Disclosure of Asset Sale Completion

John Glen Excerpts

Tuesday 2nd November 2021 Written Statements

[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

Wednesday 20th October 2021 Westminster Hall

[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

Tuesday 19th October 2021 Commons Chamber

[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

Thursday 23rd September 2021 Written Statements

[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.

[HCWS307]

Draft Capital Requirements Regulation (amendment) regulations 2021

John Glen Excerpts

Wednesday 15th September 2021 General Committees

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

I beg to move,

That the Committee has considered the draft Capital Requirements Regulation (Amendment) Regulations 2021.

It is a pleasure to serve under your chairmanship, Mrs Murray. The regulations, among other things, support the implementation of the Basel III standards in the United Kingdom. This is yet another statutory instrument that I bring to the Committee, and I am delighted to do so.

I want to begin by reminding the Committee of the background to this issue. After the financial crisis, the international community came together to rectify major deficiencies in financial regulation and created new banking standards, known as the Basel III accords. As a member of the G20 the UK is committed to implementing these standards, but now we have left the EU, we have the opportunity to do so in our own way, enabling our expert regulators to apply international standards in a way that is most fitting to the UK’s individual circumstances. The instrument therefore exercises the powers contained in section 3 of the Financial Services Act 2021, to revoke elements of the UK’s capital requirements—the CRR, or capital requirements regulation—so the Prudential Regulation Authority can update the current regime to account for the Basel III standards.

Let me turn to some of the detail. The Financial Services Act restricts the ability of Ministers to only revoking those parts of the CRR that need to be updated to reflect the new Basel standards, and anything that is connected to, or consequential to, those standards. When it makes CRR rules under the new regime, the PRA is subject to an accountability framework under which it must consider the impact of its rules on a number of areas. These are: the relative standing of the UK compared to other jurisdictions, lending to the real economy and the Basel standards themselves. In addition, the PRA must consult the Treasury on the potential impacts of any rule changes on equivalence.

The instrument also contains additional EU exit-related amendments to the CRR. It makes an amendment to article 497 of the CRR, allowing for the Treasury to extend a transitional provision that allows for certain foreign central counterparties, or CCPs, to retain temporary qualifying status. Qualifying status allows UK firms to have exposures to these CCPs without being subject to higher capital requirements. This amendment will allow for the transitional period to be extended by regulations one year at a time. These extensions are required as there may be non-UK CCPs that will be unable to receive qualifying status through recognition for a prolonged period. However, the Treasury still considers it beneficial that they retain qualifying status. The Treasury will keep these arrangements under review to ensure they are fit for purpose.

Additionally, under article 391 of the CRR, the Treasury may determine that an overseas jurisdiction applies prudential requirements to the same standard as those applied in the UK and grant it equivalence. Smaller UK banks in particular benefit from that article as it allows them to lend more as a single loan to overseas firms. However, the UK’s only equivalence decision in this area is with respect to EEA member states. That is because, at the end of the transition period, the EU had not made any equivalence decisions under the article and the European Banking Authority had issued guidance allowing EU firms, including those in the UK, to use equivalence decisions under a different article—107—as a proxy for article 391 equivalence. However, this is, in effect, regulatory guidance overruling legislation.

The Government and the UK’s regulators consider that guidance inappropriate and therefore do not intend to replicate it in the UK. It is also impractical to undertake the equivalence assessments in such short timescales. The Treasury is therefore, through this statutory instrument, using section 8 powers under the European Union (Withdrawal) Act 2018 to put in place transitional arrangements. In parallel, the Treasury will seek a legislative opportunity to streamline the system by linking the equivalence regime in article 391 to that in article 107, providing certainty to firms.

The Treasury has worked closely with the PRA in drafting the instrument. We also engaged with industry throughout the process, including through a public consultation. The Government have updated their approach in line with the points raised in the consultation.

I hope I have given Members a comprehensive overview of the measure, and I urge colleagues to join me in supporting the regulations. In short, the measure will enable the implementation of Basel III—regulation that is key to the UK’s international standing. In addition, it will iron out some of the wrinkles in existing EU regulation. Together, the proposals will give UK firms certainty, and therefore help them to flourish. I commend the regulations to the Committee.

--- Later in debate ---

[John Glen]

I am grateful to the right hon. Gentleman, as ever, for his constructive scrutiny of the statutory instrument. He always provides succinct summaries of complex matters. They are often full of wisdom, and always courteous, and I am very happy to try to address the points that he made.

The right hon. Gentleman referred to the anxiety that exists in his mind concerning the Government’s intentions with respect to standards, competitiveness, what the PRA will be subject to and what we may wish to do to encourage it to succumb to such covert lobbying. As I have always tried to stress in our encounters, this Government wish to retain the highest possible standards. Of course, having regard to our situation in the global financial services industry will always be important, but we are united, in terms of the Treasury, the PRA and the FCA, on the need to hold to the highest international standards, which give us a baseline of resilience. As the right hon. Gentleman will know, the UK was extremely influential in both shaping the Basel accords and pushing for their implementation. We remain committed to their effective implementation.

As the right hon. Gentleman will know, as part of the Financial Services Act, the PRA is required to have regard to the effect of its rules on international standards, including Basel. As was demonstrated in the publicly available analysis, which I think was published in July, the PRA considers all its rules as achieving the same outcomes: a safe and sound prudential regime to the Basel standards and EU equivalent legislation.

The second issue that the right hon. Gentleman raised was around the CCPs and the transitional rollover concept. He asked about that provision. I would want to say to him that while a foreign firm or jurisdiction can express an interest in receiving equivalence or recognition, it will be for the Treasury to decide whether to initiate consideration of an EU equivalence decision for a foreign jurisdiction and the appropriate timescales. As with all equivalence decisions, the UK authorities will need to ensure that granting equivalence is compatible with the UK’s policy priorities, including those relating to the rule of law, international standards, human rights and efforts to combat money laundering.

Let me turn to the retention of that transitional status without, I think the right hon. Gentleman said, all the forms being processed. Letting that transition fall away might create disruption for the UK firms with exposures to the relevant CCPs. That is not something we would wish to have. The market access provided by qualifying central counterparty status is more limited than that provided by full recognition status, with QCCP firms unable to provide clearing services directly to UK clients. Therefore, it is appropriate that firms may continue to benefit from QCCP status while awaiting the result of their application for recognition.

On any Government intention to extend the transition indefinitely, that is not the case. The Treasury will keep those arrangements under review to ensure they are fit for purpose while a permanent solution is considered. Obviously, I am engaged in discussions with colleagues about legislation in the next Session.

May I conclude by reminding members of the Committee of the key purposes of the statutory instrument? The legislation revokes a number of provisions in the UK’s capital requirements regulations. By doing so, it will enable regulators to make rules in these areas reflecting Basel III international standards. The PRA has consulted on those rules, and in July it published a near-final version of the rules alongside an accompanying policy statement. That set out how the regulator had taken into account public policy factors set out in legislation.

I hope that the Committee has found today’s sitting informative, and that its members will join me in supporting the regulations, which I commend to the Committee.

Question put and agreed to.

Demutualisation of Liverpool Victoria

John Glen Excerpts

Wednesday 15th September 2021 Commons Chamber

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

I congratulate the hon. Member for Harrow West (Gareth Thomas) on securing the debate. He is a strong and sincere supporter of the mutuals sector, and he has regularly raised issues with me in the, I think, 44 months that I have been in post. I very much value his knowledge and insights on these matters and welcome the opportunity to discuss his concerns.

During my time as Economic Secretary to the Treasury, I have seen the clear benefits of mutuals both for the economy and for society as a whole. In essence, these businesses focus on service, and their frequently innovative nature means that they provide a unique, distinct offer to both their customers and their communities as well as a much-valued degree of service. The Government recognise those benefits, which is why, over the years, we have shown ourselves to be a supporter of the mutuals sector.

That support has manifested itself in a wide variety of ways, including, first, in engagement. We think it is vital that we understand the sector’s needs, so two years ago the Treasury held a mutuals workshop dedicated to understanding the challenges facing the sector and how they can be overcome. We have tried to take on board the points raised in that workshop, and we continued the conversation. As a result, my officials have been working hard to raise awareness of the mutuals model across Government to ensure that other Departments are equally focused on supporting it.

Secondly, we are helping the sector to be ready for the future. That is why at the Budget we committed to amending the Credit Unions Act 1979 to allow credit unions to offer a wide range of products and services. Finally, we have ensured that mutuals have also received financial support throughout the covid crisis, recognising their vital contribution to communities up and down the country. Mutuals were able to benefit from the furlough scheme and other forms of Government financial help. In addition, the Corporate Insolvency and Governance Act 2020 introduced new insolvency support mechanisms for businesses, including many in that sector.

I would now like to address the subject of this debate in more specific detail. The hon. Gentleman has set out in some detail a range of observations about what has happened over recent months. As he is aware, the sale of LV= to Bain Capital and the ultimate demutualisation of the firm is something that I have engaged with him on and discussed previously. I want to assure the House that this continues to be a priority for me. I am closely engaged on this matter, and I am in close communication with regulators and the firm itself.

However, while I am very focused and aware of the views that the hon. Gentleman holds and the concerns that he raises, I cannot intervene directly in the sale or the demutualisation of a firm. The sale’s approval is a matter for the financial services regulators and the courts, both of which are independent of Government. The hon. Gentleman has done a lot of work to trace the interactions between the firm and the regulators, and I know that they are very aware of his interest in the matter. I am sure that that is going to lead to a very rigorous process, which I think he understands and I know is under way.

Therefore, I do not think it is appropriate for me at this point to comment on the substance of that ongoing independent process, but what I can say is this. The approval process involves safeguards designed to ensure that members and policyholders are kept informed and that their interests are protected. I recognise that we are not at the end of that process yet, and the hon. Gentleman is somewhat anxious and perhaps, I may suggest, sceptical about what the final outcome will look like. But I have been reassured that the regulators are undertaking rigorous processes, as evidenced by the number of meetings that they have had, to assess the viability of the transaction and the suitability of Bain to manage an insurance business. Importantly, the statutory objectives of the regulators put policyholders’ interests, as well as consideration of the impact of the transaction on the market, at the heart of their assessment. I greatly support the regulators in their roles, and trust that they will endeavour to secure the best outcome in the interests of members and policyholders.

I recognise the points that have been raised about further demutualisations by the hon. Member for York Central (Rachael Maskell). As I mentioned earlier, I believe mutuals have a very special place in our economy, and I very much value that contribution, but ultimately any future sales, irrespective of whether the firm is a mutual, will and should be considered on a case-by-case basis, in line with the regulators’ and courts’ duties and requirements.

I recognise that, in the course of this debate this evening, some suggestions have been made about the sorts of interventions that may be appropriate to safeguard the sector. I would be very happy to meet the hon. Member for Harrow West and the hon. Member for York Central to discuss their views on this subject, but I am, as I demonstrated earlier, very much focused on helping the sector to thrive. That means continuing the conversation so we can identify how best to facilitate the growth of the sector and understand the concerns in more detail, recognising that, across the range of mutuals of different sizes and different roles in the economy, different concerns may exist.

Therefore, I hope the hon. Member for Harrow West will relay the message to the sector that my door continues to be open to it. I would like to thank both Members for their constructive comments.

[Gareth Thomas]

I have two interlinked questions, if I may. First, the Financial Conduct Authority, in its letter to the all-party group of 5 August, made it clear that it had already decided it would not review the interlinkage, or not, of the decision by LV= to convert to a company limited by guarantee and the subsequent proposal to demutualise. I recognise that the Minister cannot intervene with the regulators directly, but he can, as I understand it, because he meets with the chief executive of the FCA, seek an explanation of that decision. Secondly, if the FCA will not engage with that question sufficiently to satisfy me, could he at least ask it to publish the details of the two independent experts appointed by the board of LV= so that customer-owners can begin to make contact with them to ask them questions about what exactly the plans of LV= are?

[John Glen]

I am always ready to look at constructive suggestions and am happy to take this forward. I suspect there may be legal impediments to the publishing of some of that information, but I will certainly ask the questions and seek to relay to the hon. Gentleman the fullest answer that I am able to. I am frequently in my current role in between this place and independent regulators. It is right that our regulators are independent and I see the frustrations that exist within that, but I am happy to take forward a constructive dialogue as far as I can.

I do not think I can add much more at this point. I recognise the sincere commitment of hon. Members who have spoken to this issue, their frustration with what has happened, the apparent unnecessary nature of this transaction, given the history and the apparent change in the direction of travel with little warning, but I am clear that the regulators are very aware of their obligations to safeguard the interests of members and I look forward to the judgments coming forth in the coming weeks and months. I hope that that gives the hon. Gentleman some satisfaction on the matters he has raised this evening.

Question put and agreed to.

Money Laundering and Terrorist Financing (Amendment) (No. 2) (High-Risk Countries) Regulations 2021

John Glen Excerpts

Monday 13th September 2021 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 (Amendment) (No. 2) (High-Risk Countries) Regulations 2021 (S.I. 2021, No. 827).

May I say what a pleasure it is to serve under your chairmanship, Sir Graham?

The Government recognise the threat that economic crime poses to the UK and are committed to combating money laundering and terrorist financing. Illicit finance causes significant social and economic cost 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 and 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 the Government are focused on making the UK an inhospitable environment for illicit finance. We have taken significant action to tackle money laundering and terrorism financing and have strengthened the whole system response to economic crime.

Underpinning those efforts are the money laundering regulations—a key part of our legislative framework—that set out a number of measures that certain businesses must take to combat money laundering and terrorist financing. They include the need for businesses to identify and verify the people and organisations with whom they have a business relationship or for whom they facilitate transactions. In addition, they require that financial institutions and other regulated businesses conduct additional checks or enhanced due diligence on business relationships and transactions involving high-risk third countries that have been identified as having strategic deficiencies in their anti-money laundering and counter-terrorism financing regimes and posing a significant threat to the UK’s financial system. The statutory instrument under discussion updates the list of countries that are specified as high risk in the money laundering regulations.

At present, the UK’s list of high-risk third countries specified in the money laundering regulations mirrors that identified in February by the Financial Action Task Force, the global standard setter for anti-money laundering and counter-terrorist financing. The Financial Action Task Force carries out periodic reviews and regularly updates its list. As a result, following the conclusion of a FATF plenary in June this year, it updated its public list of jurisdictions with strategic deficiencies to reflect changing risks and circumstances in these jurisdictions and in the global economy.

This instrument will therefore amend the money laundering regulations to update the UK’s list of high-risk third countries to mirror the latest FATF public list, ensuring that the UK’s list is responsive to the latest threats emanating from high-risk countries with inadequate counter-illicit finance systems and that the UK remains at the forefront of global standards on money laundering and terrorist financing. This update is an integral part of helping to protect our national security and the UK’s international reputation, businesses and financial systems from money launderers and terrorist financiers.

I thank Members for examining this important measure that will update the UK’s high-risk third countries list. Businesses that fall under the scope of the money laundering regulations and that deal with such countries will be required to take extra security measures. This amendment will enable the money laundering regulations to continue to work as effectively as possible to protect the UK’s financial systems. It will allow the UK to continue to play its full part in the fight against economic crime and I hope that colleagues will join me in supporting it.

--- Later in debate ---

[John Glen]

I am happy to address Members’ points.

It is the Government’s view that the amendment will ensure that UK legislation remains up to date and continues to protect the financial system from the threat by jurisdictions with inadequate money laundering and terrorist financing. The amendment enables the UK to remain in line with international standards on money laundering and terrorist financing, allowing it to continue to play its full part in the fight against economic crime. I agree with the right hon. Member for Wolverhampton South East and the hon. Member for Glenrothes about the need to retain high standards in our financial services regulation—the consistent duty I have put on our regulators in conversations with them, week in, week out.

The right hon. Member for Wolverhampton South East was absolutely right when he said that, because of the size and sophisticated nature of financial services in the United Kingdom, keeping to those high standards will always be an imperative for us. He asked me to comment on the listing of Malta and Afghanistan. At the June 2021 FATF plenary, FATF collectively agreed to include Malta on its list of jurisdictions under increased monitoring. As this is one of the FATF public lists that the UK list mirrors, Malta will be added to the UK’s list of high-risk third countries. The outstanding issues that Malta must address are outlined in FATF’s publicly available statement.

The hon. Member for Glenrothes made a point about this country’s past. FATF’s rules and processes are searching, rigorous and extensive. The British Government receive extensive lobbying on these matters but we defer to the rigour of the process, no matter how uncomfortable it might be given the strong relationships we might otherwise have. Part of today’s upgrading following the June decisions goes ahead of where the EU is on a number of these issues, and I am pleased that we are applying the highest standards.

The right hon. Member for Wolverhampton South East made a number of points about Afghanistan and the challenges that exist. Afghanistan is not currently identified on any of FATF’s public lists, but it is important to note that the money laundering regulations require enhanced due diligence in a range of situations that present a high risk of money laundering or terrorist financing, not just where a transaction or business relationship involves a country that is listed as high risk. When assessing whether there is a high risk of money laundering or terrorist financing, the regulated sector must take a number of factors into consideration, including geographical risk where countries have been identified by credible sources and alerts from supervisory and regulatory bodies.

There are at present various sanctions in place in relation to Afghanistan that include members of the Taliban. Targeted sanctions impose an asset freeze, including making directly or indirectly available funds or economic resources to or for the benefit of designated individuals or entities. Under the UN’s existing Afghanistan sanctions regime, 135 designated individuals are linked to the Taliban or the Haqqani network—which as Members will know is a UK-designated and proscribed organisation closely linked to the Taliban—and four Afghan Hawala businesses. Several other designated groups and individuals with links or possible links to the Taliban are also designated under the UN al-Qaeda/Daesh regime, UNSCR 1267.

As anti-money laundering and counter-terrorism financing supervisors, the Financial Conduct Authority and HMRC reminded obliged firms in their recent alerts about potential financial crime risks from Afghanistan and about their obligations to ensure that they appropriately monitor and assess transactions with Afghanistan to mitigate the risk of their firms being exploited for money laundering or terrorist financing purposes and to implement sanctions screening. Similarly, the Office of Financial Sanctions Implementation, which sits within the Treasury, issued an alert reminding businesses that UN sanctions are already in place against individuals and entities associated with the Taliban. The alert advised businesses to exercise caution given the changing environment and reminded them of the continued existing obligations to carry out customer due diligence and implement sanction screening.

FATF will continue to analyse countries at risk and will likely look at those matters during its next plenary, which I believe is in October. The United Kingdom will play an active part in that conversation.

[Mr McFadden]

If we were to think of a country at greatest risk of being used for terrorist financing, Afghanistan and its new Government would be high in our thoughts. The Minister tells the Committee that the list is based on FATF’s work. I understand that, but presumably the Government have the power to go beyond FATF and say, “We think Afghanistan should be on the list.” Is there anything to stop the Government adding Afghanistan to the list, according to their own timetable, before FATF looks at the issue again?

[John Glen]

The purpose of this statutory instrument is to update according to the last assessment. We would not want, as a response to immediate events and without analysis or rigour, to add additional countries. I have explained at some length the considerable sanctions regime against proscribed individuals and the upgrading of the advice on its obligations to the regulated sector from HMRC and the FCA. Other jurisdictions such as the EU are not even upgraded to the list that I hope the Committee will agree to today. We do not rule anything out in the future, but we believe that FATF is rigorous. Indeed, the UK experienced rigorous analysis in 2018. We stand by the assessment and will see what it will do in October.

The hon. Member for Glenrothes mentioned wider issues with Scottish limited partnerships. The registration numbers thereof have diminished significantly recently, but as this is a BEIS competence I hope he will not mind my writing to him on it. I hope that satisfies the Committee.

Question put and agreed to.

Pilot No-Interest Loans Schemes: Contingent Liability

John Glen Excerpts

Tuesday 7th September 2021 Written Statements

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

It is normal practice when a Government Department proposes to undertake a contingent liability in excess of £300,000 and for which there is no statutory authority, for the Minister concerned to present a departmental minute to Parliament, giving particulars of the liability created and explaining the circumstances.



I wish to notify Parliament of a contingent liability that has been created by the Government from the introduction of the pilot No-Interest Loans Scheme. The pilot No-Interest Loans Scheme was announced at the Budget on 3 March 2021. The loans will support consumers in vulnerable circumstances who would benefit from affordable credit to meet unexpected costs and will provide an alternative to relying on high-cost credit. Fair4All Finance, who were founded to support the financial wellbeing of people in vulnerable circumstances, have been appointed to run the pilot and will enter contracts with lenders to deliver the loans, including to provide a partial guarantee against default losses. To facilitate the lending to consumers in vulnerable circumstances, HM Treasury will reimburse Fair4All Finance for eligible default losses they incur under eligible guarantees.



HM Treasury will reimburse Fair4All Finance for up to 80% of eligible default losses incurred as part of the pilot. HM Treasury will reimburse losses on loans made from 22 September 2021, but the liability will not be incurred until Fair4All Finance enter guarantees with eligible lenders and defaults occur, which is not expected until financial year 2022-23.



The maximum amount to be paid under the contingent liability is £10 million, with expected payments totalling £1.8 million. HM Treasury will reimburse Fair4All Finance for eligible default losses on loans initiated after 22 September 2021 and will stop reimbursing costs by 31 March 2026. If the liability is called, provision for any payment will be sought through the normal supply procedure.



It is normal that any contingent liabilities should not be incurred until 14 sitting days after Parliament has been notified of the Government’s intention to incur a contingent liability. There is an exception in cases of special urgency. This is one such occasion.



In order to make timely progress with this policy, it is important that lenders have the certainty of the HM Treasury’s funding commitment to the pilot in good time before the November and December periods, which for many social lenders is the busiest time of the year. As such, HM Treasury’s grant agreement with Fair4All Finance has been signed to enable contract negotiations with lenders to commence.

I note that HM Treasury’s intention to develop such a pilot has been in the public domain for some time, and that the pilot has received broad support from across both Houses of Parliament since the Government funding was announced at Budget 2021. Given this support I hope the House is in agreement with my assessment that to delay signing the aforementioned agreement until the House returned would have been inappropriate and to the detriment of the beneficiaries under this scheme.



I will also lay a minute today on this matter.

[HCWS267]

Government Shareholding in NatWest Group

John Glen Excerpts

Monday 6th September 2021 Written Statements

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

I can today inform the House that on 22 July 2021 the Government announced a trading plan to sell part of the Government’s shareholding in NatWest Group (NWG, formerly Royal Bank of Scotland, RBS). This is a further step forward in the Government’s plan to return NWG to the private sector.

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 NWG to full private ownership, now that the original policy objective for the intervention in NWG—to preserve financial and economic stability at a time of crisis—has long been achieved. The Government only conduct sales of NWG shares when it represents value for money to do so and market conditions allow. The announcement of this trading plan represents a further step forward for Government in exiting the assets acquired as a result of the 2007 to 2008 financial crisis.

Format and timing

The Government, supported by advice from UK Government Investments (UKGI), concluded that selling shares by way of an on-market trading plan will deliver value for money.

A trading plan involves selling shares in the market through an appointed broker in an orderly way at market value over the duration of the plan. Trading plans are an established method of returning Government-owned shares to private ownership, while protecting value for the taxpayer. This method was used in the sell-down of the Government’s stake in Lloyds Banking Group (in that case, from a lower starting point in terms of the Government’s percentage ownership).

This is the first use of a trading plan for disposals of NWG shares by the Government. This follows previous disposals of NWG shares via accelerated book builds in August 2015 and June 2018, a directed buyback selling shares to the company in March 2021, and a further accelerated bookbuild in May 2021. UKGI and HMT will keep other disposal options open, including by way of further directed buybacks and/or accelerated bookbuilds. The decision to launch the trading plan does not preclude the Government from using other disposal options to execute future transactions that achieve value for money for taxpayers, including during the term of the trading plan.

The trading plan commenced trading no earlier than 12 August and will run for 12 months, terminating no later than 11 August 2022. Shares will only be sold at a price that represents fair value and delivers value for money for the taxpayer. The final number of shares sold will depend on, amongst other factors, the share price and market conditions throughout the duration of the trading plan.

The Government will provide Parliament with further details at the end of the term of the trading plan.

[HCWS259]

Cash Ratio Deposit Scheme: Review

John Glen Excerpts

Tuesday 20th July 2021 Written Statements

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

Cash Ratio Deposits (CRDs) are non-interest bearing assets deposited with the Bank of England (“the Bank”) by banks and building societies. They are invested in gilts by the Bank and the income is used to finance its policy functions, in particular its efforts to secure price stability and the stability of the financial system in general, from which these institutions are key beneficiaries.

The CRD scheme was extended to include building societies, and was placed on a statutory basis, when the Bank of England Act became law in 1998. At the last review, the Government committed to review the scheme within five years. The last review was in 2018 and resulted in the CRD ratio being moved from a single fixed ratio, to a variable ratio indexed to gilt yields, reindexing the ratio to prevailing gilt yields every six months. The Treasury, working closely with the Bank, will now begin the next review.

The review will include an assessment of the detailed arrangements of the scheme as well as the continuing suitability of the scheme itself compared to alternative sources of funding. It will also address the impact of the scheme on eligible institutions and involve a public consultation.

[HCWS211]