Jonathan Reynolds debates involving HM Treasury during the 2019 Parliament

Wed 18th March 2020
7 interactions (1,250 words)
Thu 13th February 2020
2 interactions (114 words)
Tue 11th February 2020
3 interactions (114 words)
Tue 4th February 2020
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Mon 3rd February 2020
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Wed 22nd January 2020
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Bank Branch Closures

Jonathan Reynolds Excerpts
Wednesday 18th March 2020

(1 year, 7 months ago)

Westminster Hall

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HM Treasury
Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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18 Mar 2020, 4:58 p.m.

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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18 Mar 2020, 4:59 p.m.

There is nothing wrong with that.

Jim Shannon Portrait Jim Shannon
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18 Mar 2020, 4:59 p.m.

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 ---
Patricia Gibson Portrait Patricia Gibson
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18 Mar 2020, 5:10 p.m.

I look forward to hearing from the Minister, who is speaking from a sedentary position.

The ATM Industry Association has warned that one fifth of Scotland’s free ATMs will start to charge consumers in the next year. That can be seen only as a cynical move to force us to become a cashless society. Picking up what has been touched on by my hon. Friends the Members for Kilmarnock and Loudoun, for East Renfrewshire, and for Midlothian, and the hon. Member for Strangford, bank closures have, as we now know—the game is up—been a tool to force people to bank online. As banks have quietly cut the fees that they are willing to pay machine operators to provide bank customers with access to cash, they are forcing us to go cashless and online. Banks are attempting to put pressure on customers who do not act in a way that they—the banks—find convenient. What happened to the customer being king?

Going cashless and banking online may, as we have heard, be the preferred option for some—and good luck to them—but some of us do not want to go down that route, and increasingly aggressive efforts are being made for it to happen, at breakneck speed. I and those of my constituents who do not favour those options will not be forced to bank online. We will not be bullied into doing so or into going cashless. It is a rum do when the service provider is bullying the customer—because that is how it feels. In any case, even among customers who may be interested in banking online there are some who simply are not able to, for a variety of reasons that the Minister will understand, and of which the hon. Member for Strangford reminded us.

I have corresponded with the Treasury about online banking in the past, and it accepted that broadband access is not yet good enough for everyone to rely on digital banking. The Government and the access to banking standard must ensure that banks have a social responsibility to provide banking facilities to all our towns. Such services could be provided relatively easily through the wide rolling-out of banking hubs. Indeed, I met the Minister in his constituency to discuss that very issue last year. I am hoping—I am quite excited about it—that he will be able to update me on progress with that. I am sure that the Minister will correct me if I am wrong but I cannot see any discernible obstacle to the option except for perhaps a lack of political will and, indeed, the arrogance and intransigence of the banking industry.

Our communities and constituents deserve better than they have had up to this point. Banks have to face up to their social responsibilities, get their heads together and create banking hubs in our towns, across the board. There is no real impediment to that, and I urge the Minister to use his good offices to bang some banking heads together and ensure that customers’ voices are heard. The Government have a role to play when the last bank in town is closed. They have said repeatedly that those are commercial decisions, but it is not just a commercial matter. It is about social responsibility and financial inclusion. I urge the Minister to reflect further on the strong feelings and concerns that have been expressed today. Will he finally bring forward legislative proposals to ensure that banks live up to their responsibilities to our communities?

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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18 Mar 2020, 5:14 p.m.

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.

John Glen Portrait The Economic Secretary to the Treasury (John Glen)
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18 Mar 2020, 5:20 p.m.

It is a pleasure to serve under your chairmanship, Sir David.

I thank the hon. Member for Midlothian (Owen Thompson) for securing this debate on an enduring concern across this Chamber and the House as a whole. I thank him for our conversation yesterday, following up on his question during business questions at the end of February. Since the start of this year, I have had conversations about similar matters with the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) and my hon. Friend the Member for Colne Valley (Jason McCartney).

In the debate, I listened carefully to the speeches of the hon. Members for East Renfrewshire (Kirsten Oswald), for Kilmarnock and Loudoun (Alan Brown), for Strangford (Jim Shannon) and for Stalybridge and Hyde (Jonathan Reynolds). In my remarks, I will address the points they made.

The hon. Member for Midlothian, in opening, referred to the current context. At this time, obviously, banks will operate using contingency plans. In the light of such circumstances, we expect them to consider what that means for their branch closure programmes.

Customer-facing financial services are undeniably changing, as consumers and businesses opt for the convenience, security and speed of digital payments and banking. In 2018, almost three quarters of UK adults used online banking, half mobile banking and two thirds contactless payments. Meanwhile, branch usage fell by 26%, on average, between 2012 and 2017, with many communities seeing even more drastic declines.

Banks clearly must balance changing customer interests, market competition and other commercial factors when they consider their response. Many have proceeded in different ways. Sometimes they take the difficult decision to close branches in order to strike that balance. Although that is disappointing for communities, I have been clear that banks are best suited to know what works for their customers, and these must ultimately be commercial decisions.

That said, in January, I visited Yarm in Stockton to look at what Barclays is doing with its network. It has taken a group of more than 100 branches—102 or 112, I think—that are the last bank in their towns, and is working hard with the communities to secure a future. I encouraged it in that work, because models exist to sustain such branches, if transfers are made into that last bank. Barclays is optimistic about a large proportion of the cohort surviving for a significant time.

The Government cannot reverse changes in the market and in customer behaviour, and nor can we determine the commercial strategies of individual firms. I still believe that it is not for me in Westminster to decide the shape of a branch network or whether a bank should place a branch in Wolverhampton or Wick, but it is important that the impact of closures on communities is understood, considered and mitigated. I will set out some of the ongoing work in that area.

The access to banking standard is a key mechanism to ensure that customers are well informed about branch closures, and that banks set out their reasons for closure and the alternatives available to consumers. Since May 2017, the major high street banks have voluntarily signed up to the standard. However, I acknowledge that hon. Members have made representations to the effect that the application of the standard lacks transparency, is inconsistent and is insufficiently tailored to local conditions.

Last July, therefore, I met representatives of the Lending Standards Board and UK Finance, which enforce and own the standard, to discuss some of these concerns. As a result, they have agreed to two key improvements to the application of the standard. The first is agreement on a common definition of what constitutes an impacted customer when a branch closes, and the second is agreement on a number of common metrics to be used in impact assessments. Both of those will drive greater consistency of information among banks when they are closing branches.

In its recent annual report, the Lending Standards Board reported improved compliance with the standard among firms. It found that firms were providing more local information specific to the branches in question, and strengthening their relationships and engagement with the Post Office. In due course, the Lending Standards Board will publish examples of best practice to highlight positive approaches and provide a standard for under-performing firms to work towards.

Hon. Members will know the important role that the Post Office plays when branches close, and I have noted the comments of the hon. Member for North Ayrshire and Arran (Patricia Gibson) about the Treasury Committee’s report on this issue. I was therefore pleased by the successful renegotiation of the Post Office’s commercial agreement with the high street banks. That means that for the next three years at least, 99% of personal customers and 95% of small and medium-sized enterprise customers can continue with everyday banking at one of the UK’s 11,500 Post Office branches.

The agreement also ensures that local postmasters will see a considerable increase in fees for processing transactions, which will rise as volumes grow. I acknowledge the hon. Lady’s point about this being a complementary activity; I do think we are on a journey when it comes to the functions that post offices can provide, because they clearly cannot provide face-to-face banking services. Those are being aggregated generally across the industry, but these are issues that the banking industry must come to terms with. I will say more about that in a minute.

Post Office figures from between 2018 and 2019 show that overall transactions increased by 15.5%, deposits increased by just under 40%, and withdrawals grew by 16%. Increased income from fees will help the post office network become more financially sustainable and will allow for investment in automation, training and security. As high street entities, post offices face similar challenges when it comes to footfall and the changing behaviour of customers.

Turning to the issue of access to cash, three in 10 payments in the UK are still made in cash, and the Government want to ensure that cash remains available for those who need it. That is why in last week’s Budget, the Chancellor announced that the Government will bring forward legislation to protect access to cash. We will work with regulators and stakeholders as we develop our approach, including with LINK, the Payment Systems Regulator, and people such as Natalie Ceeney, who carried out the “Access to Cash” review last year. That process will also involve stakeholders such as Which?, who have taken a great interest in this issue.

Improving digital access must be an equally important part of our response. The opportunities created by digital and online products should be open to all, which is why we established the digital skills partnership to bring together the public, private and third sectors to address the digital skills gap in a more co-ordinated and collaborative way. Of course, doing so depends on physical connectivity; some 98% of premises in the UK can access decent broadband, but there is more work to be done. That is why the Budget announced a £5 billion commitment to support the roll out of gigabit-capable broadband.

Mobile coverage is also important; as the Chancellor has announced, the shared rural network agreement has been finalised, which will involve an extra £510 million of funding from the Government. That means that 95% of the UK’s landmass will have that connectivity.

Last year, I concluded a Westminster Hall debate on this topic with a call to arms for the industry, which I reiterate and re-emphasise today. We cannot reverse digital innovation—nor should we, given the benefits it brings. However, this House can agree that vulnerable customers must not be left behind or locked out of opportunities. Government, regulators and industry are already acting to ensure cash remains available. I have just come off a call this afternoon in which I discussed mutual banks, credit union reform—which was also announced in the Budget—and hubs and cash access, which is something I am actively pursuing the banks about.

We must keep putting energy into digital inclusion, and not let the process of innovation run out of steam. I will be working with the industry and pushing it to go further. I value all the contributions that have been made today; they reinforce the energy that I will continue to bring to solving some of these difficult problems, which differ across the country.

Treasury

Jonathan Reynolds Excerpts
Thursday 13th February 2020

(1 year, 8 months ago)

Ministerial Corrections

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HM Treasury
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
- - Excerpts

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. 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.

[Official Report, 11 February 2020, Vol. 671, c. 690.]

Letter of correction from the Chancellor of the Exchequer, the right hon. Member for Bromsgrove (Sajid Javid):

An error has been identified in my response I gave to the hon. Member for Stalybridge and Hyde (Jonathan Reynolds).

The correct response should have been:

Oral Answers to Questions

Jonathan Reynolds Excerpts
Tuesday 11th February 2020

(1 year, 8 months ago)

Commons Chamber

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HM Treasury
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

(1 year, 8 months ago)

Westminster Hall

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HM Treasury
Alison Thewliss Portrait Alison Thewliss (Glasgow Central) (SNP)
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4 Feb 2020, 5:06 p.m.

It is a pleasure to serve under your chairmanship, Mr Hollobone. I pay tribute to the hon. Member for Thirsk and Malton (Kevin Hollinrake) for his diligence and for his role in the all-party parliamentary group on fair business banking, and for bringing yet another debate. I also pay tribute to Heather Buchanan for her diligent work behind the scenes.

If this process has taught us anything, it is that we need urgently to look at reforming the banking system into an ethical model that works for customers, whether they are private individuals or businesses, because this scandal has evaded every safeguard that ought to protect customers. As the hon. Member for Strangford (Jim Shannon) said in hope, there should now be a positive influence on the behaviour and attitude in banks, but an awful lot still needs to change. As he also mentioned, this is much bigger than only Lloyds and HBOS, and we need to look more widely at the issue.

Customers were defrauded of millions of pounds, and there was nothing short of a corporate strategy within Lloyds to cover that up. There is evidence that the bank’s own compliance officers were involved in the cover-up. The scandal was not uncovered by a regulator but by whistleblowers such as Sally Masterton, who was treated appallingly by Lloyds—as the hon. Member for Thirsk and Malton laid out—and put on enforced leave for her part in bringing the issue to light. She was even prevented from working with the police to bring about an end to the scandal. If we cannot rely on whistleblowers to be supported through this process, we have a serious problem. The hon. Gentleman also mentioned the Turners, and we should pay tribute to them for their 10-year battle through this as well. It should not take 10 years for people to get a reasonable response and to get justice when they have been wronged.

The independent Griggs review was supposed to deliver compensation to the victims, but this too fell short of expectations. The role of the independent reviewer was to oversee cases to ensure that they were fair. However, customers criticised the process, owing to the unaccountability of the reviewer, who would often fail to disclose what information had been provided to them from the bank. Some described it as corrupt, and many have reported it as being a thoroughly awful experience. Cranston himself described the banks as confrontational and, at times, forceful, which is completely inappropriate, regardless of the situation. Customers had no way of knowing what was fair or of seeing the working behind it. As the hon. Member for Thirsk and Malton mentioned, there is an inherent power imbalance within this, with people having to go to court and pursue this over many years, which many could not afford to do.

I know that Members across the House will be grateful for Sir Ross Cranston’s diligent work in his review of this fiasco, and we thank him for that. Particularly welcome is his recommendation that customers should be released from egregious settlement agreements, which many customers agreed to as they were offered on a take-it-or-leave-it basis by the bank; customers often felt that they had no other choice.

Sir Ross Cranston also recommends that the bank must arrange for the reassessment of direct and consequential losses by an independent body. In his report, he says that

“this part of the Customer Review, both in structure and in implementation, was neither fair nor reasonable… Other inconsistencies also resulted in unfairness… The general failure to communicate in a sufficiently clear and transparent way caused confusion”.

The bank did not make a single redress payment for direct and consequential losses to any business individual affected by the scandal. This could cover such damage as loss of opportunity, loss of profits, reputational damage, and claims for the impact of the scandal on a customer’s personal life. Given the time period over which this took place, it is clear this could have had a huge impact on the lives of the victims of this scandal.

It is unfortunate that banks cannot always be relied on to act in the best interest of their customers without adequate enforcement of the rules. We cannot allow them to mark their own homework. I urge the Minister to investigate the possibility of creating a permanent commercial financial dispute resolution platform, which would allow a streamlined process for consumers to hold banks to account and go some way towards alleviating the suffering of victims of mis-selling.

Although there is no doubt that some individuals went to great efforts to bring justice to the victims of this scandal, there is still no straightforward recommendation for redress for customers, for them to achieve the fairness and justice they deserve. We have seen people lose their businesses and livelihoods before any justice was served. People such as those mentioned by the hon. Member for Strangford, who have suffered through ill health or who have aged in the intervening years, need to see that soon. For many people, those opportunities may be lost forever. The Treasury must act to ensure that a scandal of this magnitude cannot happen again. The legacy of this saga must be change across the board.

My hon. Friend the Member for East Renfrewshire (Kirsten Oswald) mentioned Clydesdale and Virgin Money. We know other issues are brewing out there. I ask the Minister to take those into account. Again, I thank Sir Ross Cranston for his report, and the significant pressure for change, which leaves it to us and the UK Government to act.

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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4 Feb 2020, 5:11 p.m.

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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4 Feb 2020, 5:16 p.m.

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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4 Feb 2020, 5:16 p.m.

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.

John Glen Portrait The Economic Secretary to the Treasury (John Glen)
- Hansard - - - Excerpts

4 Feb 2020, 5:17 p.m.

It is a pleasure to serve under your chairmanship again, Mr Hollobone. I, too, pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). Obviously, in this role, I have shadow Ministers shadowing my every move, but I also have my hon. Friend, who has spoken up very effectively on these issues over the past 25 months. We have had a constructive dialogue on many matters, and I look forward to addressing the points he and others have made in my response.

It has been just over a year since I announced that Lloyds would commission a review into the Griggs compensation scheme, which is another stepping stone in Lloyds’ journey to right the wrongs of the past and rebuild trust with their business customers. From the outset, I was clear that if the findings of the review were to hold up to scrutiny, the person overseeing it must be truly independent. I was therefore delighted by the appointment of Sir Ross Cranston, a former Labour Member of Parliament who was Solicitor General between 1998 and 2001 and is a professor of law at the London School of Economics, a Queen’s counsel, and a retired High Court judge. I met him on two occasions to check on progress, between May and when purdah commenced. That was not to influence him regarding the particular conduct, but to encourage him to look at this issue as thoroughly as possible.

Sir Ross found that the Griggs compensation scheme had serious shortcomings, as has been expressed fully in this debate, and that it did not achieve the stated purpose of delivering fair and reasonable compensation offers. Assessments of direct and consequential loss were too adversarial and legalistic, which was unfair and unreasonable for the customers it was designed to support. Sir Ross also found several other inconsistencies, along with a general lack of clarity underpinning the scheme, while the bank’s failure to communicate with customers in a transparent manner caused further unnecessary confusion.

Sir Ross found that some elements of the compensation scheme were good. For example, Lloyds provided generous legal assistance and wrote off some customer debts, as well as paying substantial distress and inconvenience redress. Nevertheless, the overriding conclusions were hugely disappointing, and Sir Ross has made it clear that Lloyds has more work to do to achieve the stated aims of its original compensation scheme.

The most substantial of Sir Ross’s recommendations is that customer claims for direct and consequential loss must be reassessed, and Lloyds is working with customers and relevant parties to agree the details of this process. I know that representatives of Lloyds have been mentioned in this debate, and I have been given assurances that they are eager to get on with things. That could be through the new Business Banking Resolution Service, which has been referred to in today’s debate, or through an equivalent scheme that is committed to achieving the same rigorous outcomes. Either way, it is pretty clear to me that these cases must be considered by an independent body in a transparent manner.

There has been work on this issue by the all-party parliamentary group on fair business, with support from Heather Buchanan, who was mentioned earlier, and the SME Alliance. I also know that Sir Ross Cranston himself is engaged in this process, which must continue, and must be thorough and rigorous.

Sir Ross has also recommended that Lloyds make payments to cover the debts of customers who repaid or refinanced loans, as well as releasing customers from certain aspects of their settlement agreements. It is vital that Lloyds now implements the recommendations as quickly as possible and continues to support customers as they navigate this process. I will follow progress closely and I expect to be regularly updated; I have made that clear.

I turn now to some of the points made by hon. Members throughout the debate this afternoon. The hon. Member for Gower (Tonia Antoniazzi), who is no longer in her place, asked whether all reviews should be tested against Sir Ross’s methodology. I will just say this: I think that all banks have a responsibility to reflect on the findings of the Cranston review and consider whether their own redress schemes achieved fair and reasonable outcomes for customers. Obviously, people have different interpretations, but the Cranston review is a wake-up call to banks to examine whether the appropriate transparent processes have been followed. That should happen now.

Netflix: Tax Affairs

Jonathan Reynolds Excerpts
Monday 3rd February 2020

(1 year, 8 months ago)

Commons Chamber

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HM Treasury
Margaret Hodge Portrait Dame Margaret Hodge
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3 Feb 2020, 10:22 p.m.

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)
- Hansard - -

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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3 Feb 2020, 10:24 p.m.

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

(1 year, 9 months ago)

Westminster Hall

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HM Treasury
Alison Thewliss Portrait Alison Thewliss (Glasgow Central) (SNP)
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22 Jan 2020, 10:10 a.m.

It is a pleasure to see you in the Chair, Mr Paisley, and I thank everybody who has come to contribute to today’s debate and try to resolve the productivity issue that is plaguing the UK economy. The hon. Member for Barnsley Central (Dan Jarvis) pointed out that there is a real need for investment in skills, research and development, creating a balanced economy and infrastructure, and also a need to tackle the deprivation that holds back so many people in so many communities from accessing and participating in the economy.

Since the Scottish National party came to power in Scotland, productivity there has grown three times faster than in the UK—a rate of 1% a year, compared with the UK average which, as the hon. Member for Barnsley Central said, is 0.3%. When we consider that we have done that against the backdrop of austerity, and more recently against the backdrop of Brexit, it is all the more impressive. We are doing things such as encouraging businesses to sign up to the Scottish business pledge. According to its website, 722 businesses have now signed up to that pledge, including firms of all different sizes, large and small, from multinationals such as Coca-Cola and Deloitte to The Good Spirits Co., which is a small shop in my Glasgow constituency. Hearts football club has also signed up to that pledge, so a range of different organisations have signed up to it.

The Minister will be interested to hear that the Scottish business pledge has three core elements: payment of a real living wage, not the Chancellor’s pretendy living wage but one that people can actually afford to live on; action on the gender pay gap; and no inappropriate use of zero-hours contracts within the companies that sign up. Once companies have met those three core pledges, they are encouraged to work towards further elements of the Scottish business pledge, including environmental impact, having a skilled and diverse workforce, workforce engagement, innovation, internationalisation, community and prompt payment, all of which are important to businesses of all sizes.

I encourage the Minister to look at that pledge; I believe it has been a hugely important factor in improving productivity rates in Scotland, because businesses are being asked to sign up to something that will make them, or encourage them to, act responsibly. That pledge also has a wider effect on the economy, as those businesses spread the good word and encourage more and more people, including those in their supply chains, to sign up to it. This is not just an issue of business growth, but of the wellbeing of employees, which has a huge impact on productivity and how people feel when they turn up to work in the morning. The Minister needs to look at that further as well.

The Scottish Government are taking other measures, such as the Scottish National Investment Bank legislation which, excitingly, passed unanimously in the Scottish Parliament yesterday. The Scottish National Investment Bank seeks to increase innovation, give support to small and medium-sized enterprises and build an inclusive, high-tech economy, which is incredibly important. We can see how investment banks such as KfW, which was set up post-war in Germany, have changed, worked for and invested in their economies; for example, KfW has changed housing so that investment in that sector works towards greener standards. There are real things that we can learn, and it seems bizarre that the UK Government at that time set up an investment bank in Germany but never thought to set one up for itself, when we could use it so much.

The hon. Member for Barnsley Central mentioned the importance of R&D. The Scottish Government have invested £37 million in R&D and have a target of doubling business investment by 2025, which should go some way to make sure that people are investing in the businesses, technology and infrastructure that they have, as well as in people. We have a green new deal that will harness the power of that Scottish National Investment Bank, including a £3 billion green investment portfolio and a green growth accelerator to attract green finance to Scotland and bring the inward investment that will help drive its economy. We in Scotland have also recognised the importance of inclusive growth, and have been recognised internationally for our approach to inclusive growth. If an economy leaves people behind, it cannot be a particularly good or productive economy, never mind a happy one.

The Scottish Government are reviewing measures to tackle historic disparity. It would be useful to hear whether the Minister has any further information about things like the shared prosperity fund, because European money has been absolutely crucial to addressing that historic disparity in a number of ways. In areas of Scotland where we have been working so hard over so many years to try to correct that post-industrial Thatcher legacy, European money has been crucial, not just for constructing buildings and other things, but putting money into training programmes, universities, colleges and infrastructure. During last week’s education debate, my hon. Friend the Member for Glasgow North West (Carol Monaghan) mentioned the importance of college education in Scotland. I have City of Glasgow College in my constituency, which now has two campuses in the city centre, and looks and feels like a beacon that will attract people to enter. It does not sit, up on Cathedral Street, with any less dignity than the University of Strathclyde, which neighbours it, and that is important for how people feel when they are accessing those education institutions.

Our lack of control over wages in Scotland is a real challenge to productivity. I have already mentioned the Chancellor’s pretendy living wage; I am yet to hear a reasonable explanation as to why a 16-year-old starting in the same job and on the same day as a 25-year-old is worth over £4 less, which is all they are entitled to. The majority of people in those low-paid jobs will be women, and they will be in part-time work as well, which makes it very difficult for those women to bring more money in to support their family and to bring along the next generation. They will be struggling. As the hon. Member for Wirral South (Alison McGovern) said, it is crucial that we look at women as part of this productivity issue.

I attended the graduation ceremony at the Open University, which plays a huge role in enabling people who might not have been able to access more traditional forms of degree to obtain skills. At the end of the graduation ceremony, the participants in the room who were receiving their degrees were asked to put up their hands if they had children, had a disability, had caring responsibilities, or were working while they were doing their degree. Hands went up everywhere. I am pretty sure that no other graduation ceremony would look like that, so I ask the Minister to consider the importance of the Open University in ensuring that productivity is increased.

I also ask the Minister to review the mechanisms that are currently holding people back, particularly universal credit. Universal credit makes it incredibly difficult for people to change their job and improve their circumstances, because they are penalised when they try to do so. For example, the two-child limit traps working families who perhaps started off in life with three children, and were working quite well until something went wrong. It makes it incredibly difficult for them to get back on track when they cannot get enough money to feed their family; they end up in a trap that they cannot work their way out of. The childcare element of universal credit should be paid up front, rather than in arrears, because that is a barrier to families taking on work. It makes it very difficult for families to access employment when they have to pay those childcare fees themselves and claim them back. Other elements of universal credit, such as conditionality, sanctions, and the fact that if a woman is added as a second earner in a household it automatically has an impact on household benefits, also make it difficult for those families to improve their circumstances.

Other hon. Members have mentioned entrepreneurship, self-employment and skills shortages, all of which are important to addressing productivity. Looking ahead, all those things will be made worse by Brexit. I disagree with the hon. Member for Strangford (Jim Shannon); he always views things with great optimism, but I am afraid that I do not share his optimism about Brexit, because it will have an impact on investment and on skills. At the moment, skills shortages are filled by EU nationals’ being able to work and travel freely. I fear that the absence of those people, who are running businesses and are in our schools and our education system, will have a significant impact on our ability to improve the productivity of this country, and that impact will continue for many years to come.

Interestingly, the Chartered Management Institute sent a briefing to the debate. Its research, which is backed by the Bank of England, mentions

“a long tail of poorly managed and unproductive organisations”—

a real issue, which the Minister would do well to address. It gives a figure of 2.4 million “accidental and unskilled managers” and has worked on management apprenticeships to try to ensure that firms do not just put people into management roles without that support. An interesting aspect of the debate is to ask what more can be done to support those managers—those people who end up in positions of influence—and make sure they understand that their roles are important, that they are well supported, and that they can play an important and active role in their organisation to make it more productive.

In Scotland we look to the experience of the Scandinavian countries, which have happier and, by all definitions, more productive and equal societies. I look at them with envy, because they have the full set of economic powers that small independent countries can have and they do well for their people—not just for their economies—as a result. I imagine what Scotland, as an independent European nation, could do with the full set of economic levers to move towards being a more inclusive, fair and prosperous country for all our people. That is very much something to aspire to, but which we cannot fully reach at the moment in the UK.

Jonathan Reynolds Portrait Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
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22 Jan 2020, 10:21 a.m.

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

22 Jan 2020, 10:27 a.m.

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
- Hansard - -

22 Jan 2020, 10:27 a.m.

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.

Simon Clarke Portrait The Exchequer Secretary to the Treasury (Mr Simon Clarke)
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22 Jan 2020, 10:33 a.m.

I begin by echoing the thanks of all Members to the hon. and gallant Member for Barnsley Central (Dan Jarvis) for calling today’s debate on an issue that goes to the heart of so many of the issues facing our economy and our society. I congratulate him on his key role in progressing the devolution deal for South Yorkshire, which we all hope will help to unlock significant productivity benefits for the people of his region. I know he shares this Government’s view that devolution across the nations and regions of the United Kingdom can boost productivity across the country, and we look forward to working together to achieve that.

Giving power to local people on the ground is undoubtedly the best way to make the most of every area’s unique strengths and to confront their unique challenges. That is why since 2014 the Treasury has led negotiations with several city regions across the country to strike landmark deals with eight places as part of a devolution revolution. The slogan might have changed, but the metro mayors are now delivering on local priorities. Tees Valley, where I live, is home to the South Tees Development Corporation, which is regenerating the former SSI site at Redcar. Manchester, the home of the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), has a focus on trams. We are talking about Northern Powerhouse Rail connecting up the regions better. Liverpool has its rail networks, as the hon. Member for Wirral South (Alison McGovern) alluded to, which are key to driving the benefits that we all want. Our commitment to enabling local people, who know their areas best, to be the masters of their own economic destiny could not be stronger.

We saw further progress just last week, as South Yorkshire moved forward with its own deal that agreed £900 million of new Government funding over 30 years for investment in local priorities identified by the Mayor and his combined authority, not by Westminster. I will be travelling to Leeds next week to hold talks with West Yorkshire’s leaders on a mayoral devolution deal for Leeds city region. We are determined to build on Leeds city region’s strengths in digital, financial services and the creative sectors, as we level up and share the success of the opportunities ahead. We will put our money where our mouth is for the right agreement. I will go to Leeds next week in search of that deal.

We know that Britain is currently too centralised and that solving the productivity puzzle will need us to think differently. We cannot just sit in Whitehall, pull a lever and cross our fingers—I completely understand that. People want control over their lives to come up with their own plans and, crucially, to be able to put them into action more quickly than the machinery of central Government sometimes allows. We need to give them that. We are hugely committed to making devolution to Sheffield city region a success. We look forward to continuing to work closely with regional leaders to build an economy that works for everyone by improving connectivity, strengthening skills, supporting enterprise and innovation and promoting trade to ensure that the people of South Yorkshire benefit from the powers and investment envisaged in the deal.

Clearly, such issues transcend the borders of England. The hon. Member for Strangford (Jim Shannon) referred to Northern Ireland, and I am delighted that we have managed to get devolution back up and running at Stormont. It is crucial to ensuring that all parts of the community in Northern Ireland feel the benefits of renewed growth and renewed control over their own destiny. I very much look forward to picking up talks with the new Ministers there as part of our efforts to make sure that our policies and theirs work as closely as they can for our shared benefit.

In her powerful speech for the SNP, the hon. Member for Glasgow Central (Alison Thewliss) mentioned the UK shared prosperity fund. Obviously, we are determined to make sure that that is delivered correctly; we need to take the time to get that right. I confirm that we will be setting out our full plans at the comprehensive spending review later this year. That will be the moment when we start unveiling how that will work and give people the clarity that they need to make the investment decisions over the course of the years ahead, as we transition out of the European Union.

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Simon Clarke Portrait Mr Clarke
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22 Jan 2020, 10:45 a.m.

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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22 Jan 2020, 10:47 a.m.

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
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22 Jan 2020, 10:47 a.m.

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.