Critical Benchmarks (References and Administrators’ Liability) Bill [Lords] (Allocation of Time)
John Glen Excerpts(2 years, 5 months ago)
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The Economic Secretary to the Treasury (John Glen)
I am grateful to the hon. Member for Glenrothes (Peter Grant) for the points he has made, and I recognise the relatively unusual procedure being adopted here. He was present during the passage of the Financial Services Act 2021. Indeed, he contacted my office last week for a briefing prior to this Bill, which I made available to him and Opposition Front Benchers earlier this week. I hope that, in the course of the Second Reading debate and the Committee of the whole House this afternoon, we will indeed give full scrutiny to these matters. They relate to some concerns that arose following the passage of the Financial Services Act earlier this year. As my right hon. Friend the Leader of the House mentioned in response to a question on the business statement a few moments ago, the lack of amendments suggests that this is an uncontroversial matter. However, I am confident that there will be an opportunity to fully scrutinise the provisions of this small and technical Bill through a Committee of the whole House. I do not believe that we are in any way forestalling the appropriate and necessary level of scrutiny for a very technical matter consequential on an Act of a few months ago.
Question put and agreed to.
Central Bank Digital Currency
John Glen Excerpts(2 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
The UK, like many countries, is actively exploring the potential role of a retail central bank digital currency (CBDC) as a complement to cash and bank deposits. A retail CBDC would be a new form of digital money, denominated in sterling and issued by the Bank of England, for use by people and businesses for their everyday payments needs. Exploring the opportunities that a CBDC could offer is aligned with the Government’s wider agenda to remain at the forefront of innovation and technology in financial services.
Earlier this year, the Chancellor of the Exchequer announced a taskforce jointly chaired by HM Treasury and the Bank of England to lead the UK’s exploration of a UK CBDC, along with forums to engage a broad range of stakeholders from across our economy and society, including consumer groups, think-tanks, businesses, academics, financial institutions and technology experts. The taskforce will ensure the UK authorities adopt a strategic and co-ordinated approach as they explore a CBDC, in line with their statutory objectives.
No decision has been taken by the Government and Bank of England as to whether to issue a UK CBDC, which would be a major national infrastructure project. A decision will be based on a rigorous assessment of the overall case for a UK CBDC and will be informed by extensive stakeholder engagement and consultation.
Exploring and delivering a UK CBDC, if there were a decision to proceed, would require carefully sequenced phases of work, which will span several years. I am today setting out the next steps for the exploration of a UK CBDC.
The UK authorities are currently engaged in a process of research and exploration to examine the opportunities and implications of CBDC. As part of those explorations, HM Treasury and the Bank of England will publish a consultation in 2022 setting out their assessment of the case for a UK CBDC, including the merits of further work to develop an operational and technology model for a UK CBDC.
If there is a decision to proceed following the consultation, a development phase would include the publication, by the Bank of England, of a technical specification to explain the proposed conceptual architecture for a UK CBDC. This development phase could involve in-depth testing of the optimal design for, and feasibility of, a UK CBDC.
Following this, a decision would be taken on whether to move into a subsequent build and testing phase. Given the scale and national importance of such a project, this phase would likely take several years and could involve the development of large-scale prototypes and live pilots.
Were the results of each of these phases to conclude that the case for CBDC were made, and that it were operationally and technologically robust, then the earliest date for launch of a UK CBDC would be in the second half of the decade.
The Government are also committed to continuing to work closely with international partners on the cross-border implications of a potential CBDC. The UK, through its G7 presidency, has been leading the global conversation on the opportunities and implications of CBDC. G7 central banks and finance ministries have developed a set of public policy principles for CBDC, and a full report capturing these principles was published in October. These international principles for CBDC represent a step change in the global conversation and are intended to support and inform exploration of CBDCs in the G7 and beyond.
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Financial Services: Future Regulatory Framework Review
John Glen Excerpts(2 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
The Government have today laid before Parliament the second consultation on the future regulatory framework (FRF) review, “Financial Services Future Regulatory Framework Review: Proposals for Reform” (CP 548). The FRF review provides a once-in-a-generation opportunity to ensure that, having left the EU, the UK establishes a coherent, agile, and internationally respected approach to financial services regulation that is right for the UK.
In his speech at Mansion House on 1 July 2021, the Chancellor set out the Government’s vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the UK. Delivering the outcomes of the FRF review is a key part of achieving this vision.
An initial consultation was published in October 2020. HM Treasury received over 120 responses and has carried out significant further engagement with the sector. The consultation document laid today sets out the Government’s response to the feedback received, and the proposals to deliver the intended outcomes of the FRF review.
The consultation sets out a number of proposals to build on the strengths of the UK’s existing domestic framework of financial services regulation, including by:
Ensuring that, as the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) take on greater responsibility, their objectives continue to be appropriate. To reflect the importance of the sector as an engine for growth across the wider economy and the UK’s position as a global financial centre, the Government intend to introduce a new secondary growth and international competitiveness objective for both the PRA and the FCA.
Moving to a system where the financial services regulators take responsibility for setting many of the direct regulatory requirements which were previously set by the EU, establishing a comprehensive FSMA model of financial services regulation for the UK. This will be achieved by repealing the majority of retained EU financial services legislation, with the regulators given powers to replace the current requirements with their own rules. This will ensure a more agile regulatory framework for the future while supporting the UK’s commitment to high standards of regulation.
Ensuring that there continues to be appropriate democratic input into, and public oversight of, the regulators’ activities. This means strengthening the mechanisms through which Parliament holds the regulators to account and which underpin the regulators’ relationship with HM Treasury, in addition to proposals to improve stakeholder engagement in the regulatory policymaking process.
This publication is available on www.gov.uk and will be open for responses until 9 February 2022.
“Future Regulatory Framework Review: Proposals for Reform”: www.gov.uk/government/consultations/future-regulatory-framework-frf-review-proposals-for-reform.
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Treasury Updates
John Glen Excerpts(2 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
Today the Government are publishing the Finance Bill 2021-22 which will include a clause to increase the normal minimum pension age from age 55 to age 57 from 6 April 2028. This increase in the normal minimum pension age was announced in 2014 in the response to the consultation on “Freedom and Choice in Pensions” and the draft clause was published in July 2021. The normal minimum pension age is the lowest age at which the majority of members can take benefits from a registered pension scheme without incurring tax charges, except in cases of ill health.
This change will not apply to members of certain uniformed public service schemes, nor to those whose scheme rules provide an unqualified right to take benefits before age 57. Members with these rights will have a protected pension age.
The draft clause included a window of time during which people could either join or transfer into a scheme which can offer a protected pension age. The window was designed to ensure that those in the process of transferring a pension could complete their transfer and not unexpectedly lose the right to a protected pension age. Stakeholders have subsequently expressed their concerns about this window running until 5 April 2023 as originally proposed, including possible adverse impacts on the pensions market and on pension savers.
The Government believe it is right to offer a protected pension age to those whose scheme rules give them an unqualified right to take their pension before age 57. The Government also believe it is right that those in the process of transferring their pension do not unexpectedly lose the right to a protected pension age. However, after listening to stakeholder views on the draft clause, the Government has decided to shorten the window. The window closed at 23:59 on 3 November 2021. Those who have already made a substantive request to transfer their pension to a pension scheme with a protected pension age of 55 or 56 will still be able to keep or gain a protected pension age assuming the transfer is completed in accordance with the current regulations. This shorter window will help address the issues raised by stakeholders while also being fair for pension savers.
Ordinarily this change to a Finance Bill clause would have been announced at autumn Budget 2021. On this occasion, giving prior notice of the shorter window ahead of its closure on 3 November 2021 could have led to unnecessary turbulence in the pensions market and led to some consumer detriment. Some pension savers could find themselves with poorer outcomes (or even be the victim of a pension scam) if they were rushed by rogue advisors to make a quick transfer in the short time period before the window closed.
A tax information and impact note for this clause is also being published today.
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London Capital & Finance Compensation Scheme: Contingencies Fund Advance
John Glen Excerpts(2 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
On 19 April 2021 the Government announced the detail of a compensation scheme for London Capital & Finance plc (LCF) bondholders (HCWS922). The scheme provides 80% of LCF bondholders’ principal investment up to a maximum of £68,000 and will be open to all bondholders who hold bonds that have not already been compensated by the Financial Services Compensation Scheme (FSCS).
Now that the necessary legislation has passed through Parliament, final preparations are being made so that the scheme can begin making payments in November. The Government have appointed FSCS to run the scheme on its behalf using part 15A of the Financial Services and Markets Act. The Government and FSCS are committed to providing all eligible bondholders with their compensation within six months.
I would like to emphasise that bondholders do not need to do anything at this stage and should wait for FSCS to contact them about their compensation payment. Further detail on exactly how the scheme will operate, including the scheme rules and frequently asked questions, are available online at www.gov.uk/LCF-compensation-scheme
The Compensation (London Capital & Finance plc and Fraud Compensation Fund) Act received Royal Assent on 20 October 2021 but provision for this was not included in the main estimate for HM Treasury at the start of the financial year. In accordance with normal procedures, HM Treasury will therefore be using a contingencies fund advance to enable bondholders’ access to their compensation payments, ahead of the provision being provided in the Treasury’s supplementary estimate.
Parliamentary approval for additional resources of £120,000,000 for this new expenditure will be sought in a supplementary estimate for HM Treasury. Pending that approval, urgent expenditure estimated at £120,000,000 will be met by repayable cash advances from the contingencies fund.
[HCWS370]
Oral Answers to Questions
John Glen Excerpts(2 years, 6 months ago)
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Liz Twist (Blaydon) (Lab)
The Economic Secretary to the Treasury (John Glen)
Distributional analysis published at the Budget and spending review last week shows that in 2024-25, tax, welfare and spending decisions made since the spending round two years ago will have benefited the poorest house- holds most as a percentage of income. This Government believe that work is the best route out of poverty. That is why the Government are investing £6 billion in labour market support over the next three years.
Liz Twist
Analysis of the Chancellor’s Budget and tax and spending plans for the next six years shows that they will cost women an additional £48 billion over that period. That is a staggering amount of money to be taken from women, and it is in contrast to the planned tax cuts for banks. Is that why the Government have failed to produce an equality impact assessment for this Budget, as they are required to—because the Chancellor knows that his tax choices are totally unfair?
John Glen
The hon. Lady must have missed a number of measures announced by the Chancellor in the Budget last week in which significant investment was made to support families through the household recovery fund and support for women in particular to get back into the labour market, alongside a whole range of other interventions.
Saqib Bhatti (Meriden) (Con)
One issue concerning me at the moment is the lack of access to cash in the north of my constituency, which suffers from significant degrees of inequality. I was pleased to be at the opening of Kingshurst post office, which will restore some cash services, but the issue remains a problem as retail banks reduce their estate. Does my hon. Friend agree that shared banking hubs are a good way forward? Will he highlight to the House what work is being done to increase access to cash?
John Glen
Banking hubs will absolutely be a part of the solution, alongside a whole range of other interventions. The Government have committed to legislate on this matter, but in the meantime, I am very hopeful that industry will come forward with meaningful proposals for a range of options to deal with the declining use of cash and ensure access is available everywhere.
Tim Farron (Westmorland and Lonsdale) (LD)
The colossal economic inequality facing rural communities is something that I hope the Government take seriously. Is the Minister aware of the collapse of local housing in communities such as mine—and indeed in the Chancellor’s next-door constituency—into the second-home and holiday-let markets? Following the Welsh Assembly Government’s example, will the Minister look at doubling council tax on second-home properties, so that communities such as mine do not lose their local populations and become riddled with ghost towns?
John Glen
The Government are looking at tightening up the rules around second homes and council tax. We would be very happy to engage with the hon. Gentleman on the matter.
James Wild (North West Norfolk) (Con)
Stephen Crabb (Preseli Pembrokeshire) (Con)
The Economic Secretary to the Treasury (John Glen)
Some 1.6 million people have moved into work having received support from work coaches, and hundreds of thousands of jobseekers have been supported by our other Plan for Jobs programmes, such as kickstart. It is clear that this plan is working; unemployment is now expected to peak at less than half of what was initially predicted.
Laura Farris
Unemployment in West Berkshire has fallen in every month since April, in no small part thanks to the apprenticeship levy and the kickstart scheme. However, among the over-55s who lost their job in the pandemic the picture is more mixed. Can my hon. Friend set out what the next stage of the Plan for Jobs will do to target that group, particularly given their risk of long-term unemployment?
John Glen
Yes, I can. My hon. Friend is right; unemployment is at 3.5% in her constituency, as against the 5% average. On people aged 50 to 64 who unfortunately lose their job and find a return to work less likely, this spending review announced an enhanced 50-plus offer worth more than £20 million to ensure that that cohort of the workforce receive that support to remain in work and benefit from living those fuller working lives. That is in addition to the other interventions across the whole of the working age group.
Stephen Crabb
Right now, in this country, about 1 million children are growing up in long-term workless households. Does my hon. Friend agree that the measures the Chancellor took in the Budget last week to boost the national minimum wage and the work allowance, and to lower the universal credit withdrawal rate when people move into work, mean that we have the best opportunity in more than a generation to really bear down on long-term unemployment and improve the life chances of children growing up in homes where there is no role model of someone going out to work every day?
John Glen
I agree entirely with my right hon. Friend, who has been a champion in this area, throughout his experience in government and in his work now as Chair of the Select Committee on Welsh Affairs. In addition to what he has set out, we responded to the call to raise the national living wage. It may interest him to know that the April 2022 increase will mean that a full-time worker’s annual salary will have increased by more than £5,000 since the national living wage was introduced, when he was in government, in April 2016.
Karin Smyth (Bristol South) (Lab)
I recently visited the newly opened jobcentre in Knowle to support people back to work, and I have previously been chair of the all-party group on apprenticeships. I cannot fathom why the Government are abolishing BTECs, which are a crucial bridge for young people in Bristol South. Has the Treasury done an assessment of abolishing BTECs, and will the Government reconsider?
John Glen
The hon. Lady will know of the Government’s investment in T-levels and the additional investment last week in apprenticeships, as well as a number of other interventions that the Chancellor has worked tirelessly with employers’ organisations and trade unions on to develop the workforce and opportunities over the past 18 months.
David Johnston (Wantage) (Con)
Sam Tarry (Ilford South) (Lab)
Does the Chancellor agree with the Conservative party donor, Mohamed Amersi, who once claimed that the Tories were operating an access capitalism scheme for their major donors, and described corruption as a “heinous crime”, but who was later seen to have been part of a £162 million bribe to the daughter of Islam Karimov, the awful former president of Uzbekistan? If so, can he look at this and bring forward the response to the Pandora papers, particularly the Registration of Overseas Entities Bill?
The Economic Secretary to the Treasury (John Glen)
The Government are committed to making the UK a hostile place for illicit finance and economic crime and ensuring that all donations to political parties comply with the legislation that the Labour party enacted in Government. We have taken tough action through our No Safe Havens strategy to ensure that the correct UK tax is paid. Our landmark 2019 economic crime plan builds on that, and we will continue to work on these matters.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Disclosure of Asset Sale Completion
John Glen Excerpts(2 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
I can confirm today the completion of the sale of the share capital of Bradford & Bingley (B&B) plc and NRAM Ltd, returning both companies to private ownership.
In February 2021, the Government announced the agreement of a transaction to sell the share capital of B&B and NRAM, and their remaining loan assets, to a consortium of Citibank and Davidson Kempner Capital Management. The sale of the loan assets to Citibank completed in March. Following the receipt of regulatory approvals from the FCA, the sale of the companies to Davidson Kempner completed on 29 October.
Accounting for final adjustments ahead of completion, this transaction generates a total consideration of £5.2 billion for the Exchequer.
The completion of this transaction marks a significant milestone in the Government’s work to divest the institutions and assets brought into public ownership as a result of the 2007-08 financial crisis.
[HCWS367]
Access to Cash
John Glen Excerpts(2 years, 6 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Economic Secretary to the Treasury (John Glen)
What a pleasure it is to serve under your chairmanship, Mrs Miller. I commend the hon. Member for Pontypridd (Alex Davies-Jones) for her speech and for securing the debate. She set out many of the core issues and gave a very fair assessment of them, which was echoed by the 13 speeches from Back-Bench Members and three interventions that we have heard this afternoon.
I have been the Minister for this issue for quite a long time, and I very much feel the urgency in resolving it while I am still around. I appreciate having the opportunity to update hon. Members on the Government’s efforts to protect cash and, in particular, the recent consultation on legislation to do exactly that.
As a number of colleagues said, many people still rely on cash and the infrastructure that delivers it. It is changing rapidly, but we need to recognise that it is an imperative for everyone’s daily life. That is especially the case for more vulnerable groups, be it in Pontypridd or in my constituency of Salisbury. Just today, we have seen more bank branches close, including one in Amesbury in my constituency. My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) once again showed his encyclopedic understanding and depth of knowledge and powerfully expressed the urgency with which we must address the matter.
During the pandemic, there was evidence of access to cash being stretched. However, I am pleased that the Treasury was able to work closely with financial regulators, such as the FCA, and industry to maintain that access while protecting the safety of staff and customers. The vast majority of people were able to get hold of the cash they needed throughout the pandemic. Indeed, the share of the UK population who lost access to a source of cash within three miles during spring 2020 never exceeded 0.1%. In this conversation, I have always been very aware of the fact that—as the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), with whom I have met separately, said—we have to deal with a very wide range of constituency interests, with very urban constituencies and very sparsely populated constituencies. That guides me as I contemplate what next to bring forward from the Government’s perspective.
Margaret Ferrier
With the closure of many high-street bank branches, many communities are finding it hard to get essential access to physical money. A pilot post office bank hub in Cambuslang, in my constituency, provides face-to-face services for customers. Would the Minister agree that the scheme could be rolled out UK-wide?
John Glen
I am very grateful to the hon. Lady for raising that point. I visited her constituency last Thursday and saw that facility first hand, and I will say a little bit about it in a moment. It was a great example of banks coming together and working with the Post Office to find a practical solution—one that many colleagues in the Chamber have raised in previous debates.
We are in a strong position to build on our success in meeting the needs of local communities across the country over the long term. Access to cash across the UK remains extensive. Over the last year, the Financial Conduct Authority and the Payment Systems Regulator have undertaken important work to map cash access points across the UK. That has shown that access remains comprehensive, even though it is evolving. As of the first quarter of this year, more than 95% of the population were within two kilometres of a free cash withdrawal point. I would say to the hon. Member for Pontypridd that, as of August 2021, Pontypridd itself had 76 ATMs, 50 of which were free to use.
However, we are in no way complacent about access to cash. I recognise that we need a range of solutions. We understand that cash remains important for millions of people across the UK. That means that we have a responsibility to protect the cash system and ensure that it is sustainable. That means two things: being innovative in the provision of cash while ensuring that we maintain sufficient coverage.
The Government have already taken decisive action in a number of ways to support the widespread availability of cashback without a purchase from shops and other businesses, including legislative changes as part of the Financial Services Act 2021. That is a significant step change, and the industry is really on board with it. We have already seen the success of cashback without a purchase as part of the community access to cash pilots, which are trialling bespoke cash access solutions across a number of areas.
The hon. Member for Harrow West (Gareth Thomas) raised the issue of the role of credit unions. On my visit to Glasgow last week, I was pleased to meet with Glasgow Credit Union and discuss some of the legislative changes required to allow them to expand the provision of services. The notion of a bespoke solution in individual communities is very much uppermost in my mind as we move forward. It was great to hear how well received those pilots have been by the local community in Cambuslang, where I visited the post office bank hub pilot and saw at first hand the impact that innovative industry solutions can have. The hub is a post office counter service, and different bank representatives come there on different days. When a customer’s bank representative is not there, other representatives can also help them.
I am delighted by the industry’s announcement that, following the Government’s changes to the law, cashback without a purchase will be rolled out to thousands of shops over the coming months. When it comes to ATMs, LINK, which, as a number of hon. Members have mentioned, runs the UK’s largest ATM network, remains committed to protecting the broad geographic spread of free-to-use ATMs, and it is held to account against that commitment by the Payment Systems Regulator. The Government also continue to fully support the post office banking framework agreement, which allows 95% of business and 99% of personal banking customers to deposit cheques, check their balance and withdraw and deposit cash at the nation’s 11,500 post office branches. The Access to Banking standard and FCA guidance force the banks to look at their mitigation responsibilities to maintain face-to-face banking services in situations where branches close.
On top of that, the Government are doing more. As several hon. Members have mentioned this afternoon, we have been developing new legislation that will enable us to protect cash over the long term. The most recent step in that process was the consultation on proposed legislation, which closed less than a month ago, on 23 September. That consultation was designed with a simple principle in mind: finding that crucial balance between supporting the use of cash and embedding flexibility as the cash landscape continues to evolve.
At the most fundamental level, that has meant setting out proposals for new laws to ensure that people need to travel only reasonable distances to pay in or take out cash. Through our actions to date and these proposals, we seek to support the continued use of cash in people’s daily lives, including supporting local businesses in continuing to accept cash. The consultation also set out proposals on what sort of organisation should be within scope of legislation to ensure that industry, especially banks, continues to play a key role in supplying cash, be it through their own branches or through funding customer transactions at ATMs or post office counters.
It is crucial, of course, that any legislation is coupled with appropriate regulatory oversight, and that has been another important aspect of the consultation. We want regulators to have appropriate powers and responsibilities, but without imposing unnecessary burdens on businesses. We believe that the FCA is best placed to play the leading role in holding firms to account on access to cash, so that the needs of consumers and businesses are met.
The Government also intend the Payment Systems Regulator and the Bank of England to maintain their existing functions regarding retail cash. As I mentioned earlier, the co-ordinated actions by the FCA, PSR and the Bank of England on cash as part of the covid-19 response have shown that co-operation between the regulators at both strategic and operational levels works well.
For all that the Government are doing to preserve access to cash, it is also worth acknowledging that the trend away from the use of cash towards cards and other digital payments has been both significant and accelerating over the past 18 months. That brings with it many opportunities, such as the potential for cheaper and more tailored payments, as set out in the Government’s recent response to the payments landscape review call for evidence, which was running in parallel.
It is important that digital connectivity is in place to help individuals and businesses to seize those opportunities, as has been mentioned by many hon. Members this afternoon. That is just one of the reasons why the Government are striving to ensure that no one is left behind in the transition to digital. To improve digital connectivity, the Government’s £5 billion Project Gigabit is helping to deliver lightning-fast, reliable broadband, including in Wales and therefore in towns such as Pontypridd.
We are working with industry to target a minimum of 85% gigabit-capable coverage by 2025, and will seek to accelerate roll-out further to get as close to 100% as possible. Action is also being taken to improve mobile connectivity in rural areas, recognising the challenges of getting to that complete coverage. The Government are providing £510 million for the shared rural network, and by 2025 that will expand 4G mobile coverage to 95% of the UK.
Out of respect for the hon. Member for Pontypridd, I looked into what is happening in Wales. The shared rural network programme is helping to reduce partial mobile phone notspots in Wales, and in the South Wales Central area, where her constituency is located, 4G coverage from all four operators will increase from 82% to 90% by the end of the programme.
Our consultation on proposed legislation closed on 23 September and the Government will set out the next steps in due course. I hope hon. Members will understand that it was only three and a half to four weeks ago, but I acknowledge the urgency that has been expressed this afternoon. I take it to heart, and I recognise the determination to get this done as quickly as possible.
I also acknowledge the recognition by my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) of the imperative for banks to come forward with proposals. The Government are always open to constructive suggestions from the banks as to what they wish to do in the meantime, but I cannot say much more at this stage. What I will say is that the Government remain absolutely determined and committed to legislate to ensure that people have access to cash over the long term. In doing so, we need to strike a balance between, on the one hand, being open to innovation and, on the other, ensuring that people are not financially excluded by losing access to cash. That is what we will do.
I sincerely thank Members for their thoughtful and constructive advice and contributions, and I can assure them that I will continue to work with Members from across the House. I do not see this as a partisan matter at all. I will continue to hear from them and to work with them to come up with an enduring solution next year and beyond.
Fossil Fuel Industry: Regulation of Investments
John Glen Excerpts(2 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
I congratulate the hon. Member for Coventry South (Zarah Sultana) on securing this debate on an issue that we all agree is of crucial importance. I will do my best to do justice to this broad and complex issue in the allotted time, focusing my remarks on my brief as Economic Secretary to the Treasury, with oversight of financial services, which the hon. Lady mentioned on a number of occasions.
Let me begin by stating the obvious: the Government take their responsibility to tackle climate change extremely seriously. That is why in June 2019 the UK became the first major economy to legislate to end our net contribution to climate change by 2050, increasing the ambition of existing commitments under the Climate Change Act 2008, which was introduced by the Labour Government in that year. Just today, we published our net zero strategy, outlining measures to transition to a green and sustainable future.
The hon. Lady is right to highlight the crucial role of finance and investment in addressing the challenge of climate change. I am pleased to reassure her that we are implementing a credible, practical plan to align that investment to climate change goals, with multiple strands of activity, including engagement with the oil and gas industry, the greening of finance and action on the international stage.
Our view is that we need actively to engage with and work with fossil fuel companies to get them to reform, and that approach is working. Earlier this year, we agreed the North sea transition deal with the oil and gas industry, to support workers, businesses and the supply chain in preparation for a net zero future by 2050, including the reduction of emissions by 50% by 2030. We also agreed joint Government and oil and gas sector investment of up to £16 billion by 2030 to reduce carbon emissions, with up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, up to £3 billion on carbon capture, usage and storage, and up to £10 billion for hydrogen production. Indeed, since 2010 more than £94 billion has been invested in clean energy in the UK.
From my perspective as City Minister, we clearly also need continuous and increasing green investment right across the board, as the hon. Lady called for. I am delighted that yesterday we published “A Roadmap to Sustainable Investing”, which will help every financial decision—and decision maker—to take climate and the environment into account.
Zarah Sultana
Does the Minister support the call that I made in my speech to divest from fossil fuels in our pensions fund? Will the Government support the more than 360 MPs who are supporting the Divest Parliament campaign? It is really important to make the statement ahead of COP26 that this House is committed to divesting, fully and immediately, from fossil fuels.
John Glen
It is absolutely the case that the UK pensions and investment sectors—asset owners, asset managers and the service providers that support them—have an important role to play, using their influence and ownership rights over investee companies while fulfilling those fiduciary responsibilities. The Financial Reporting Council’s stewardship code 2020 sets that gold standard for such stewardship activities. The Government expect asset owners, managers and their service providers to progress work on stewardship within their organisation. That will obviously be a matter for the trustees of individual funds to attend to.
The roadmap on sustainable investment sets out details of the new whole-economy sustainability disclosure requirements—the legislative and regulatory changes that will be made to deliver world-leading reporting standards for environmental sustainability. Under these changes, companies and investment products will, for the first time, need to set out the environmental impact of the activities that they finance according to a universal definition of green. At the same time, products must clearly justify any sustainability claims that they make. It is our expectation that firms will use this information to actively engage with investee companies and encourage businesses and shareholders to set, and act on, credible net zero transition plans.
But I recognise that Government too must take action. Another part of our strategy has therefore been to establish markets to mobilise private capital. That is the thinking behind our green gilt, the first issuance of which last month was the largest ever sovereign green bond issuance, of £10 billion, and was 10 times over-subscribed. It is also part of the rationale for the creation of the UK Infrastructure Bank, which has a specific mandate to help tackle climate change, particularly the transition to net zero by 2050. I was pleased just last week to meet John Flint, the chief executive, who is putting together the team at the UK Infrastructure Bank in Leeds to move forward the investment decisions, and that organisation, as quickly as possible.
Looking at the financial numbers, there are already some grounds for optimism. The UK’s world-leading investment banks are consistently ranked at the top of the global green and sustainable debt underwriting league tables. In the UK, almost half—49%—of the £9.4 trillion in assets were integrating ESG, or environmental, social and governance, in their investment processes last year, up from a reported 37% the previous year. In other words, as City Minister I see a sector that is increasingly innovating and investing in green. On the hon. Lady’s point, that does not mean that we are complacent, but it does demonstrate the irreversible direction that has been set and the progress that is rapidly being made.
We need to remember that this is also a global problem requiring a global solution, as the hon. Lady acknowledged. That is not an excuse for inaction but rather a simple acknowledgement of the reality. The Government are acting nationally and internationally, and here there are some further reasons for optimism. As a country, we need to be part of a global effort to turn this around, and we are, including as host of next month’s COP26 conference. About 70% of the world’s economy is now covered by net zero targets, up from less than 30% when the UK took on the presidency of COP26. Under the UK’s presidency, all G7 countries committed to put an end to funding fossil fuels and coal power this year. Japan and South Korea have said that they will end public financing for overseas coal-fired power plants, with China then committing to not building any new coal power plants overseas.
When it comes to transitioning the finance sector, too, we are part of an international effort. In April, the UK played a key role in the launch of the Glasgow Financial Alliance for Net Zero. When the UK assumed the COP presidency in partnership with Italy 18 months ago, $5 trillion of private financial assets were committed to net zero. Now 300 financial institutions across 40 countries, controlling balance sheets of $100 trillion, are co-ordinating their efforts under this alliance.
I agree with the hon. Lady that the stakes are high, but I hope I have shown that the Government are acting on many fronts in engaging, legislating and investing. I am certainly not complacent, just as the Government as a whole are not complacent. We will continue to do all that we can and all that needs to be done to address this global and significant challenge.
Question put and agreed to.
UK National Risk Assessment of Proliferation Financing
John Glen Excerpts(2 years, 7 months ago)
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The Economic Secretary to the Treasury (John Glen)
As a major global financial centre, a key component of the UK’s economic strength and prosperity is our openness to investment and trade. However, this quality also makes the UK economy vulnerable to illicit finance activities, including proliferation financing. Despite robust controls in place in the UK to tackle proliferation financing activity, actors involved in proliferation financing look to exploit the UK’s position in the global economy and international financial system to raise funds to develop chemical, biological, radiological, and nuclear (CBRN) programmes which counter UK national security objectives and threaten international peace and security.
On 23 September, the Government published the UK’s first national risk assessment (NRA) of proliferation financing risks. This assessment, published by HM Treasury using views and evidence from Government, the private sector, and academic and research partners, provides a comprehensive review of the proliferation financing risks facing the UK. The UK is one of the first jurisdictions to carry out an assessment of this kind.
The key findings of the UK national risk assessment of proliferation financing are:
The UK’s financial sector is at high risk from proliferation actors. It is highly likely that proliferation actors will target the UK to gain financing for CBRN proliferation despite the robust controls in place to prevent this. The UK’s financial services industry, particularly the banking and insurance sectors, is especially at risk.
The Democratic People’s Republic of Korea (DPRK) and Iran are the most significant proliferation financing actors at state level. The DPRK seeks to evade international sanctions regimes to obtain financing for its unlawful weapons of mass destruction and ballistic missile programmes, and Iran for its nuclear programme.
There is limited awareness in the private sector of proliferation financing compared to other risks, including money laundering and terrorist financing. A lack of awareness of proliferation financing in parts of the UK economy can lead to a lack of understanding of how certain industrial products, for example, may be manipulated for hostile use or for use in a CBRN programme.
Despite the above threats, the assessment highlights the robust counter-proliferation legal framework in place in the UK to protect the country from proliferation financing. The UK's autonomous financial sanctions regimes targeting CBRN proliferation, as well as UN sanctions regimes implemented in the UK, export control regimes, and other tools available to the UK Government, limit opportunities for proliferating actors to exploit the UK to obtain financing for CBRN capabilities.
The report is available on gov.uk www.gov.uk/government/publications/national-risk-assessment-of-proliferation-financing.
The national risk assessment demonstrates the UK’s ongoing commitment to counter proliferation financing, set out in the integrated review of security, defence, development, and foreign policy 2021. We also committed to publishing a proliferation financing NRA in the Government’s economic crime plan. Moreover, the UK is at the forefront of international efforts to counter proliferation financing, particularly at the Financial Action Task Force (FATF) where we have led progress on updating FATF recommendations focusing on proliferation financing.
This is the first NRA the UK has produced evaluating the threat posed by proliferation financing. Under proposed amendments to the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations (MLRs), HM Treasury will be required to review and update this NRA on a regular basis. This would offer opportunities to further refine the assessment and its methodology going forward and ensure that the UK is proactively seeking to address new threats and trends posed by proliferation financing. In this proposed amendment of the MLRs, which is currently out for public consultation until October 2021, the Treasury also plans to set requirements on relevant persons to take appropriate steps to identify and assess the risks posed by proliferation financing, and to establish strategies to mitigate and manage these risks effectively. The findings of this assessment will also provide the UK with further opportunities to develop its counter-proliferation financing policy.
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