Bank Branch Closures

Jonathan Reynolds Excerpts
Wednesday 18th March 2020

(4 years ago)

Westminster Hall
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Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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First, I congratulate the hon. Member for Midlothian (Owen Thompson) on bringing forward the debate—I think there has hardly been a banking debate that I have not been at. The Minister is always in his place to respond, and I am sure he knows what we will say before we say it and that he shares our frustration over bank closures. As I mentioned earlier, my constituency has seen one of the largest numbers of bank closures in the whole of the United Kingdom of Great Britain and Northern Ireland. There has been some attempt to fill the gap with credit unions and post offices, which have done so to a certain extent, but not in totality. That is where my concern lies.

I joined in the debate last June—we had another one a few weeks ago—to express my frustration with the banks that were closing branches because they say there is another one just 15 minutes up the road, or 50 minutes up the road, as the hon. Member for East Renfrewshire (Kirsten Oswald) explained. That is not very helpful for people who are on their lunch break or reliant on public transport, which is not always available at the time that they need it to get them back to work, as she also suggested, especially in a rural constituency.

Physical branches are important to the consumer, but not to the bottom line, and it would seem that that is the only consideration for some of those at the top of the banks. How annoyed was I, last month, to find that yet another bank closure is planned for Newtownards, the main town in my constituency? This time it was Barclays. I got the obligatory email of intent, as we all do, and an offer to meet, going through the format of a visually arranged meeting. I have arranged it in my diary, by the way, and I will meet them, but the fact is that although the meeting might relieve some of my frustration, it will not make one button of a difference to Barclays.

I mean no disrespect—I try to be respectful to everyone as best I can—but I have no hope at all of persuading them to keep the Barclays bank in Newtownards open. I have sat in too many of those meetings, which is why I have become a bit cynical about meeting the banks. I think I have had some nine bank closures in total in my constituency. I have had a meeting with the banks on every one of those occasions, and with all the persuasion of stats and letters from customers that we had, we were not successful in turning things around.

As those branches have closed one by one, I have sat in too many of those meetings and been shown increases in online activity, as the hon. Lady mentioned. If we take the logic that she referred to, it is true that, if we close all the banks, more people will go online. But it does not suit everybody to go online—that is the point we are making, but it seems to fall on deaf ears. What is not explained is that the increase is because staff members have been pushing this, which they have. There is nothing wrong with pushing the online deal if it suits people, but it does not suit everybody, and the bank customers on whose behalf I went to all those meetings were not able to bank by logging on to the system. It is not always easy, either, when people do not have the broadband access to enable that to happen.

Over the years the bank closures in my constituency have been Kircubbin, Portaferry, Killyleagh and Ballynahinch—all Ulster Bank—Danske Bank in Kircubbin and Portaferry, Barclays bank now imminent, Bank of Ireland and Allied Irish. Those banks have all moved to other towns or moved out of the area completely. I remember when we used to have at least four banks on the Ards peninsula, but they have all been closed. There were some sub-banks, which would have been there on certain days a week, but they are away as well.

The hon. Member for Midlothian referred to credit unions, and we have been fortunate that credit unions have grown in my constituency, as they probably have in all our constituencies. They have tried to fill the gap, and they have done so to some extent, but they cannot provide what the banks offer to customers. We have a new credit union in Kircubbin; I am very pleased to see it, and it is very active and very able. The credit union in Portaferry has grown as the banks have closed, as has the credit union in Newtownards. I had the Minister over about a year and a half ago to visit the one in Newtownards, which is doing extremely well. The credit unions are filling the gap.

Then there are post offices. The Minister might say that post offices are able to fill the gap, and in some ways they are, but they cannot provide all the range of support and services that can be given in the banks. Post offices can only fill those in a small way. We need to have all the opportunities that the banks offer. I am becoming increasingly frustrated with the banks. I say that not as a socialist—

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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There is nothing wrong with that.

Jim Shannon Portrait Jim Shannon
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There is nothing wrong with being a socialist, by the way—I am letting you know that right now. I am not against the banks, but I get immensely frustrated when it seems that they make decisions in order to bring bigger dividends for their shareholders. I suspect that everyone who spoke and the shadow Minister will say the same thing, but to me it is simple: the wee man and wee woman need help, and they deserve to have their banks, yet it is all about the profit at the end of the year. Whenever banks are making a massive profit, in a way it is about getting more profit. Was it Jean Paul Getty who said that the only thing better than having £1 million is having another £1 million? Speaking about Jean Paul Getty probably ages me, but I am just making the point that banks focus only on their profit margin and how much they can make, not on delivering.

The hon. Members for Midlothian and for East Renfrewshire referred to online banking—I know that others will refer to it as well—but it does not suit everybody. I tried to help a number of customers of those banks to do online banking, but it was lost on them. I hope those people took their savings to the post office or the credit union, but I suspect that some did not, and I therefore fear money being stored under the blanket, the pillow or the mattress, or in some tin box somewhere, because those people want to be in control.

My wife’s auntie was in that situation. She had some money in the house, which we did not know about. One day she was out for only half an hour, but the thieves obviously knew, and they came in and stole her life savings—£8,500—which were probably to pay for her funeral. It is soul-destroying. The community came together to help as best they could. That happened to a couple of others in my constituency as well, and again the community reached deep into their pockets and made some of that money available.

I realise that time is flying. I was sitting here almost loth to speak, to again use the same words and rhetoric, because it is not stopping the closures. Then I realised that this is the place where changes need to take place. I have the utmost respect for the Minister, as he knows, but I urge him and his Department to give serious consideration to supporting those banks that support their local community. For Newtownards, that is the Danske Bank, the Ulster Bank—the one that is left—the Santander bank, which has filled some of the gap for some customers, and the Nationwide building society. Those are the last four banks in Newtownards. All pay rates and council tax, provide local employment and are all available for the vulnerable—for me, this debate is about the vulnerable; those who do not have access to banks—to open their first bank account or for those who want face-to-face advice, because we need that from the banks as well.

I ask the Minister what we can do to reward those banks that do right by local communities and keep an online thrust as well. I understand that some people want to go online. I am an old traditionalist; I will probably still write cheques for all my things every week, as I always do, and I will probably still carry cash in my wallet, because that is how I did it when I opened my first bank account at age 18. How can we encourage more banks to be part of local communities, instead of being removed and literally counting their pounds rolling in? I look to the Minister for guidance, because asking, reasoning and pleading with the banks is not working. Maybe rewarding community-minded banks is the way forward.

--- Later in debate ---
Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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It is a pleasure to see you in the Chair, Sir David.

I thank the hon. Member for Midlothian (Owen Thompson) for securing this debate on a topic of vital importance to people across the UK. Today’s debate takes place at a time of unprecedented national crisis, but, as the hon. Gentleman said, the conversations that we are now having about the social and health implications of compulsory isolation show how important our high streets and shared social spaces are. Bank branches play a fundamental part in maintaining contact for vulnerable people. Even in a time of rapid change, when we are shifting a lot of our lives online, we have to make sure that communities that need a physical bank branch are not left behind.

We have had many debates on the issue. We gathered here, by my reckoning, just over a year ago to address it; the hon. Member for Strangford (Jim Shannon) was definitely present. In the year since, the matter has become no less pressing. At the time, I shared with colleagues some of the experiences of my constituents and what bank branch closures have meant for them. Too often, we are distracted by the headline numbers and forget the impact of the closures on real people’s lives. I will revisit some of those comments today.

I represent the towns of Hyde, Stalybridge, where I live, Dukinfield, Longdendale and Mossley. They are exactly the kinds of towns that have suffered very badly from the closures in recent years. I have lost branches of RBS, Lloyds and Yorkshire Bank. Here are some direct quotes from constituents about how it has affected them. One constituent said:

“Losing the Lloyds in Stalybridge has been a blow. Yes there is one in Ashton and there is online banking. But there is no substitute for making an appointment you can walk to and talking to an actual human being.”

A constituent just outside of my area said:

“Here in Droylsden we now don’t have a single bank! We’ve gone from having Lloyd’s, NatWest, Royal Bank of Scotland and Halifax to having none!!! Our infrastructure dwindles by the day.”

For businesses in particular the closures have posed challenges. One of my local business owners said:

“You can do banking at the Post Office but, in order to pay things in, you have to get in touch with your bank first and get paying in slips sent out. Santander would only send me 5 and I have run out now. It means I can’t accept cheques for my business easily. I don’t have the time to keep ringing up for paying in slips…It’s a killer for small businesses who have to close their shops to go and stand in a queue for a lengthy period of time just to get change.”

I have also heard moving stories from those who care for others, who have inevitably borne the brunt of closures. One said:

“My mum with Alzheimer’s relied on her Lloyd’s branch in Droylsden before it was shut. The staff knew her well and helped her. They knew her condition and if she was in a bad way they would phone me and give her a cup of tea while they waited for me to arrive. The staff said there were lots of other people like my mum. The closure really affected her.”

The most recent disappointing news that I have had in my constituency is that Barclays will be closing its branch in Hyde, too. When I announced that on my Facebook page, it very quickly attracted more than 100 comments from local people. People really care about this issue, and they are right to do so. A common thread among the feedback that I hear from constituents is that nobody wants their community to become a ghost town.

Equally, no one is saying that they want to halt progress, but we must ensure that technology works for us and not the other way around. Some of the technological advances could be harnessed to include people who historically have had trouble interacting with traditional banking, such as offering remote video appointments or having speaking ATMs. However, the goal must be to strive to ensure that we use technology to benefit bank customers, rather than creating a pared-down automated banking sector that leaves people without the support that they need.

That is also true of access to cash, which many Members have raised. Although habits around cash are changing—when I am at work in London, I tend not to use cash very much—I certainly need it when I go home at the end of the week. Members are correct to say that we must not allow ourselves to sleepwalk into a system that leaves some communities stranded without ATMs. I know that the Government and the Minister are concerned about that, but communities must have the fundamental right to demand an access to cash review in their area, like the access to cash review proposed, so that the power is theirs to ask for a review of their cash arrangements.

Although, as habits change, we would anticipate that some bank branches would have had to close in recent times, the hon. Member for Midlothian is right that the rate at which the branch network is shrinking is accelerating, which is the primary concern. Figures from Which? show that 3,509 branches have closed across the UK since January 2015. That is at a rate of 55 a month. The scale of those closures seems disproportionate and does not necessarily match what people are saying to us about how they want to use their bank branches. Research conducted in 2016 by the Social Market Foundation found that there remains a strong consumer appetite for a physical presence.

Labour’s proposal in our recent manifesto was to change the law regulating banks so that no closure could take place without appropriate local consultation and without FCA approval. I share the concerns that have been raised about the existing nature of consultation. Crucially, a bank should have to consult with not only the customers of that branch but representatives of the local council. Fundamentally, it should have to publish details of the reasons for closure, including financial calculations showing the revenues and costs of the relevant branch.

The share of central costs, such as those for accounting systems, IT, security, personnel and so on, would have to be allocated to the branch and separately identified, especially as many of those costs are relatively fixed and are not proportionate to the number of branches. The FCA’s approval would then be needed for any bank branch closure. I urge the Government to think perhaps not about the specifics of that, but certainly about the transparency of information published by a bank when a branch is to close. In addition, we wanted to see the Post Office evolve from its current banking framework to being a bank in its own right. Many countries operate very successful postal banks, and that could have been the basis for the long-term future of the Post Office, too.

In the next few months, we will be shown the harsh realities of social isolation. This is an important moment to think about how important communities are, and the role that bank branches play in holding high streets and localities together. Regulators, banks and policy makers must work together to improve what we have at the minute and to ensure that we end up with a banking infrastructure that works for all customers, all communities and the future.

Draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2020

Jonathan Reynolds Excerpts
Monday 9th March 2020

(4 years ago)

General Committees
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Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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It is a pleasure to serve with you in the Chair, Mr Pritchard. This statutory instrument will finally bring to an end, in April, the freeze on working-age benefits that has been in place for four years and in that time has caused significant hardship to families. It follows what was, in our view, a deeply politically motivated and unnecessary choice to freeze those benefits in 2015.

To offer some context, in 2017, the Joseph Rowntree Foundation said that it believed the benefits freeze was

“the single biggest policy driver behind rising poverty in the UK.”

As a result of the four-year freeze, families living in poverty have been left a total of £560 a year worse off on average—equivalent to three months’ food shopping for an average low-income family. It is no surprise that there has been a corresponding and shameful increase in the use of food banks throughout the country in that period. The cost of living has not been frozen for four years. Between 2016 and 2020, the benefits freeze will have affected more than 27 million people, including 11 million children.

The Opposition will not vote against the statutory instrument as to do so would be to oppose the uprating, but I state on the record our belief that the rise is long overdue and will not reverse the damage caused by this especially pernicious strand of austerity. That is not just our opinion. In 2019, Shelter said:

“While the Government may have finally called time on its benefits freeze, the proposed rise in support is so tiny it won’t make a dent in the damage already done.”

Have the Government have made any assessment of the overall impact of the benefits freeze over the last four years? If not, how will they help working-age families begin to recover from the last painful four-year period?

I conclude with an insight from the Resolution Foundation following research published in October last year. It said:

“the real value of basic out-of-work support in 2019-20 is lower than it was in 1991-92, despite GDP per capita having grown by more 50 per cent since then. Even more starkly, child benefit for a second child or beyond is worth less in 2019-20 than when it was (fully) introduced back in 1979.”

Those are astonishing figures and proof that, although the Government may talk of their intention to create a fair system, a rising tide no longer lifts all boats.

Draft Employment Allowance (Excluded Persons) Regulations 2020

Jonathan Reynolds Excerpts
Monday 2nd March 2020

(4 years ago)

General Committees
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Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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It is always a pleasure to see you in the Chair, Ms Buck, and I thank you for the opportunity to respond to the Minister.

I thank the Minister for his explanation of this measure. I am aware that it has been in the pipeline for some time and I can understand the Government’s desire to focus the allowance on smaller businesses. However, I would like to ask the Minister several questions to aid the Committee’s understanding of its likely impact.

First, the Minister said that he believed that this would raise £1 billion a year. Will he share with us some of the Government’s analysis as to how many businesses, which were previously able to claim this allowance above the £100,000 threshold, will be affected from 6 April 2020? I ask that, with reference to the revenue, because this seems to be a significant undertaking in terms of the administration being asked of the recipients. Will the Minister explain who is affected and how those savings justify the change that is being proposed? As we often discuss in debates on Finance Bills, constant tinkering with allowances can be unhelpful, as it creates confusion among businesses as to what they are entitled to and when.

Secondly, I would like to ask about the reclassification of this payment as state aid under EU rules. Given that we have left the European Union—although we are still in the transition period—why is this reclassification necessary and what relevance does the Minister anticipate this will have in the future under UK law?

Finally, I am aware that an administrative change is associated with this amendment to the allowance, in that companies will no longer have an ongoing rolling entitlement, but will instead fill out a new claim each year. I want to ask the Minister to address the unnecessary bureaucracy and paperwork that might, therefore, be put on to all business owners, on top of the implementation of Making Tax Digital and the likely increase in bureaucracy as a result of Brexit. How will this change be communicated to all those it will affect? How are the Government communicating this to small business owners, so that they understand that they will not be affected, in a timely manner and with adequate support?

I hope the Minister can respond now to those points, but if not, he can respond in writing.

Draft Double Taxation Relief and International Tax Enforcement (Gibraltar) Order 2020

Jonathan Reynolds Excerpts
Tuesday 25th February 2020

(4 years, 1 month ago)

General Committees
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Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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May I, too, say that it is always a pleasure to serve under you in the Chair, Ms McDonagh? I thank the Minister for his opening remarks and his explanation of the order that we are dealing with today. It is vital that the interests and affairs of Gibraltar, and its relationship to the rest of the UK, are carefully considered as we depart from the European Union. All hon. Members will want to make sure that Gibraltar’s interests are properly protected, particularly as I understand that Spain has made its own tax treaty arrangements with Gibraltar.

Overall, the Opposition are pleased that the Government have chosen to follow the OECD model convention as the template for the order, so there is no reason for us to oppose it. I have a few minor questions to ask the Minister, however, about the exact implementation of the model.

In the explanatory notes and the Minister’s speech, it was mentioned that the double tax arrangement meets the minimum standard recommended by the OECD/G20 base erosion and profit shifting project, which aims to stop abuse of DTAs by individuals and companies trying to reduce their tax liability. Gibraltar as a jurisdiction has made progress in recent years in strengthening its anti-BEPS provisions. About 11 months ago, in a similar delegated legislation Committee on the Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019, my hon. Friend the Member for Oxford East (Anneliese Dodds) addressed some of those points and noted that Gibraltar had been removed from the tax haven list by the OECD after concluding some of its DTAs.

With that in mind, I wonder whether the Government gave any regard to using this process as an opportunity to develop a measure that not only meets the minimum standards but enhances them and provides a leading example of how we can enhance the provisions. All aspects of BEPS must be dealt with, and that is especially important if the UK is to have flexibility in how it sets cross-border taxation policy in future.

Elements of the OECD model convention allow for considerable leeway. Is it the Government’s intention to take advantage of any of that flexibility? For example, there is a quite expansive definition of “permanent establishment” in the text of the model convention. Will that be adopted in future DTAs?

I am interested to hear further detail about how consultation is taking place with the Government of Gibraltar on the arrangements, and how Parliament will be kept informed of that process, to ensure transparency and accountability.

My final question raises a broader point about the UK’s interaction on tax affairs in the light of our departure from the European Union. Is it the UK’s intention to seek observer status in the code of conduct group—a sub-committee of ECOFIN—given that the Cayman Islands, a British overseas territory, is being blacklisted by the EU? There will clearly need to be a shift in our approach for the UK and Gibraltar, as we will no longer be able to participate in that committee by right as a member of the European Union. I would appreciate any clarity that the Minister can provide on those points.

Treasury

Jonathan Reynolds Excerpts
Thursday 13th February 2020

(4 years, 1 month ago)

Ministerial Corrections
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The following is an extract from Treasury Questions on 11 February 2020.
Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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Three years ago, at my first shadow Treasury questions from this Dispatch Box, I asked the Government about their plan to continue market access for financial services to EU countries after Brexit. Since that time, the Government’s ambitions have faded from the wide-ranging access-all-areas free trade deal that we were promised, to a basic agreement barely covering goods. The Chancellor has announced this morning that he is asking for enhanced equivalence for financial services, which the EU has already ruled out and which does not even exist in sectors such as insurance. This is our largest export sector, so how is it that we are still waiting for a credible plan after three years?

Oral Answers to Questions

Jonathan Reynolds Excerpts
Tuesday 11th February 2020

(4 years, 1 month ago)

Commons Chamber
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Sajid Javid Portrait Sajid Javid
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I can assure the hon. Gentleman that we are working very closely with individual businesses and their representative groups. The one thing they have certainly welcomed in the past few weeks is that we have ended the uncertainty around Brexit by actually leaving the European Union, as we said we would. We will be working very closely with business as we forge that new free trade agreement, which I know we will do.

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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Three years ago, at my first shadow Treasury questions from this Dispatch Box, I asked the Government about their plan to continue market access for financial services to EU countries after Brexit. Since that time, the Government’s ambitions have faded from the wide-ranging access-all-areas free trade deal that we were promised, to a basic agreement barely covering goods. The Chancellor has announced this morning that he is asking for enhanced equivalence for financial services, which the EU has already ruled out and which does not even exist in sectors such as insurance. This is our largest export sector, so how is it that we are still waiting for a credible plan after three years?

Sajid Javid Portrait Sajid Javid
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The hon. Gentleman needs to get his facts right. The EU has not ruled out equivalence. Indeed, it agreed in the political declaration to work at speed on an equivalence decision by the end of July this year, and that is welcome.[Official Report, 13 February 2020, Vol. 671, c. 12MC.] We are working very carefully and closely with the EU on having a broad agreement that will mean that our financial services continue to thrive—not only for our benefit, but for its benefit.

Lloyds, HBOS and the Cranston Review

Jonathan Reynolds Excerpts
Tuesday 4th February 2020

(4 years, 1 month ago)

Westminster Hall
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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

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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I am grateful, Mr Hollobone, for giving me the chance to respond to this debate. I thank the hon. Member for Thirsk and Malton (Kevin Hollinrake) for securing this debate and the all-party parliamentary group on fair business banking for all its efforts to secure justice for victims of banking fraud and misconduct.

The hon. Gentleman has made clear the significance of the Cranston review in reconsidering the process by which banks compensate business customers where there has been historical misconduct. I add my voice to his. Strangely, this is now a positive story: we finally have the review we all wanted, although the journey to get here has been fairly tortuous.

Everyone here has been involved in these issues for some time. In my time as the shadow City Minister I have had to become familiar with and speak about an appalling litany of complaints about how business customers have been treated, not multinational businesses, but the small businesses that we would all recognise as the backbone of our constituencies and this country. The stories have been of livelihoods and relationships destroyed, and of entrepreneurs and companies losing family businesses they have spent years building.

We are here to discuss Lloyds. The HBOS Reading issues were clearly an issue of criminal liability in that bank. In the wider sector we have discussed a whole range of unacceptable conduct: the mis-selling of interest rates and hedging products, the mistreatment of companies in distress by pushing them into restructuring, and the unscrupulous sales of loan books to vulture funds. That is why the question of how redress happens has become so important.

Research shows that a frighteningly small number of small businesses in this country believe that their bank will do the right thing by them. Given the reports detailing the historical conduct we have discussed, we cannot blame them. We must all improve on that. Whether we are politicians, banks or businesses, this lack of confidence is not in our interest. We need to be able to tell our constituents that there is a level playing field when they find themselves in conflict with their bank, and that there is a path to fairness, justice and proper redress.

Too often, in recent years, the response from banks to us has been, “Systems are in place and we believe they are fair. All the historical issues have been sufficiently dealt with.” This report has shown unequivocally that not to be the case, vindicating those of us who have campaigned in this area for years, particularly the hon. Member for Thirsk and Malton.

It is not acceptable for industry to equivocate on this any longer and, to use the hon. Gentleman’s phrase, to mark its own homework. Key problems identified in the Cranston review include the lack of independence in assessing complaints and the benchmark for compensation being so high that no customer could hope to meet it. It is important that we, as parliamentarians, learn the lessons from these observations and embed those principles in any new schemes. I look forward to the Minister’s response to the review.

There are other avenues we must continue to consider, to get to the root of this problem. I believe we should consider a full public inquiry into business banking scandals. This review is about the shortcomings of one bank compensation scheme, but it emphasises the importance of investigating all areas of misconduct, not just to ensure that victims get fair compensation—that is the minimum—but to identify systemic problems at the root of these scandals, to prevent them happening again. That could be challenging to us as parliamentarians.

I always worry that the model of banking in this country, whether for customers or small businesses, effectively relies on upselling products, so we do not really pay for the cost of our banking services, and therefore we have business models where products must be sold on to banking customers. Perhaps we need to look at that. We must continue to work towards the success of the business banking resolution scheme, to assess how successful it is in addressing these problems.

Kevin Hollinrake Portrait Kevin Hollinrake
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The hon. Gentleman makes a good point about products and services being sold to consumers and businesses. The royal commission in Australia determined that one of the biggest drivers of mistreatment of businesses and consumers was the incentives paid to people at the sharp end to sell those products. The hon. Gentleman is absolutely right. A public inquiry might well identify where this is going so badly wrong.

Jonathan Reynolds Portrait Jonathan Reynolds
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I am grateful to the hon. Gentleman for his intervention. We must look at the issue that he raises. In some ways, we have already addressed some of the things that the Australians had not yet got round to, as the scope was different, but that must be part of the conversation, because we can go back, decade after decade, and find historical problems in the sector. Clearly, something is happening, whether it involves the incentives for staff or the structure of the sector, that we might want to change.

I mentioned the business banking resolution scheme. Historically, I have always supported an independent tribunal system and I still believe that that proposal has merit, but perhaps we need to revisit regularly the BBRS’s work to ensure that it is getting the results that it requires in the timeframe.

My final point is on whistleblowers. Sally Masterton was mentioned. She was treated disgracefully. Other countries have much stronger protection for whistleblowers. I think we could look at that issue. If I were, as I have always wanted to be, in the Minister’s place, responding to the debate, I would want us to take that forward, to ensure that we really had an appropriate system that addressed all the needs.

Draft Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019

Jonathan Reynolds Excerpts
Monday 3rd February 2020

(4 years, 1 month ago)

General Committees
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Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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It is always a pleasure to see you in the Chair, Mr Sharma, and it is nice to see the Minister in his place once again.

As the Minister has outlined, the draft order will make a change to the governance arrangements of the Public Works Loan Board. Abolishing the unpaid role of commissioner will mean that the body ceases to exist. My understanding is that, as he described, in reality, the board’s function is already managed by the Debt Management Office, so there should be no impact on lending policy.

A consultation on the subject was undertaken in 2015, and the issue was addressed in the Infrastructure Bill of the same year. The public consultation returned a consensus in favour of this move, without substantive objections. I am minded to say that Labour has no reason to oppose the draft order, but I will listen to the contributions from other Front Benchers before making that commitment. However, I want to ask the Minister a number of questions about Treasury policy on how the ongoing functions of the Public Works Loan Board will be exercised following the passage of this instrument.

First, the Minister may remember that in October 2019 he and I debated a statutory instrument that increased the cap on the funds that local authorities could borrow in this way. In that Committee, I raised some of the funding challenges that local authorities face as a result of their budgets having been significantly reduced in recent years; he will know that there is a widespread practice whereby borrowed funds are invested in assets that pay a higher return. According to research last year by the Library, which examined the use of commercial property investment as a source of revenue, local authorities are turning to different financial methods to seek to alleviate the strain; in effect, they are borrowing money at a low rate from the Public Works Loan Board and investing it in higher-return asset classes, such as commercial property. Following the passage of this instrument, will it still be Government policy to permit that practice without formal restriction?

Will the Minister please elaborate on whether any further assessment has been conducted of that type of activity, and on the Government’s plans for regulation in this area? Surely, that practice exposes all of UK local government to a downturn in the commercial property market, for which, ultimately, the taxpayer would be on the hook.

Secondly, local authorities were shocked when the interest rate on loans from the Public Works Loan Board increased from 1.8% to 2.8% in October 2019. I tabled a question about that in the last Parliament, but I did not receive a response—although we did have several other things to discuss at the time. Will the Minister explain the rationale for that decision, given that the overall cost of borrowing remains low? Given that the instrument relates to the oversight of lending, it is important that we have full transparency about Government policy in this area.

The Opposition are not alone in raising these concerns; the Chair of the Treasury Committee wrote to the Minister in October last year to raise similar issues—specifically the oversight of loans and the impact of the rate hike. The Minister’s response insinuated that the rate hike was a deliberate effort to reduce the volume of borrowing. It seems to me that the Government are not being absolutely clear about their policy. Ultimately, of course, the only real answer is to address the underlying issue by seeking to reverse the 10 years of cuts that have affected local government. If the Minister clarified the Government’s position, that would be to the satisfaction of everyone involved.

Netflix: Tax Affairs

Jonathan Reynolds Excerpts
Monday 3rd February 2020

(4 years, 1 month ago)

Commons Chamber
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Margaret Hodge Portrait Dame Margaret Hodge
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I am all for encouraging Netflix’s growth here, but I am afraid that that in no way mitigates its refusal to pay its fair share of tax.

Where Netflix’s UK profits do end up is a complete mystery. It uses a shady system of subsidiaries and shell companies based in tax havens to shift its profits and avoid paying its fair share in many jurisdictions. From the publicly available data and translating that data into pounds sterling, it looks as if between £251 million and £329 million of non-US profit was shifted into tax havens from the Netherlands. Netflix did pay some tax on profits. Ironically, over 90% was paid by the Netherlands-based company and went to Brazil, where the authorities use a withholding tax to extract money. Is it not astounding that Brazil is more efficient at collecting tax from digital companies than we are? If Brazil can tax Netflix, why can’t we?

The UK makes up 14% of Netflix’s non-US market. We provide a vital consumer base for Netflix, and much of its content is created here, so the intellectual property on Netflix’s product is developed here in the UK. Google always argued in the past with me that it should not pay tax in the UK because its intellectual property was developed in California. If that argument has any credibility, given that much of Netflix’s intellectual property is created here and funded in part by the taxpayer through tax credits, the case for taxing it here in the UK is irresistible.

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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I am very impressed with the case that my right hon. Friend is making. Like her, I have had conversations with companies that claim that intellectual property means there has to be adjustments in national tax rates, but if, as she is saying, the sales in this country are registered to a company in Holland, although the intellectual property is here and the company is based in America, it makes no sense at all and simply looks like an avoidance mechanism.

Margaret Hodge Portrait Dame Margaret Hodge
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I agree: it is nothing other than an avoidance mechanism.

It should be borne in mind that Netflix depends on services that are funded by the taxpayer, such as our physical and digital infrastructure, which is in part publicly funded, our world-class universities and our highly educated workforce, and our NHS, which keeps its staff healthy. It takes from the public purse, but fails to pay its fair share back.

There is one simple solution to this injustice, and I should appreciate the Minister’s comments on it. Video streaming services must be included in the new digital services tax. At present they are excluded. Why? Why cannot the Government simply extend the provisions to include them?

The United States Secretary of State has threatened us with tariffs on our cars if we go ahead with the digital services tax, and I welcome the Government’s resistance to that threat. Fair taxation cannot be a bargaining chip to be cashed in to secure a trade deal. We must maintain our stance, and have no truck with the bully-boy tactics of the Trump regime.

There are plenty of examples of other countries taking action to claw back some tax from the streaming giants. The French levy a 2% tax, and the Brazilians not only get their withholding tax but have a 2% tax that covers online streaming services and is paid to the local government. There is a strong case for extending the digital services tax to include streaming services. The tax is “oven-ready”, as our new Prime Minister is fond of saying, and I urge the Minister to expand its scope to cover streaming sites so that we can fund our vital public services.

What is particularly galling is that Netflix actually makes a net profit from the UK taxpayer. In the last two years it has received nearly £1 million from the Government in tax credits, and that is just the start. According to its US accounts, it is ready to enjoy £218 million in tax credits worldwide. We do not know how much of that will be paid by the UK taxpayer, but we do know that Netflix has massively expanded its production network here, and has taken out a lease for at least 10 years on virtually the whole of the Shepperton Studios site. That implies that a huge chunk of our money—taxpayers' money—will be gifted straight into the coffers of Netflix in tax credits. It is nothing less than superhighway robbery. The UK taxpayer is being taken for a ride. We are actually handing over cash while Netflix stashes money offshore.

However, Netflix is far from the only culprit. Tax credit abuse is rife in other industries, including film and video games. Rockstar Games, the maker of the controversial Grand Theft Auto series, is one example. In the UK we have a thriving creative industry with large amounts of production happening here, and that is to be encouraged and celebrated, but the present rules are clearly absurd. Large, profitable companies like Netflix and Rockstar Games claim that no profit is made here, and, as a result, are simply making money on the back of the UK taxpayer. It is the worst kind of corporate welfare. Why, I ask the Minister, can we not adjust the eligibility criteria, and insist that any company that is enjoying tax credits must declare the revenue earned from its products created with those tax credits here in the UK? Why can we not make that a condition of the tax credits, so that we collect the tax?

Finally, if the Minister will indulge me, I want to talk very briefly about the role of the United States. These digital corporations are spurred on by the US Government, who, I believe, encourage such shady tax practices. As long as some taxes are paid in the US, the US Government do not care if American corporations use shell companies, offshore tax havens or other instruments. They are happy for them to avoid taxes in the UK and other jurisdictions around the world. In recent years, US-based multinationals have built up cash piles of more than £1 trillion in tax havens such as Bermuda. Since Donald Trump’s 2017 tax reforms, the US has claimed all that profit for itself for American headquartered companies. If the companies repatriate their income from the tax havens, the income that the companies receive from outside the US is charged at a much lower rate of corporation tax—just 13.12%. So the US has become a tax haven for the overseas operations of its multinational companies. That explains why, in December last year, Google decided that it was moving its intellectual property from Bermuda back to the USA. Why stash your cash offshore when the US itself has become the world’s largest tax haven? If companies choose not to repatriate their income, they are still charged a flat rate of tax of just over 13% on the revenue they hold and accumulate in tax havens.

An obvious way through this web is to lift the shroud of secrecy that surrounds the revenue and profits of multinational digital giants. That is why this Government supported a measure that would require companies to report their activities, their revenues and their profits on a country-by-country basis. We passed the law enabling country-by-country reporting in 2016. I ask the Minister: when will the Government bring that provision into force? Only with greater transparency will we know how much profit these digital companies make and where they should be paying their taxes. Only then can we ensure that every country gets a fair ride.

I accept that we need a new international consensus on the corporate tax regime. However, news from the OECD suggests that the United States itself is blocking progress on international tax reform. It is outrageous that the US is holding up international reform, threatening individual countries with new tariffs when those countries try to tax global companies, and then charging those global companies tax—albeit at a very low rate—on the business they secure and the profits they make outside the US.

The case of Netflix is a scandal. If we want to stop this abuse, we can. The Government can be assured that such action would command the support of the whole House, but failure to act represents a betrayal of every law-abiding taxpayer. If the Government fail to take the practical actions that I have suggested, I know that I and others will not remain silent.

National Productivity

Jonathan Reynolds Excerpts
Wednesday 22nd January 2020

(4 years, 2 months ago)

Westminster Hall
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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.

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Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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It is a pleasure to see you in the Chair, Mr Paisley. I thank my hon. Friend the Member for Barnsley Central (Dan Jarvis) for securing the debate. He made an excellent contribution, as did the hon. Member for Strangford (Jim Shannon) and my hon. Friends the Members for Islwyn (Chris Evans) and for Wirral South (Alison McGovern). I genuinely enjoyed listening to them. I say that every time I close a debate, but it was true today, because if I had my way, we would be talking about this subject every day of the week.

All hon. Members have correctly said that the No. 1 objective of any Government must be to ensure that the country’s economy works to provide the maximum prosperity and living standards for all parts of the country and all our constituents. That is what we all want, which means that we should celebrate what we do well as a country and the optimism that the Government are asking us to embrace. It also means, however, that we must be honest about what is not working well and what needs to get better, and then discuss what the solutions might be. In the UK, productivity is clearly one of those significant problems.

As my hon. Friend the Member for Barnsley Central said, according to the figures from the House of Commons Library, UK labour productivity has historically grown by about 2% a year, but it has stagnated since the recession in 2008-09. The level of labour productivity in the third quarter of last year was only marginally above what it was 11 years earlier, in 2007. We might look at the impact of Brexit and the uncertainty that was mentioned earlier, but we must acknowledge that the problem is more deep-seated.

It is normal to expect a recession of the depth and severity that the financial crisis brought about to have an impact on productivity, but we would expect that to last only for a certain amount of time. The fact that we are still only just recovering to pre-crisis levels is a deeply worrying indicator and does not reflect well on how the Government have handled the recovery. Overall, UK productivity is still 16% below the average for the rest of the G7 countries. As hon. Members have said, that matters a great deal. In a highly competitive global environment, we are not match-fit. We are about to voluntarily increase our barriers to trade—at least in the short term—with our major trading partner, the European Union, as Brexit occurs, so if we do not improve productivity, we face a challenging future.

There are many reasons for that underperformance. Something so persistently bad must be deep-rooted, and many hon. Members have put forward accurate analyses and persuasive arguments about what they want to be addressed. My hon. Friend the Member for Barnsley Central talked about skills and devolution, and I agree entirely. My hon. Friend the Member for Islwyn talked about capital investment and monetary policy, which was spot on. I particularly agreed with the contribution of my hon. Friend the Member for Wirral South about gender disparity and the need to look at issues such as childcare alongside capital infrastructure projects.

I will talk about three additional areas where we need decisive action: transport, automation and business support. I acknowledge, however, that there is a counter-argument to what I will say. Some people will put the UK’s poor productivity down to our higher employment rate. In other words, some might say that, by definition, having more economically active people than France, for example, comes at the expense of higher productivity—so a country could feasibly have a smaller but more productive workforce that exists alongside significant unemployment.

We cannot be satisfied by that explanation. In 2018, the employment rate among people of working age was the highest ever in this country, as we have often heard from Ministers in Treasury debates. But in 2018 the employment rate was also the highest ever in Canada, Germany, Australia and 22 other OECD countries. The truth is that the Government have been incredibly fortunate to be in office at a time when technology has driven up employment rates in all developed countries. We should therefore be in no doubt that we have serious work to do.

On transport, I will shamelessly talk about my own constituency. Every hon. Member present has a sound grasp of north-west geography, but for people who are not aware, Stalybridge, Hyde, Mossley and Dukinfield sit about 10 miles east of Manchester city centre. My constituency’s other border is where Derbyshire begins. It should take about 15 minutes to get from Stalybridge train station to Manchester city centre, but that can happen only if the train turns up. Every single day—today is no different—I get up, turn on Twitter, and see my constituents telling me, rightly, that they are not getting the service they deserve. If I say, “Brexit is coming. We’ve all got to roll up our sleeves and improve this nation’s productivity,” they will reasonably suggest that the first thing to do to achieve that might be to give them a train service that gets them to work on time.

The problem is about much more than underperformance by the franchisee, although that is evident too. It is an endemic problem of inadequate infrastructure outside the south-east of England. Not that long ago, my constituency was full of big firms such as ICI, Christy, which produces towels, and Total Petrochemicals—real industrial giants—that employed the vast majority of local people.

Jim Shannon Portrait Jim Shannon
- Hansard - - - Excerpts

On that point, there were people on the news this morning who were unable to get a train on time. One lady, who started a new job in Manchester in the new year, had been late to work every day since—not because of her, but because the trains were late. If there is going to be connectivity and dependability on the train service, that service must ensure that the trains are on time and that the number of trains can grow, so that people are not saying, as they were this morning, “If the train doesn’t go on time, I’m going to go by car.”

Jonathan Reynolds Portrait Jonathan Reynolds
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I could not agree more. I am delighted to hear about new jobs being created in Manchester, but not that people are struggling to get to them.

My point about the state of infrastructure, and not just the short or medium-term performance of the franchise operators, is that, not that long ago, people said that modern communications technology would make place less relevant to economic development, that we would all be able to work from home, that it would improve productivity, and that we would see the benefits of that. My hon. Friend the Member for Barnsley Central made the point, however, that place is as crucial as ever, because cities have generated the jobs of the future, particularly in the knowledge industries and in services. Our transport system is only now trying to catch up.

If we cannot give people an adequate journey over 10 miles, we have no chance of linking up the north, the midlands or South Yorkshire more comprehensively. From Stalybridge and Hyde, people should be able to go to work by public transport in not just Manchester, but Leeds, Liverpool, Sheffield and, of course, Barnsley. That is why I have always championed transport projects in my constituency, such as electrifying the Huddersfield rail line, which the Government are still prevaricating about and telling us might be partly possible; the Mottram-Tintwistle bypass, which would make it easier to get to Barnsley; and the extension of successful transport networks, such as the Metrolink tram network. That is also why we need schemes such as HS2 and Northern Powerhouse Rail. I say to the Minister that those two projects are complementary, not in competition. They will require major transport investment, but it will be worth it.

Secondly, I want to talk about automation. Many people fear the rise of automation and worry that it will destroy jobs and create huge and painful upheaval. I understand those concerns; I grew up in the north-east in the 1980s, which was a time of tremendous upheaval. We did not deal with those changes well, but, in the right hands and with the right leadership, automation makes the country more productive and more prosperous, not less. The problem in the UK is that we have not enough automation, rather than too much. The International Federation of Robotics notes that, in 2018, there were 71 robot units in the UK for every 10,000 manufacturing employees. The comparative figure in Japan was 303, in Germany, 309, and in South Korea, 631. We need more ambition with technology, not less. It is amazing that, until very recently, one 10th of all the fax machines in the world were in use in the NHS. I would like to see the Government lead on a managed automation plan as part of their industrial strategy, to drive up the use of new technology, and alongside that, have a technology displacement fund to support workers with the skills and training they would need if they faced displacement through new technology.

I also want to talk about business support, because as well as the things the Government need to do to improve productivity, decisions that individual firms make clearly have a big impact, based on the leadership and training they possess. The previous Chancellor, Philip Hammond, used to mention that a lot. There is some excellent work already happening. Many Members will be familiar with Be the Business, the business-led organisation that works with peers to improve and benchmark productivity performance. I am impressed with its work, but I wonder whether it could be taken further. Could Be the Business be the basis for a new social partnership or standing organisation to further expand on that work?

I hope this is one of many debates we will have on this subject in this Parliament, but I want to sound a word of warning. We are told the Government want to ban the word “Brexit” in an attempt to present it as being done, but, in reality, so many of the debates in this Parliament will be related to our exit from the European Union. The impact of future trade deals, in particular, will require serious debate about which sectors will be prioritised and which will be severely disrupted. The announcements we have had so far suggest there will be no substantive deal covering services of any kind, especially financial services, and that, on goods, the just-in-time supply chains that the automotive and aerospace manufacturers depend on will be significantly disrupted. Those sectors are where productivity is currently strongest. For instance, the Nissan car factory in Sunderland has a claim to being the most efficient in the world. If all of us here today are in agreement that national productivity must be improved, we must also make sure we do not lose the good sectors that we have.

We should work to improve the UK’s productivity where we can, but we should not take poor decisions that would make our productivity and therefore our prosperity and the living standards of our constituents much worse. I look forward to what the Minister has to tell us about the Government’s plans in this area.

--- Later in debate ---
Simon Clarke Portrait Mr Clarke
- Hansard - - - Excerpts

That is certainly an interesting idea, which I promise to look at. I would very much welcome the hon. Lady’s sending through her thoughts on this. We have, for example, committed to compulsory gender pay gap reporting. Those kinds of tools that can help to shine a light on hidden inequities, and we are keen to look at that. I am certainly happy to consider that idea.

We are excited about putting our plans into action, but we have to make sure that, when we begin to tackle the productivity puzzle, everyone in our country benefits. That is why we are taking advantage of low interest rates to invest in our priorities across the regions and nations of the UK. In our manifesto, we committed to spend £4.2 billion on upgrading local transport connections in England’s largest cities, and £500 million a year on tackling potholes—a recurrent source of frustration for all of us across the country. We are spending over £28 billion on roads through the national roads fund from 2020 to 2025—the largest ever investment in England’s roads. We are making sure every corner of the country benefits: we are spending almost £3 billion in the north, £2 billion in the midlands, and £2 billion in the south-west on improvements to our major road infrastructure. We are investing £2.5 billion in up to 18 city regions across England to improve roads, public transport, and cycling and walking networks through the transforming cities fund.

The hon. Member for Barnsley Central will no doubt welcome the fact that the Sheffield City Region and West Yorkshire Combined Authorities have both been shortlisted for the £1.2 billion transforming cities fund. We will be announcing allocations from the fund shortly. I am sure that he has seen that the Government are also investing in a £3.6 billion towns fund to unlock regional potential and create places across the UK where people can live and thrive. I am sure he will be pleased that we have allocated more than £12 billion from the local growth fund to local enterprise partnerships, to be spent on local priorities.

I pay tribute to everyone who has taken the time to contribute. This has been a genuinely good debate, conducted in a tone of consensus. So many of the issues raised are accepted on both sides of the Chamber as priorities that we need to tackle as we move into the 2020s. From Strangford to Sheffield, we remain highly ambitious. On 11 March, the Chancellor will set out a Budget that lays the foundations for what we should all hope is a decade of renewal that will unleash our country’s potential and level up opportunities.

Jonathan Reynolds Portrait Jonathan Reynolds
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In an interview with the Financial Times at the weekend, the Chancellor very ambitiously said he intends to double the trend rate of economic growth that we have seen since the Conservative party returned to power. What kind of improvement in productivity would the Minister like to see, and what can we use to hold him to account for the successes of the strategy?

Simon Clarke Portrait Mr Clarke
- Hansard - - - Excerpts

It is best that we wait for a fiscal event to set out our targets in this area. The Government are clear that we need to increase trend growth. There is no doubt that we accept that challenge, which is thrown down quite legitimately. As we have now cleared the rubble from the 2008 crisis, we need to aspire to do more. I accept that in the spirit in which it is offered. It is right to challenge the Government and hold us to account on whether we can now put that vision into practice. There is always a lag when it comes to investment on the scale and of the nature that we are talking about, but we are doing things that I hope by the end of the Parliament will have made a demonstrable impact, in terms of changing our economic structure.