legislative solutions. I will say more about that in a moment, but first I will set out the Government’s position on this specific case. As hon. Members no doubt appreciate, there are limits to what I can say, but Mr Alistair Greig perpetrated a large-scale fraud over several years, much of it accurately depicted by Members this morning. He lied to those who trusted him with their pensions and life savings, and caused enormous suffering.

Midas was founded by Mr Greig in 2006 and it carried on a financial advisory business based in Aberdeen. In 2007, it became an appointed representative of a firm called Sense Network Ltd, and the Treasury understands that much of its business was mortgage advice. Mr Greig used his senior position in the firm and its relationship with Sense to convince his clients that he was investing their hard-earned money in high street accounts with RBS.

I want to pick up the point made in passing by the right hon. Member for Orkney and Shetland on the culpability of RBS. In all these tragic cases, it is incumbent on all parties to examine their processes. I think the right hon. Gentleman mentioned that RBS had—

[Mr Carmichael]

A lack of curiosity.

[John Glen]

A lack of curiosity. I cannot know whether that is the case, but I say as a Minister that it is important that every business reflects on its responsibilities in cases of this sort.

Clearly, what Mr Greig said about where he was putting that money proved not to be the case. Instead, he was operating what we can all acknowledge was a Ponzi scheme. It went well beyond the scope of Midas’s appointed representative arrangement with Sense, the principal firm, and accepted deposits without proper authorisation. Instead of investing on behalf of clients who had trusted him with their savings, he transferred the money to his personal account and used it to fund the lavish lifestyle that has been spoken about this morning. His fraudulent activities were halted only when the Financial Conduct Authority intervened in 2014, following contact with a concerned investor. When the FCA became involved, the scheme included 279 members of the public, whose investments have not been repaid. They had paid £12.8 million and were owed a total of £13.6 million. Following the conclusion of a legal case involving some of the investors and Sense, the Financial Services Compensation Scheme declared Midas to be in default, following which the scheme was able to start accepting claims from investors and begin paying compensation to eligible claimants.

Although I am pleased that the scheme was uncovered and stopped by the FCA and that the FSCS has been able to compensate for a significant proportion of what was lost, I recognise that the scheme will have caused great pain to those involved, and I condemn unreservedly the actions of the man responsible. In seeking to understand the case, it is worth while for me to unpack the appointed representatives regime, which has been mentioned by the right hon. Member for Orkney and Shetland and others. It is the key policy area that is thrown into focus by this case.

As Members will know, under the UK’s regulatory approach to financial services, a firm must be authorised by either the FCA or the Prudential Regulation Authority in order to carry out a regulated activity. Authorised firms can also appoint other firms to act as appointed representatives for certain regulated activities, but it is worth noting that deposit taking, which Mr Greig was carrying out, is not an activity allowed under the regime, and I will say more about that in a while. In such relationships, the authorised principal firm must ensure that its appointed representatives are complying with all relevant regulatory requirements set out by the FCA. Mr Greig was a director of Midas Financial Solutions, which was a firm that was permitted to carry out the regulated activity of providing investment advice because it was an appointed representative of Sense Network, a financial advice firm that is authorised directly by the FCA.

The FCA’s investigation found that Mr Greig deliberately concealed his fraudulent operation from Sense Network, the firm that had regulatory responsibility for Midas. Unfortunately, all firms—whether directly authorised or appointed representatives—can be susceptible to individuals deliberately acting in a fraudulent manner, which is what happened. It was a shocking case of fraud. Greig was operating a scheme for which his firm was not authorised, and he hid the scheme from Sense Network.

[Mr Carmichael]

I have a question that I hope the Minister will answer in the next sentence or two. How would any individual investor know the extent of the authorisation and the relationship between the principal and the AR? This does not conform to any other aspect of the law of agency.

[John Glen]

I hope I am coming to that point. The right hon. Gentleman addresses the core point, which is about the comfort that the appointed representative regime provides to the consumer, and the Treasury and FCA are taking steps to ensure that use of the appointed representative regime is not open to abuse.

The relationship between a principal firm and the appointed representatives, including what regulated activities it covers, should be available to the public. That is now a regulatory requirement, and the FCA is taking steps to improve the information that is available to the public by clarifying what the appointed representative firm is authorised by the principal—in this case, Sense—to undertake and what it is therefore not authorised to undertake. That will give consumers clarity on what activities they can legitimately discuss with the appointed representative firm and ensure that they know there is regulatory oversight.

As we know, Sense was not found to be at fault in its role as a principal, as Mr Greig was acting outside the Sense-Midas agreement. The right hon. Member for Orkney and Shetland has spoken about the role of the principal, and the hon. Member for Hampstead and Kilburn asked what the Treasury is doing about this issue, following the Select Committee report last summer. We are undertaking a review of the appointed representative regime and examining how consumers are protected when dealing with an appointed representative and not directly with the authorised firm.

On 3 December, we published a call for evidence on the regime as a whole. At the same time, the FCA published a consultation paper on proposals that will strengthen the oversight that principals have over their appointed representatives, or ARs, and the information available to consumers on the FCA register when dealing with these firms. That call for evidence is essentially gathering information from interested parties and it closed a few weeks ago on 3 March. The Treasury and the FCA are working together to consider the responses, and to set out the next steps in due course and as urgently as we can.

I will also speak a little bit about the role of the FCA, which, as the House will be aware, is an independent regulator, and of the Financial Services Compensation Scheme. The FCA took steps to investigate Midas and Alistair Greig in relation to the activity of accepting deposits without the necessary authorisation and subsequently referred the matter to the police, who launched a successful criminal investigation. The FCA took civil action to stop the activity and obtain compensation for victims, securing agreements to repay over £1.3 million in October 2015. As a result of the proceedings, the FCA recovered approximately £380,000, which has been distributed to victims. Mr Greig was charged by Police Scotland and sentenced to 14 years in jail in April 2020 for fraud.

Although the FCA took action and the subsequent police action led to Mr Greig being prosecuted and sent to prison, I acknowledge the point made in the complaints commissioner’s report that the Financial Services Authority, which was the predecessor to the FCA, should have taken more action, more swiftly and more effectively. It is right, therefore, that the FCA, the successor organisation to the FSA, apologised for that.

Let me just say something about the Financial Services Compensation Scheme, which is the UK’s compensation scheme of last resort. It pays compensation to consumers when authorised financial firms fail and a relevant regulated activity has been undertaken. The FSCS carries out its compensation function within the rules set by the FCA and the PRA. The FSCS first became aware of claims against Midas in December 2019, when lawyers representing claimants approached the FSCS, and it declared the default in March 2020. By August 2020—so, just a few months later—it had processed 197 claims and paid out £9.6 million in compensation.

In order to aid investors claiming compensation, the FSCS, using data collected by the FCA, was able to pay compensation to 175 investors without those investors actually needing to make a claim. It also ran a media campaign targeting the Aberdeen area to ensure that all investors were aware that they could claim compensation from the FSCS, recognising the sensitivity with respect to named constituents that the right hon. Member for Orkney and Shetland mentioned.

On that note, I will take this opportunity to say that the FSCS is still accepting claims against Midas, so I encourage anyone who thinks that they may be eligible to get in touch with the FSCS. Some Midas investors brought a claim against Sense as Midas’s principal, which is the point the right hon. Member made, and I understand that some of those investors are disappointed that the compensation they received from the FSCS did not cover their legal costs.

As set out in the FCA’s rules, the FSCS covers losses suffered by a customer caused by the firm in connection with its regulated activities. It does not, however, extend to covering legal costs in pursuing a regulated firm, especially where the firm is not even a party to those legal proceedings.

[Mr Carmichael]

I am grateful to the Minister for giving way; I see that he is on the last sheet of his speech and I think that we are coming to the very heart of the matter here.

Access to the FSCS was only an option because of the action taken by the 95 against Sense. Quite apart from that, the FCA has a power to pay ex gratia payments. It has not done so, even though it has apologised for the shortcomings in the actions of the FSA. This point was considered by the Commissioner, who declined to order an ex gratia payment, drawing a parallel with damages and saying it would

“clearly undermine Parliament’s intention to provide the regulator with some protection”.

What is more important to the Government here? Is it providing the regulator with protection or the consumers with protection?

[John Glen]

The Government work closely with the FCA. As I have said, we are taking very seriously the implications of this case and the relationship between the principal and the appointed representative, as well as the apparent lack of clarity over what consumers know to be covered by that delegated authority of the principal to the appointed representative. The right hon. Gentleman is referring to the relationship between two entities: the FSA and the FCA. The FCA acknowledges the FSA’s prior failings to do the job as it should have. The right hon. Gentleman is asking me to comment on the eligibility of the victims to access the FCA compensation scheme, which is clearly something that is governed by its protocols. I hope we can learn from this very sad case that, going forward, we will bring more clarity to the appointed representative regime and more clarity to consumers. Of course, consumer care is important.

However, we also have to recognise that the FCA is responsible for around 51,000 authorised firms. Of course, the role of some of those authorised firms in acting as sponsors for appointed representatives needs examination: as I have set out, the Treasury and the FCA are undertaking that. It would be pretty impossible for every appointed representative to undergo the same sort of supervision as an authorised firm—that would expand the scale of the FCA’s responsibilities. We have to make sure that authorised firms’ responsibilities to their appointed representatives are more effective.

I think that I have expressed with clarity that this has been an extremely challenging case for everyone involved. I acknowledge unequivocally that Mr Greig’s fraudulent scheme will have caused great misery to the investors he misled, and it is absolutely right that he was brought to justice. I am pleased that so many of those who made losses have been compensated by the FSCS, and I hope they can now put it behind them.

The Government are not complacent about this. I have gone into some detail about the lessons that we need to learn. We will work alongside other financial authorities to counter fraud and ensure that cases such as these are prevented wherever possible and that, where they do occur, they are dealt with appropriately.

It will always be the case that the Government will need to work with regulators to create an environment that protects consumers while allowing firms to operate. What we have to do—and, since the new chief executive came in about 17 months ago, work has been going on urgently at the FCA to do this—is to undertake a transformation programme to allow the FCA to examine risks across the authorised firms and act more effectively than its predecessor organisation, the FSA, did in this particular case. I hope that is helpful to the House this morning.

Oral Answers to Questions

John Glen Excerpts

Tuesday 15th March 2022 Commons Chamber

[Mr Ben Bradshaw (Exeter) (Lab)]

12. What steps he is taking to tackle illicit finance.

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

We continue to review and reform our regulatory and enforcement approach to ensure that, as illicit finance evolves, our responses do too. We have announced an unprecedented package of sanctions, including against prominent Russian oligarchs. Last night, we brought forward the Economic Crime (Transparency and Enforcement) Act 2022 to crack down further, and we will continue to do further work on the economic crime Bill in the next session. We have also brought a new kleptocracy cell into the National Crime Agency to tackle those explicit threats.

[Mr Bradshaw]

But it took a group of anarchists to seize Deripaska’s London mansion yesterday, so when will the Minister do what Europe and America have already done and seize rather than just freeze Putin’s cronies’ assets? When will he close the loopholes that still allow them to escape sanction by putting their assets in their family members’ names or using shell companies based in British overseas territories?

[John Glen]

The Government have worked closely with the US and the EU on a whole range of interventions. We have sanctioned 500 individuals and entities, including 386 members of the Russian state Duma. We have also worked with the US on the expulsion of banks from the SWIFT banking system, cut off 3 million Russian companies from capital markets and seen $250 billion wiped of Russian stocks. We will continue to work closely with our allies to ensure that our response continues to be comprehensive.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

The Government have once again delayed the long-overdue reforms to Companies House that could have deterred illicit finance, prevented covid fraud and provided vital information to the authorities. I will ask the Minister an important question, and I want him to update the House accurately. How many Russian-linked individuals and businesses have been wrongly given Treasury-backed covid-related business support?

[John Glen]

We worked to give widespread support to lots of individuals across the economy. I cannot give the hon. Lady the exact chapter and verse on individuals who have been supported, but we will continue to work on Companies House reform, which will be the most significant reform of the companies register in 170 years, and later this year we will publish a second economic crime plan and fraud action plan to address the threats that we continue to see.

[Marsha De Cordova (Battersea) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

--- Later in debate ---

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

When the Government set up the coronavirus business interruption loan scheme, they recklessly failed to agree any guidance on early repayments. As a result, businesses are now being charged extortionate fees and are facing bankruptcy. Why is the Chancellor putting the profits of unscrupulous lenders above the recovery of our small businesses?

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

He is not doing that. The schemes were set up in various ways, depending on the size of businesses, and it will be for the individuals who borrowed money to engage with the lenders to refinance those loans on a case-by-case basis.

[Felicity Buchan (Kensington) (Con)]

T9.   People in my constituency who live in mansion blocks where heating is paid for centrally do not currently benefit from the energy price cap. That is clearly an anomaly. Will my hon. Friend meet me to discuss ways in which we might ameliorate the situation?

--- Later in debate ---

[Chris Bryant (Rhondda) (Lab)]

We really must start seizing assets and not just freezing them. That is the only way in which we can make sure that the money goes towards the reconstruction of Ukraine. Would it not also be a good idea for us not just to look at the really famous people like Abramovich, but to look at the people who own £750,000 properties in the UK and who may be the cousins, brothers, sisters, parents or some other proxy of Russian oligarchs in the UK? Must we not also do far more to tackle the personal finance of President Putin, much of which, I am told, is in the UK?

[John Glen]

As ever, the hon. Gentleman has made a powerful point about a very important matter. Work with our allies is ongoing to establish how we can deepen our response in a co-ordinated way in order to make a real impact on illicit finance.

[Sir David Evennett (Bexleyheath and Crayford) (Con)]

T10.   I regularly visit businesses throughout my constituency, and have been fortunate enough to meet some very talented apprentices who are eager to develop their skills and build careers. Does my hon. Friend agree that apprenticeships will play a key role in closing the skills gap by helping young people to gain employment in more highly skilled roles, and can he say what action the Government are taking to encourage more employers to take on more apprentices?

Independent Panel on Ring-fencing and Proprietary Trading: Final Report

John Glen Excerpts

Tuesday 15th March 2022 Written Statements

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

Today I have laid before Parliament the final report on behalf of the Independent Panel on Ringfencing and Proprietary Trading. In 2020, the Treasury appointed an independent panel¹—first to review the operation of the legislation related to ring-fencing; and secondly to review banks’ proprietary trading activities, following a statutory report from the Prudential Regulation Authority published in September 2020². Given the inherent links between the structure of the banking sector and proprietary trading activities, the Treasury appointed a single panel to conduct both reviews.

The ring-fencing regime was introduced in the aftermath of the 2008 financial crisis, following recommendations from the Independent Commission on Banking in 2011, to strengthen the resilience of the UK banking sector. The regime, which came into force in January 2019, separates core retail banking services from investment banking activities, with the aim of protecting depositors from riskier activity conducted outside of the ringfence or in the wider financial system.

Following Brexit, the Government have the opportunity to develop an approach to financial regulation that better suits our markets, while maintaining high standards, fostering competition, and boosting international competitiveness.

The Treasury welcomes the panel’s comprehensive set of recommendations. The Treasury will establish a taskforce with the Bank of England with immediate effect to assess the panel’s recommendations and options for taking them forward and will publish a Government response later this year.

This report is published at: https://www.gov.uk/government/publications/independent-panel-on-ring-fencing-and-proprietary-trading-final-report and copies are available in the Vote Office.

¹ Terms of reference for the Panel’s appointment:

https://www.gov.uk/government/publications/members-of-the-ring-fencing-and-proprietary-trading-independent-review-panel-announced-and-terms-of-reference-for-the-review-published/independent-reviews-of-ring-fencing-and-proprietary-trading-terms-of-reference

² https://www.bankofengland.co.uk/prudential-regulation/publication/2020/proprietary-trading-review

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