Financial Exclusion: Access to Cash

Jonathan Reynolds Excerpts

Tuesday 21st May 2019 Westminster Hall

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank you, Sir Henry, for giving me the opportunity to respond to the debate. I thank my hon. Friend the Member for Feltham and Heston (Seema Malhotra) for securing this debate on such an important issue. It is good to see such a significant turnout of colleagues. There has been a fair degree of consensus in what has been said.

As shadow City Minister, I spend a great deal of time thinking about how financial services can be changed to improve financial inclusion and how we can remove the poverty premium that we know exists in the UK and that so many Members have referenced. For me, it is impossible to build a fair society—the kind of society we all want—without guaranteeing a degree of access to basic financial services. It always confounds me that we are one of the most advanced global financial centres in the world, yet there are 1.6 million adults in the UK who remain unbanked, and thousands more who are denied access to the basic levels of credit that many of us take for granted.

When I look to the future, I see the challenge as making sure that we can use new technology to tackle financial inclusion, rather than compound the problem. Some new financial technology companies are doing brilliant work to break down historical barriers in banking, such as providing easier access to bank accounts or using rental payment data to help build up credit scores, but technology risks leaving people behind if we do not protect and equip them along the way. That has been evident in the trends surrounding the use of cash.

As many Members have said in the debate today, our use of cash as a nation is declining. According to figures from the British Retail Consortium, cash accounted for just 22% of retail transactions in 2017, which is an inevitable consequence of the rise in popularity of contactless and mobile payments, but there is a significant danger of sleepwalking into a cashless society without giving careful thought to what that will really mean. Some communities, especially vulnerable ones, are still reliant on cash and their ongoing access to cash must be protected. I unreservedly commit the Opposition to that position.

Some poorer families and individuals need cash to budget effectively, a point that was well made by my hon. Friend the Member for Makerfield (Yvonne Fovargue). There is no solution that compares with cash for people who are reliant on, for example, a carer to carry out tasks for them—it is quick and easy to see how much change there is when a carer has done the shopping for someone—and, of course, for the unbanked, cash is a lifeline without which participation in society would simply be impossible. It is up to us to carefully consider access to cash and to create a system that protects more vulnerable individuals.

Natalie Ceeney’s Access to Cash report, which was commissioned by Link and has been referenced quite a lot in the debate, outlined the situation we face and made some sound recommendations for consideration. The Chair of the Treasury Committee noted at the time that

“leaving the future of cash to be determined by market forces will not work.”

The Opposition certainly agree with that.

Establishing cash as a utility will be central to protecting consumer access. I have heard quite a lot of support for that in my initial conversations with the big UK banks, with ideas such as how they could share cash-centre facilities—the sort of back-office function that underpins much of the cash system.

Bank branch closures form a critical part of this debate. In the Opposition’s view, the reduction of the bank branch estate has been too severe. Under a Labour Government, there would be mandatory consultation on bank branch closures, given the negative impact they have on communities, which many Members have referenced. I am mindful that we have held quite a few Westminster Hall debates on this topic recently, and Members will have heard our views then, so I want to focus on the ATM estate.

We know that the number of ATMs has dropped significantly. There are complex factors at work that we must be mindful of. We should focus on protecting ATMs in communities that would end up being stranded long distances from free access to cash if they were to close. LINK’s offer to pay a subsidy on those machines of up to £2.75 is an important step towards preventing cash deserts from emerging.

In other places, especially city centres, we will ultimately see that there is an excess of cash machines. It is inevitable that there will be closures in areas of high concentration. For example, I am planning to go home today and when I get to Manchester Piccadilly station, there are at least six free-access cash machines on the station. I think that will probably decline over time.

I add a word of caution. We must be alert as politicians and regulators not to be seen as being there to protect the incumbents from the consumer change that we have seen. We can protect access to cash at the same time as recognising changing consumer habits.

We must also must be open-minded about creative solutions that will help to safeguard choices for everyone in how we pay. Lloyds Banking Group, for example, has launched a pilot scheme to incentivise cashback by paying retailers a small fee per transaction. We will have to see the results to ascertain whether it is effective, but at face value it seems like an interesting addition to the provision of cash. Cash can be expensive for shops to process and handle securely, yet keeping a small cash float that can be passed on to consumers would help address that problem. It means they can still accept some cash from customers who want to use it, and it would encourage visits to the high street. The point about business rates raised by my hon. Friend the Member for High Peak (Ruth George) must also be addressed. There will not be one panacea that regulators can impose to solve access to cash. The solution will lie in deploying a mix of such co-operative tools that see banks and shops working together.

The Opposition urged the Treasury to open an urgent review into access to cash when Natalie Ceeney’s report was published. I am pleased that those calls have been heeded with the establishment of the Joint Authorities Cash Strategy Group, which must act quickly to ensure that the future of cash can be safeguarded. I am particularly keen for local communities to be given the right to demand a review of access to cash in their areas, which the regulator will then have to respond to if necessary. For our part, the Opposition are ready to support any effort that moves us towards treating cash as the essential utility it is, guaranteeing access to it for all and protecting cash for those who really need it.

VAT (Place of Supply of Services) (Supplies of Electronic, Telecommunications and Broadcasting Services) (Amendment and Revocation) (EU Exit) Order 2019 Finance Act 2011, Schedule 23 (Data-Gathering Powers) (Amendment) (EU Exit) Regulations 2019 Customs (Records) (EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Tuesday 14th May 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is indeed a great pleasure to serve under you in the Chair, Mr Sharma. It has been a while since the Minister and I addressed a no-deal statutory instrument together, but unfortunately we remain n a process beset by uncertainty and have little insight into whether we will actually need this regime. The Opposition’s view has not changed and we continue to have profound concerns about conducting such significant decision making through the secondary legislative process.

Today, we are here to discuss matters relating to VAT. Existing VAT exemptions for cross-border trade among member states are critical, and any changes need to be carefully considered. I would like to raise two broad questions before getting into the detail of the instruments. In the run-up to 29 March, Opposition Members spent many happy hours in Committee Rooms debating dozens of no-deal statutory instruments that the Government had laid before the House. However, with the extension until 31 October, that preparation essentially ceased. Indeed, some legislation, such as the Financial Services (Implementation of Legislation) Bill, has not returned to Parliament at all, and we still have no date for that. First, therefore, I ask the Minister why selective no-deal preparation has resumed today, with instruments such as these. Will he offer some clarity as to the strategy now being pursued?

Secondly, a large number of the instruments that we dealt with in that period related to establishing a temporary permissions regime and to onshoring EU rules on financial services, so that firms operating in the sector would have a minimum period to cope with transition and to mitigate any consumer detriment in a no-deal scenario. Given that the proposed non-EU scheme will allow British companies to operate within the EU in the same way as they do now, why are the Government not seeking regulatory alignment on some of the VAT issues raised today, even on a temporary basis?

We are talking about the impact on small businesses, which have fewer resources and less time to deal with disruption, so what efforts are being made to minimise disruption for them? The approach seems inconsistent, as in some elements there has been a divergence from the status quo and in others we have had measures intended to duplicate the existing framework. It does not seem right that such policy decisions are being taken in an opaque manner without any real explanation being provided to Parliament.

The first instrument before us will repeal the most recent changes to the VAT MOSS provisions, as the Minister described. Those provisions made life easy for businesses by preventing them from having to register for VAT in every member state in which they supplied digital services. It is worrying, therefore, in relation to smaller businesses that may not be in a position to quickly adapt to the changes, that those provisions may be withdrawn if we crash out without a deal. Has action been taken to raise awareness of the potential change among small businesses? With the addition of the difficulties raised by the Making Tax Digital programme, is there not a risk that small businesses will be heavily disrupted by wide-ranging and rapid change in VAT, for which there is insufficient resource at HMRC to offer appropriate support? I note that no impact assessment has been carried out, which seems ill advised given the potential consequences for small businesses. How can HMRC offer adequate support if we do not know how many businesses will be affected, and to what extent?

The second instrument relates to the data-gathering powers in schedule 23 of the Finance Act 2011. The Minister has elaborated on the explanatory memorandum’s stating that the instrument enables:

“HMRC to ensure that overseas businesses sending goods to the UK in postal packets comply with those regulations... HMRC will require information on such imports and therefore will need to obtain data from various parties involved in these transactions. The instrument amends current data gathering legislation to add “postal operators” as a category’.”

Once again, the Opposition are concerned that legislation has been designed to enable a new customs regime without proper parliamentary consultation. The instrument stipulates that data can be provided only if it is relevant to VAT; however, the rationale for that limitation has not been made clear and I ask the Minister to clarify it just a bit further.

The final instrument, the Customs (Records) (EU Exit) Regulations 2019, require that

“a person who is subject to a Customs obligation…keep and preserve records, in such form, and for such period, as specified in a notice published by HMRC.”

Although the explanatory note indicates that the intention is to replicate the current EU requirements, there is insufficient clarity about what is required and what the potential penalties might be for non-compliance. Will the Minister confirm whether there will be any change from the current system? How will any penalties be decided? What communication has taken place with the businesses that may be affected? I shall be grateful if the Minister provides some clarity on those points before we decide our course of action today.

Draft Customs Safety and Security Procedures (EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Monday 25th March 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is always a pleasure to serve under your chairmanship, Sir Henry. Once again, we are here to discuss a statutory instrument that makes provision for a regulatory framework after Brexit in the event that we crash out without a deal. On each occasion, I and my Front-Bench colleagues have spelled out our objections to the Government’s approach to using secondary legislation to enable the process.

An issue raised repeatedly by Opposition Members is the impact of a no-deal exit on our ports system. I thank the Minister for his introductory explanation of the SI. My understanding is that, in the event of a no-deal Brexit, goods coming into the UK from the EU, Norway and Switzerland would be able to enter without having to submit safety and security information for a period of six months. I assume that the measure is designed to prevent gridlock at the ports, but the Opposition are troubled by the potential chaos that could occur if we do not get some resolution by the end of this week.

Paragraph 3.4 of the explanatory memorandum to the SI effectively admits that ports, hauliers and ferry operators are not ready. There has been unbelievably poor planning by the Government and it is something we have warned about since the passage of the customs Bill a year ago. The explanatory memorandum explicitly states:

“There is a strong possibility that businesses, such as hauliers and ferry operators, will suffer immediate hardship if the UK leaves the EU without a negotiated deal. They do not have the systems in place in readiness for exit day.”

How have the Minister and the Government allowed that to happen? How is it that restitution of a temporary way forward is being proposed only four days away from our proposed exit date?

The Opposition are concerned about how the exemption could increase the level of smuggled goods and undermine security, particularly at a time when threats to national security are rising. What safeguards do the Government propose to protect against both those risks? Furthermore, what are the implications for the collection of taxation if we are to forgo collecting taxes at the border simply because we do not have the capacity to do so? That is the Government’s stated approach, and the Financial Secretary to the Treasury himself gave evidence to the Treasury Committee last summer, admitting that keeping the ports open would take priority over collecting tax. But how long is such chaos expected to be justified? What assessment has the Treasury made of the potential loss to taxation?

Her Majesty’s Revenue and Customs is already struggling against the weight of the cuts already sustained and the new burdens placed upon it as we leave the EU. We seem to be contemplating potential chaos at our borders. As the Opposition have previously warned, it will be worsened by the serious issues concerning the roll-out of the customs declaration service. The Office for Budget Responsibility stated in its economic and fiscal outlook, published at the spring statement, that the Government’s new customs declaration service has processed just 500 declarations from four traders in seven months, since its launch last August. Yet it was built to handle 300 million import and export declarations. That is extremely worrying. One way to prevent the short-term chaos that we seem to be talking about is to consider staying in a customs union with the EU, as Labour has consistently argued.

I also want to ask the Minister what checks and balances will be placed on the powers. What is to stop us reaching the end of the six-month period and simply extending the process once again by statutory instrument? We would therefore effectively be in a de facto customs union, but without the wider scrutiny of Parliament and the wider benefits that such an active decision would bring. A sunset clause on the extension of the powers would have been an important component in preventing that.

To conclude, this seems an extraordinary statutory instrument to be discussing this week. I have huge concerns about whether this is the right way forward, and I very much want to hear the Minister’s further justification of these measures.

--- Later in debate ---

[Jonathan Reynolds]

I am grateful to the Minister for, as ever, batting solidly for the Government about the proposed measures. I was struck by two things he said. First, a no-deal situation is the purest form of Brexit, in the sense that it is the minimum level of co-ordination with our European colleagues and the strongest articulation of sovereignty over prosperity available of the options. Even under that scenario, what the Government are offering is essentially our being a supplicant to the European Union. For the reasons of keeping the country open, we would be forced to forgo the checks and balances that we could wish to impose, while not having any assurances from the European side that that would be reciprocated.

Secondly, it is a year since we had the customs Bill. The one thing we knew about Brexit was that it would increase friction at the ports; it would make the need for more capacity in the UK more evident. To be in this position in the final week of March is extraordinary. It is extraordinary to have an explanatory memorandum for a key statutory instrument that tells us we are not ready for the one thing that we knew was a distinct possibility. On that basis, I recommend that we divide the Committee.

Clydesdale Bank and SMEs

Jonathan Reynolds Excerpts

Tuesday 19th March 2019 Commons Chamber

[John Glen]

I acknowledge my hon. Friend’s long-standing efforts in this area. Before I was a Minister, I was a member of that APPG. The whole range of dispute resolution mechanisms that have taken place over the past 10 years all seem to have a very different story. As the Minister responsible, I was keen to ensure that we had a meaningful historical redress mechanism that would give discretion for the banks to examine these individual cases. I was also very keen that this House should be represented on that group. That is why having my hon. Friend the Member for Thirsk and Malton, with representatives from the SME Alliance, involved will allow full scrutiny of all the cases that have not been resolved adequately.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank the hon. Member for Lanark and Hamilton East (Angela Crawley) for securing this urgent question and for being a firm advocate on behalf of her constituent.

All people and all businesses in the UK deserve a mechanism that provides them with access to justice in the event that they end up in dispute with their financial services provider. Under your guidance, Mr Speaker, I will not comment on the specifics of the Guidi case. However, as many Members are aware, the issue of redress for SMEs against banks and other financial services providers is one that we have discussed in this place many times. At present, too many businesses are caught between the threshold for using the Financial Ombudsman Service and the cost and difficulty of using the full legal process to pursue a claim. So this issue is about more than just one case.

We must take decisive action to draw a line under historical cases like these, as well as ensuring that we have an adequate system of redress going forward. If we do not, then we have no hope of restoring the trust and confidence in business banking that this country so desperately needs. The debates that we have held so far have revealed a substantial coalition across the House for a full tribunal system, alongside a historical case review, that would look again at cases that have been settled by internal bank review processes. The Labour party, the Scottish National party, the Liberal Democrats, the Democratic Unionist party and many individual Conservative MPs certainly hold that view; it is only the Government who do not.

I therefore have some questions for the Minister. First, do the Government agree with the Opposition that where there is evidence from complainants, the historical review process should be willing to consider cases going back to 2000? At present, only those going back to 2008 would be eligible. Secondly, are the Government willing to reconsider their view on the establishment of an independent tribunal system for dispute resolution in order to level the playing field between businesses and their banks? Thirdly, have the Government listened to those people arguing that the expansion of the ombudsman service alone will not solve the problem, as it does not have sufficient resource and capacity to get to the root of the problem, and the mooted compensation cap by the Government looks far too low?

Most of all, do the Government acknowledge that MPs want to see some real action and progress on this? It is disappointing that despite many hours of parliamentary debate and consensus on what must happen next, with agreement stretching across the Treasury Committee, the Opposition, the Financial Conduct Authority, the major banks themselves, such as TSB and Metro, and the all-party parliamentary group on fair business banking, the Government are still reluctant to join this consensus. We all want to be able to tell our constituents that these issues are resolved and simply will not be allowed to happen again.

[John Glen]

I thank the hon. Gentleman for his comments. I always listen very carefully to the constructive way that he presents his case.

Let me address the hon. Gentleman’s three core questions. First, the historical review process has been as set out, but there is discretion within that. I know that there will be a lively discussion at the first board meeting about how the handling of past cases will be considered. In terms of the disputes over how to resolve this, the role of the Financial Ombudsman Service is being expanded. Its representatives were in Parliament last week offering access to colleagues across the House, and I have visited them to examine what they are doing to recruit the extra resources needed to deal with this extra category. I think that this will work; I would not have made the decision otherwise. The other key consideration I have to balance is about the rapidity and efficiency with which the vast majority of cases—we are talking about 99% of businesses with a turnover of up to £6.5 million—will be able to get a resolution. That is why I think that the ombudsman service is the right way to go forward.

Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Monday 18th March 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is always a pleasure to serve under your chairmanship, Mr Bailey. Once again, the Minister and I are discussing a statutory instrument that makes provision for a regulatory framework after Brexit in the event of us crashing out without a deal. On each occasion, my Front-Bench colleagues and I have spelt out our objections to the Government’s approach of using secondary legislation to fulfil that process.

As the Minister has said, we are reaching the end of the process or, as Churchill might have said, the end of the beginning. This is one of the last few statutory instrument Committees that I will address before we perhaps leave the European Union at the end of the month. We have had some 25 or 26 debates—my hon. Friend the Member for Oxford East (Anneliese Dodds) has shared the burden with me. I place on record my thanks to my staff, particularly Sophia Morrell in my office and Mary Partington in the shadow Chancellor’s office, for their assistance with the process. It has been technical and burdensome, so the support of dedicated staff has been essential. I also thank my hon. Friends the Members for Manchester, Withington and for Colne Valley for their support and attendance.

It has been a long process for us all, including the Minister and his staff. It is a source of some frustration that the Government held a vote to prevent us crashing out only last week—we wanted that to happen many months ago. Technically, we are debating secondary legislation that the Government have stated that they will never allow to be needed, but these are not normal times. I also note that we have not received a new date for the Financial Services (Implementation of Legislation) Bill to return to the Commons. Will the Minister tell us whether there is any plan for it to return?

The statutory instrument demonstrates the scope of what the Government have attempted to carry out in the process. The pressure of scrutiny has been immense and, at this late stage, we seem to have been presented, in a way that is difficult to analyse, with a substantial wrap-up item that contains dozens of individual changes to previous statutory instruments. The Minister has shed some light on the source of the amendments and has been candid in saying that some reflect deficiencies in the original instruments that we have passed, but they are similar in scope to the Financial Services (Implementation of Legislation) Bill and go to the core of our critique of the process.

Surprisingly, I note from the explanatory memorandum that the SI was originally tabled as a negative instrument. That decision was subsequently declined by the European Statutory Instruments Committee, or sifting Committee, hence our debate under the affirmative procedure today. I am minded to vote against it for that reason, on principle, but if the Minister agrees, a better way forward might be for him to write to me to set out, in his view, the balance between the drafting errors and the technical amendments contained in the instrument, and to place a copy in the Library so there will be complete transparency for all hon. Members as to exactly what it contains and relates to.

[The Chair]

In the absence of other hon. Members queuing up to contribute, I call the Minister to reply.

Draft Uncertificated Securities (Amendment and EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Tuesday 12th March 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

As ever, it is a pleasure to serve with you in the Chair, Mr Sharma. Once again, the Minister and I are here to discuss a statutory instrument that would make provision for the regulatory framework after Brexit in the event that we crash out without a deal. On each of those occasions, the Minister has heard the objections that my Front-Bench colleagues and I have spelled out about the Government’s approach to transposing this amount of legislation through the secondary legislative process.

I thank the Minister for his explanation of the regulations. The Opposition are satisfied that parts 1 to 4 are essentially straightforward transpositions of the EU regulations into UK law. Central securities depositories form an important part of our financial market infrastructure, and it is important that their regulation continues to be robust and consistent. Post-trade market systems have been subject to significant reform after the financial crisis and it is important that those changes are not mitigated or unpicked in any way.

I would, however, like the Minister to provide additional clarity on part 5, which begins on page 7. As the explanatory memorandum stipulates—this was the subject of the exchange between the Minister and the hon. Member for North East Hampshire—the instrument allows the Bank of England to charge fees to some central securities depositories located in third countries. I ask the Minister for a little more explanation about whether that is a typical function of the Bank’s activities.

The explanatory memorandum also states that the Bank can charge fees to cover expenses that it or the FCA incur. Can the Minister clarify why the Bank would pick up fees on behalf of the FCA and the nature of that arrangement? Why would the FCA not collect its own fees? Once again, the concern is that this appears to be a material change to the relationship between significant institutions and we should be clear if that is what we are doing during the transposition.

Furthermore, as was announced on 1 March, the European Securities and Markets Authority will recognise the UK CSD in the event of a no-deal Brexit, but can the Minister say if there has been any clarity on whether the fee arrangement would be reciprocal? Would central banks in the EEA reserve the right to change the UK CSD fees and, if so, what assessment of the potential impact of that has been carried out? Those two points of clarity are all I want to raise with the Minister.

Draft Mortgage Credit (Amendment) (EU Exit) Regulations 2019 Draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) (EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Monday 11th March 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship this evening, Mrs Moon.

Once again the Minister and I are here to discuss statutory instruments that make provision for a regulatory framework after Brexit in the event that we crash out without a deal—[Interruption.] On each of those occasions, I and my Labour Front-Bench colleagues have spelt out our objections to the Government’s approach to the process and the use of secondary legislation.

Today we are here to discuss two different instruments that have been grouped together, no doubt in an effort to clear the significant workload that still remains to complete the statutory instruments that are necessary in the event that we crash out without a deal and with which we have been engaged since October—[Interruption.]

[The Chair]

Order. I will not have Members muttering from the Back Benches. If you wish to be heard, you ask to be heard. You do not mutter from a sedentary position. I do not intend to make that remark again.

--- Later in debate ---

[Jonathan Reynolds]

Thank you, Mrs Moon.

I was about to thank the Minster for his detailed explanation. On the draft mortgage credit amendment regulations, will he give us some clarification? In the explanatory policy note on the regulations, the paragraph on amending the territorial scope of the application of regulated consumer buy-to-let lending covers various changes that are not altogether obvious. First, it notes at the bottom of page 4:

“Lending relating to land in the EEA outside the UK that was entered into after the implementation of the Mortgage Credit Directive but before exit day, and which is currently supervised under the consumer buy-to-let regime, will continue to be covered by FCA regulation under that regime.”

Can the Minister guarantee that the FCA will still have the right to apply the regulations to do that? Is it not the case that local rules would apply at that point?

The explanatory policy note also stipulates that the regulatory perimeter for owner-occupiers will be amended under a separate statutory instrument relating to the Financial Services and Markets Act 2000. Can the Minister confirm whether that was included in the version of FSMA that we have already debated? If not, when will it come to Committee?

I am sure that I do not need to remind the Minister that, at the end of this week, we will be just two weeks away from exit day, so we have an extremely short amount of parliamentary time. If anything, owner-occupiers will need more certainty than buy-to-let owners, given that we are more likely to be talking about their actual homes than a rented holiday home. I confess that I do not have a place in the sun in Europe, but many Britons do, and they will need clarity as they seek to make retirement plans or decide where their family will be located in future.

The explanatory policy note also notes that the Treasury is conferring another power

“to make regulations modifying the remarks and assumptions which accompany the formula for the calculation for the annual percentage rate of charge (a standardised calculation of cost of credit), where they are out of date or do not create a uniform result.”

Could the Minister give us some further explanation about the scope of those remarks and their typical impact? Given that no impact assessment has been prepared on the statutory instruments, we are somewhat in the dark as to the exact ramifications of the proposals.

The second set of regulations provide important consumer protections in the UK and the Opposition support onshoring them in principle. Again, however, I would like to clarify some points with the Minister. First, the explanatory policy note states that

“references to the European Consumer Credit Information Form have been replaced with references to the Pre-Contract Credit Information (Overdrafts) Form.”

Has a full assessment been undertaken of where deficiencies might arise as a result of the switch between those documents?

Secondly, the European Union is undertaking a review of the regulations, as announced by the publication of an evaluation and fitness roadmap consultation in December 2018. Will the Treasury pay any heed to the outcome of that consultation, if it identifies issues with the regulations that we are attempting to onshore?

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My hon. Friend is making an important speech. Am I correct that he just wants clarity about whether there will be any effective reduction in the amount of consumer protection that will apply to UK consumers as a result of the regulations?

[Jonathan Reynolds]

I am extremely grateful to my hon. Friend for that question. That is exactly the type of concern that we on the Front Bench have sought to outline. As she knows, we need not only to onshore some regulations, but to prepare for the legislation that will be passed in the European context between exit day and the end of any transition. We are all particularly interested in the impact on consumer protection, the overall regulatory burden and the function of the regime, and the Minister has sought to provide clarity on those issues.

Those two specific points are all I wished to say about the second set of regulations.

Oral Answers to Questions

Jonathan Reynolds Excerpts

Tuesday 5th March 2019 Commons Chamber

[John Glen]

Financial services are well protected and ready to engage on arrangements for beyond the implementation period, but the Government are not complacent in respect of the whole economy. We have made a series of interventions through our productivity fund to meet the challenges of the next generation.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Whenever the Government table self-congratulatory questions like that one, there is a need to put on record what is really happening out there. Six million jobs in the UK pay less than the real living wage, 3.8 million people are in insecure employment and 2.5 million people work less than 15 hours a week. Economic growth, where it exists, is so geographically unequal that it does not reflect the reality of what people see around them. Let me ask, on behalf of those people: what is this Government’s strategy for in-work poverty and insecure employment?

[John Glen]

I thank the hon. Gentleman for his question. This Government’s strategy is to relentlessly pursue growth in the economy and opportunities for all. We have seen 18.3% growth since 2010, and a record 32.6 million people in work. We will continue to prioritise interventions around technical education, cuts in business taxes and support for new technologies to recognise the new jobs that need to be provided for.

Tax Avoidance, Evasion and Compliance

Jonathan Reynolds Excerpts

Monday 4th March 2019 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

The Opposition came to Parliament today prepared to debate, to amend and to scrutinise the Financial Services (Implementation of Legislation) Bill, and we did so in good faith, even though we were given just three hours to table amendments to the Bill last week, having been told on Wednesday afternoon that the remaining stages would be taken today. I should make it clear that the Bill had only come out of Committee the day before, on Tuesday, and that the business for this week was announced only last Thursday.

Let me be absolutely frank. The Bill has been pulled, and this statement scheduled instead, for one simple reason: the Government thought that they were going to lose. They have shown such contempt for Parliament today, and they are in such a state of chaos, that even the annunciator could not keep up with them this morning. This is not a statement from the Government on tax avoidance; it is a poor attempt to put up something that the Government can hide behind, because they are afraid to let Members of Parliament vote on the provisions of the Financial Services (Implementation of Legislation) Bill.

There were two main amendments to the Bill. The first would have prevented the Bill from legislating for a race to the bottom in regulatory standards if we were to crash out of the EU without a deal—something that the Government say they are already committed to. The second, standing in the names of my right hon. Friend the Member for Barking (Dame Margaret Hodge) and the right hon. Member for Sutton Coldfield (Mr Mitchell), would have compelled the introduction of public registers of beneficial ownership in the Crown dependencies and reiterated their introduction in the overseas territories—something that the Government are already committed to doing. It is woeful and embarrassing for the Government to pull the business of the House today, to avoid Parliament having a say on those amendments, and to make this statement instead.

In relation to the substantive point on tax evasion that has led to this, I know that the Crown dependencies have a difference of opinion with this Parliament on the merits of public registers of beneficial ownership, but I believe that there is a majority view in Parliament that public registers provide for greater transparency than the existing data-sharing protocols between ourselves and the Crown dependencies provide for. Public scrutiny would provide for analysis of suspicious patterns of behaviour, and it would disclose inconsistencies in supposedly factual information and reveal wrongdoing by people who might not already be the subject of official law enforcement action. Around the world, such information getting into the public domain has been essential to exposing tax evasion and corruption, from the laundromat scandal to the Panama papers, and the public want to see action.

In relation to what the Minister has said today, all I can ask him is whether his reference to not enforcing historic cases is code for the Government not proceeding with the 2019 loan charge? His words suggested that they might not be proceeding, but he did not really say one way or another. If the answer is that they are not proceeding, I am not really sure, with all due respect to the Minister, why he needed to make a statement today at all.

Let me return to the main point. If we had debated the Financial Services (Implementation of Legislation) Bill today, I had intended to start with a genuine word of solidarity with my opposite number, the Economic Secretary to the Treasury, who is also the MP for Salisbury, because it is exactly a year since the appalling attack in his constituency that featured chemical weapons. I still want to take this opportunity to express our support and solidarity with him and the people of his constituency. I mention this now because the House has united on a cross-party basis to push for new laws in this area precisely because transparency in overseas jurisdictions has become an issue of national security for us in the UK. We cannot, and should not, tolerate those who threaten the safety of our people being able to hold major assets in the UK through complex and opaque financial arrangements.

In the light of that, the Government’s words today are simply not good enough. If there is consensus in this House that action must be taken now, how can the Government deny us the chance not only to vote for further action but to vote to reaffirm the action that we have already passed through the House of Commons? Real action on tax avoidance, transparency and money laundering is well overdue, and if the Government cannot bring themselves to take that action, they should at least stop preventing other Members of Parliament from getting on with the job.

[Mel Stride]

I thank the hon. Gentleman for his reply. He spent some time focusing on the legislation that was due to come before the House this evening. Some amendments have been tabled, particularly the second one to which he referred, that could have significant constitutional ramifications for our Crown dependencies and overseas territories. For that reason, and given that the amendments were tabled only last Thursday, it is only right that we should have time to consider these important matters. They are not directly Treasury matters; they are more a matter for the Foreign and Commonwealth Office and the Ministry of Justice.

The hon. Gentleman refers to wanting to see public registers of beneficial ownership of companies, but he neglected to mention that we have already introduced these in respect of UK companies. That came in in 2016, and that database has been accessed in excess of 2 billion times. He mentioned that we have already made commitments to work with the overseas territories to bring in those measures by 2023. He asked me specifically what the meaning was, in the context of IR35, of focusing particularly on future compliance rather than on the history of the businesses that would be in scope of this measure. This is simply a clear indication that this is not about trawling through previous activities. It is about looking to the future and ensuring that we take a fair, proportionate and reasonable approach to IR35 as it goes into the private sector.

The hon. Gentleman asks me whether there were any implications for the loan charge. I know that people often conflate IR35 and the loan charge in relation to disguised remuneration, but as he will appreciate, they are entirely different things. There is no implication in any element of my statement on any change in respect of the loan charge.

The hon. Gentleman makes an important point, in relation to our national security, about the importance of general transparency in business and tax affairs internationally. I remind him that this Government and this country have been at the forefront of the base erosion and profit-shifting project with the OECD and that it is this country that has helped to drive our common reporting standards, which provide information across hundreds of overseas tax jurisdictions. With that, I will conclude, because I think that I have addressed the points that the hon. Gentleman has raised.

Draft Securitisation (Amendment) (EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Wednesday 27th February 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Hanson. Once again, the Minister and I are here to discuss a statutory instrument that would make provision for the regulatory framework after Brexit in the event we crash out without a deal. On each occasion, my Front-Bench colleagues and I have spelled out our objections to the Government’s approach to the process.

Today we are here to discuss the draft Securitisation (Amendment) (EU Exit) Regulations 2019. Given the impact that securitisation had on the wider economy and its role in the 2008 global economic crisis, I am sure I do not need to remind anyone in the room of the importance of ensuring that the securitisation market is properly regulated and monitored. The Opposition have laid out its wider concerns on the no-deal regulatory provision process for financial services, which incorporates dozens of statutory instruments and the in-flight Bill for EU legislation that is in train but not yet implemented. We believe there should have been a consolidated financial services Bill that presented a single overview of the changes proposed, which would allow us thoroughly to scrutinise and assess the new allocation of powers across different regulators and institutions.

This statutory instrument is a case in point. We have already debated one business-as-usual securitisation SI, which was subject to the negative procedure, to implement new European regulations. Now we have another securitisation SI, related to no deal and subject to the affirmative procedure, just a few weeks later. The powers allocated in the other SI are complicated by their interaction with this one, as my hon. Friend the Member for Oxford East (Anneliese Dodds) stated on 13 February in the debate on that instrument.

I want the Minister to clarify some points that are of concern to the Opposition. First, the explanatory memorandum highlights that an exemption is provided to national promotional banks, and that the exemption will continue for UK parties only, namely the British Business Bank. Where does that leave existing securitisation deals with exposure to entities such as the German KfW, given that their preferential treatment will be removed? Will those deals need to be liquidated and novated the British Business Bank? I am sure the Minister agrees that that has the potential to be highly disruptive. What would their legal status be?

Secondly, what long-term plan does the Treasury have to ensure that securitisation regulations will continue to be robust given the volume of powers that will be transferred to the FCA? Much of the securitisation regime has not been developed domestically, as the Minister said, yet we will take full onshore responsibility for regulating and monitoring a regime that might contain substantial risks.

I reiterate my hon. Friend’s comments in the debate of 13 February about the new powers bestowed on the FCA, and on which we still do not have full clarity. It seems that under the Treasury’s proposed approach of transferring powers that rest with the European systemic risk board, the FCA can permit re-securitisation for specified legitimate purposes in an exemption to the general ban. The general ban prevents the underlying assets of a securitisation from being themselves securitised assets, which as we know is the type of circular activity that caused the issues that in many ways led to the financial crisis. Will the Minister explain what checks and balances will be in place to ensure that the development of this regulation is properly scrutinised and monitored? That is all I have for the Committee this morning.