Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 17th May 2022 Commons Chamber

[John Glen]

We watch these things very carefully. That is why, in January this year, we announced that certain cryptoassets will be brought within the scope of financial promotions regulation. I am very aware of the Financial Conduct Authority’s advice, which shows that only one in 10 cryptoholders are aware that they can lose all their money. We need to get that number up.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

4. What steps his Department is taking to tackle economic crime.

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

Money obtained through corruption or criminality is not welcome in the UK. The Government are taking concerted action to combat that threat by investing £400 million over this spending review period, with the kleptocracy cell in the National Crime Agency targeting sanctions evasion and corrupt Russian assets hidden in the UK. The Government have taken far-reaching steps to improve corporate transparency, including through recent and forthcoming primary legislation announced in the Queen’s Speech last week.

[Kevin Hollinrake]

I thank the Minister for that answer. NatWest and HSBC have been hit with big fines for facilitating money laundering, and Danske Bank will probably see a fine of £2 billion for £200 billion of money laundering. This is seen not as a deterrent, but as a cost of doing business for these big banks. Does he agree that the only way that we will tackle this is through criminal prosecutions both at a corporate level and of senior managers? Does he support the calls to that effect in the economic crime manifesto by the all-party groups on fair business banking and on anti-corruption and responsible tax, and will he support such measures in the economic crime Bill?

[John Glen]

I thank my hon. Friend for his question. I think he is the House’s foremost observer of banks’ behaviour, but he also knows that this is an extremely complex area of law. The Government have asked the Law Commission to undertake an in-depth review of laws around corporate criminal liability for economic crime and to make recommendations. My understanding is that the Law Commission will make an announcement on this subject imminently, and we will look at that very carefully.

Coronavirus Grant Schemes: Fraud

Debate between Kevin Hollinrake and John Glen

Tuesday 18th January 2022 Commons Chamber

[John Glen]

I thank the right hon. Gentleman for his comments, which I am very happy to address. First, we are not writing anything off. The figures quoted are what we expect that taxpayer protection taskforce to recover in the next two years in which it will exist. HMRC has longer to address fraud in the schemes, which it will do in the context of wider compliance activity. HMRC did not produce the figure of £4.3 billion. I understand that it was an inference made by journalists who subtracted £1.5 billion from the estimate of the amount to be recovered by the taxpayer protection taskforce from the £5.8 billion estimated as error and fraud in 2020-21. That was published and Jim Harra and others from HMRC publicised all this before Christmas—in November. HMRC simply used the same numbers in a “mythbuster” article to be published later this week.

Those are the facts. There is nothing new here today, but I would like to address some of the underlying concerns. The right hon. Gentleman is absolutely right to say that fraud is unacceptable. We think that, which is why—as I said in my opening remarks—in March last year, the Chancellor dedicated £100 million to employ 1,265 people from HMRC to undertake these fraud checks and to bear down on the fraud. We have had 13,000 one-to-one inquiries and sent 75,000 letters to those thought to have incorrectly claimed.

I point out to the right hon. Gentleman, however, that many of these schemes were stood up, refined and adapted very quickly. In order to meet the needs of individuals, the self-employed and businesses up and down the country, £81.2 billion of payments were made across the three main schemes. Although I recognise that there has been an element of fraud, the Government have never been complacent about that. Grants for employees and businesses used data on HMRC systems. The design of the scheme was informed by expert advice from HMRC, which has extensive knowledge and understanding of where errors and fraud risks lay. We have implemented post-payment compliance to identify and recover overpayment, and we have invoked automated controls into digital claim processes, which have prevented 100,000 ineligible, mistaken claims.

The Government are not complacent at all about error and fraud. We will continue to bear down on it, and I urge Members of the House and members of the public to continue to contact HMRC, as they have done, as we seek to maximise the recovery of moneys lost.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I say to the Opposition that it is the easiest job in the world to stand on the sidelines and criticise, but what would they have done? Would they have waited and left businesses in peril? Would they have done that in search of the perfect? Some £407 billion has gone to businesses, the vast majority of which went to the right places. Of course there will be lessons to learn, but if the same situation happens again, will my hon. Friend prioritise the needs of business, rather than making the perfect the enemy of the good?

[John Glen]

I thank my hon. Friend for the clear point behind his question. We were straining every sinew in the Treasury to get money out as quickly as possible. On 14 April 2020, a Labour party press release stated:

“It is clear that additional action needs to be taken to increase the take-up of the different measures. We have called for urgent action…as take-up is worryingly low.”

That is why we intervened to change the design of the bounce back loan scheme and to make it 100% backed to get the money out quickly—£46 billion to 1.5 million businesses. I am sure that lessons can be learnt from what we have done—absolutely they can—but the principle of getting that money out and designing schemes with HMRC’s excellent input during that period was imperative for the Government.

Covid-19: Government Support for Business

Debate between Kevin Hollinrake and John Glen

Thursday 16th December 2021 Commons Chamber

[John Glen]

Of course discussions will take place across government. The hon. Gentleman draws attention to the transport sector, where of course significant support has been given. However, I take on board his point.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I welcome the fact that the Minister and the Chancellor are meeting those in the hospitality sector this afternoon. There is no doubt that they are suffering because of some of the mixed messages we have heard in the past few days. The obvious places to help them would be by looking at VAT again, potentially reducing it back to the 5% rate until the end of March, and at the recovery loan scheme. As the Minister knows, the original schemes—bounce back loans and the Coronavirus Business Interruption Loan Scheme—did not require a forward viability test, whereas the recovery loan scheme does. It is very difficult for those in hospitality at the moment to demonstrate forward-looking viability for their businesses, so will the Minister look again at the scheme and look to reform it so that businesses can access this vital financial support?

[John Glen]

As ever, my hon. Friend brings sensible and credible points to the Chamber on these matters. He is very familiar with the different aspects of small and medium-sized enterprise financing. The recovery loan scheme, operational until June next year, gives a 70% guarantee to lenders, but of course we will look at all those measures in the round, and I look forward to our meeting later today on other matters.

Dormant Assets Bill [Lords]

Debate between Kevin Hollinrake and John Glen

2nd reading
Monday 6th December 2021 Commons Chamber

[John Glen]

I thank my hon. Friend for that point—a legitimate point that will be raised in different ways across the country during the consultation, and one on which the Secretary of State will need to reflect in due course before an order is laid.

It is vital that we afford everyone a fair and open opportunity to have their say, so the Government plan to launch the first public consultation, which will last for at least 12 weeks after the Bill receives Royal Assent. Until we have launched the consultation and fully considered the responses, the Government are not prepared to make decisions or commitments on the ways in which future funds will be used in England. To do so would clearly undermine the validity and transparency of the consultation exercise.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Under the current legislation—the Charities Act 2011—urban regeneration is one of the areas that distributions are allowed to go into, but it is not clear whether they can go to, for example, a regional mutual bank. As my hon. Friend knows, the all-party parliamentary group on fair business banking is strongly in favour of that. Could the point be clarified in the Bill to facilitate a quicker move to fund those regional mutuals?

[John Glen]

In short, no; that will not feature on the face of the Bill. However, my hon. Friend is a doughty advocate for that cause, and I am sure he will make a hearty contribution to the consultation which will inform the Government’s response in respect of those future parameters.

Mindful of time and the need for contributions from so many Members on both sides of the House, I will end by reiterating that the Government are committed to supporting industry efforts to reunite more owners with lost money, and to provide a practical way for unclaimed and unwanted funds to be put to good use. The dormant assets scheme has achieved that, and we are determined to ensure that it continues to be a success. I hope that the Bill will command cross-party support this evening, and that we will be able to work together on expanding the scheme to unlock hundreds of millions of pounds more for good causes throughout the country in the years to come. I commend the Bill to the House.

Financial Conduct Authority and Blackmore Bond plc

Debate between Kevin Hollinrake and John Glen

Wednesday 30th June 2021 Commons Chamber

[John Glen]

I have set out the record as the FCA has presented it. I am sure that the hon. Gentleman will wish to continue correspondence with the FCA on some of those unresolved matters. However, I do make the distinction between the different responsibilities that the FCA has with regard to the different actors in this case.

It is only right that we do our utmost to minimise the chance of episodes like Blackmore Bond taking place in future, so I want to turn to the regulation of mini-bonds and the steps we are taking to safeguard consumers, which was a key focus of the hon. Gentleman’s remarks. I want to be clear to the House that the Government are committed to ensuring that the financial services sector is well regulated and consumers are adequately protected. That is why in April we launched a consultation that includes proposals to bring the issuance of mini-bonds into regulation. This follows the action taken by the FCA to ban the promotion of high-risk mini-bonds. This work is the culmination of a review into the regulation of mini-bonds that I announced in May 2019, and it delivers on one of the recommendations of Dame Elizabeth Gloster’s recent report. The consultation closes next month, in July, after which the Government hope to bring forward plans to legislate in the autumn.

The hon. Member for Glenrothes also referred to the financial promotions regime, and I think that underlying that was a concern about what the Government are doing to improve the efficacy of the regime. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. The Government have set out our intention to bring forward legislation to create a regulatory gateway for authorised firms approving the promotion of unauthorised firms. That change is designed to strengthen the regime by ensuring that the firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be able to better identify when a financial promotion has breached the restriction and take action accordingly.

[Kevin Hollinrake]

The Minister is doing a lot to close down opportunities for these scams, but there is a further way that we could take this forward, which we have discussed. Google has today said that it will ensure that all firms advertising on its platform are regulated firms. We could require that of all platforms and all firms that provide an internet channel, for example through the online harms Bill, so that all internet advertising in this area is regulated.

[John Glen]

I thank my hon. Friend for his intervention. He speaks with some authority on these matters. There is a process that will continue, as he knows, through the scrutiny of that legislative vehicle. We do need to make sure that, overall, including through the Department for Digital, Culture, Media and Sport’s online advertising review, we come out at the right place in dealing with these significant challenges for consumers.

As well as introducing new legislation to protect savers, it is right that our regulator also closely examines its own operations, to ensure that it can protect consumers as effectively as possible. As a result, the Government welcome the FCA’s ongoing transformation programme, which is introducing reforms that will fundamentally change the way it works. The programme will help the regulator become more efficient and effective by, among other things, enhancing its use of technology in order to make interventions earlier, which clearly is desirable.

It is heartening to see that significant steps have already been taken. Those include important structural changes within the organisation, as well as the appointment of the FCA’s first chief data information and intelligence officer. I particularly welcome this focus on improving the FCA’s use of data and analytics, which will improve the efficiency and speed with which the regulator can act.

These are serious matters, and we have spoken about the number of our constituents who have been adversely affected. I regularly meet the FCA’s chief executive, Nikhil Rathi, to discuss the transformation programme and monitor progress. There can be no complacency. This is a complex area where financial services are evolving all the time, as are fraudulent activities. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) mentioned the innovation announced today by Google, which is a welcome step, but we will need to look at these matters and at the experience through different cases, such as the Blackmore Bond, in order to get this right.

I close by reiterating my deep sympathies to all those who have suffered as a result of the Blackmore scheme. As a Government, we recognise that financial services are constantly evolving and the regulatory system must, therefore, be ready to respond. As I have highlighted this evening, we are committed to a process of continuous improvement in all dimensions to ensure our regulations benefit both UK consumers and the wider economy.

Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 27th April 2021 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

What steps his Department is taking to support businesses affected by the covid-19 outbreak.

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

Throughout the pandemic, the Government have sought to support businesses across the UK. To do this, we have put in place a package of economic support for businesses and individuals worth £352 billion since the start of the pandemic. The Office for Budget Responsibility and the Bank of England have highlighted that without this intervention the UK economy would be significantly worse than it is today.

--- Later in debate ---

[John Glen]

My hon. Friend brings a great deal of expertise and experience to this matter. The Government have committed to over £16 billion in business rates support for eligible retail, hospitality and leisure property since April last year. When combined with small business rates relief, this means that three quarters of a million retail, hospitality and leisure properties in England will pay no business rates for the 15 months from 1 April last year. The Government are, however, undertaking a fundamental review of the business rates system and have invited stakeholders to contribute their views and ideas for reform. I know that my hon. Friend will also be very pleased to see the £16.9 million of business grants that his constituents have received.

[Kevin Hollinrake]

Warren Buffett once said:

“What we learn from history is that people don’t learn from history.”

With a 50% rise in the number of companies in significant financial distress, to prevent repeating the historical mistakes of post the last financial crisis, inflicting all that scandalous treatment on SMEs, will my hon. Friend consider working with the banks to extend the very fair and sensible provisions of the pay as you grow scheme and bounce bank loans, and also transfer that into CBILS—coronavirus business interruption loan scheme—loans?

[John Glen]

The Treasury has, as my hon. Friend will know, amended the CBILS rules to allow lenders to extend loan terms from six to a maximum of 10 years, and that would assist borrowers in that repayment. CBILS term extension will be offered at the discretion of lenders, unlike pay as you grow options for bounce back loans, because they are different in terms of the guarantees that the Government have offered. Extensions are limited to those borrowers that lenders assess are in difficulty and will benefit from that extension, and only for the duration required. That customised approach, as I am sure he would understand given his vast business experience, is appropriate given the nature and scale of that different intervention.

Financial Services Bill

Debate between Kevin Hollinrake and John Glen

Monday 26th April 2021 Commons Chamber

[John Glen]

I thank the hon. Gentleman, as ever, for his contribution. I will go on to explain the situation of the remaining 125,000 individuals who could be categorised in that way, the actions that we have taken to date and what we will continue to look for. If that category can move without Government intervention, they are not “prisoners”.

Of the remaining 125,000 who cannot switch, 70,000 are in arrears and therefore could not secure a new deal even if they were in the active market. Those borrowers need to work with their lender to agree an appropriate repayment plan. The remaining 55,000 who are with inactive lenders and are up to date with their payments but who cannot switch are paying on average only 0.4 percentage points more than similar borrowers on reversion rates with active lenders—those with similar characteristics. The reason these borrowers are unable to switch is not that their mortgage is with an inactive firm but that they do not meet the risk appetite of lenders. They may, for example, have a combination of high loan-to-values, be on interest-only mortgages with no plan for repayment, or have higher levels of unsecured debts, non-standard sources of income or poor credit history. Similar borrowers in the active market are also typically unlikely to be offered deals with new lenders.

As I have set out previously, the Government and FCA have undertaken significant work in this area to create additional options that make switching into the active market easier for some borrowers. In particular, the modified affordability assessment allows active mortgage lenders to waive the normal affordability checks for borrowers with inactive lenders who meet certain criteria—for example, not being in arrears and not wishing to borrow more.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I know that the problem the Minister is trying to solve is not of his making. The problem originated when the affordability rules were changed pursuant to the financial crisis. The affordability rules were waived for people with their existing lenders who wanted to move from one fixed-rate deal, when it terminated, to the next one. Those with inactive lenders who are in the same situation cannot do that because those products are simply not available. That is one of the key problems that we have not solved yet. I would appreciate his continued efforts to work with us on this particular issue.

[John Glen]

I thank my hon. Friend, who, without equal in this House, has done so much to champion mortgage prisoners. I hope he will carry on working with us as we continue to improve our understanding and the quality of the data that could underpin further interventions.

I can reaffirm to the House today that my own, and this Government’s, commitment is as strong as it ever has been to finding further solutions that do not provide false hope to borrowers, but I am afraid that amendment 8 represents neither a proportionate nor practical response on this complex issue. I will address the two sections of the amendment in turn. First, the amendment seeks to cap the standard variable rate, or SVR, that inactive firms charge borrowers. This would be an unprecedented intervention in the mortgage market and is a completely disproportionate approach when the data shows that the 55,000 borrowers to which I referred pay on average 0.4 percentage points more than similar borrowers in the active market. Such drastic Government intervention should not be undertaken lightly, as it could have significant impacts above and beyond the effect that the amendment seeks.

That cap would be deeply unfair to borrowers in the active market who are in arrears or unable to secure a new fixed-rate deal, because the cap would not include them. Let us consider two hypothetical borrowers. The first borrower took out their mortgage prior to the financial crisis when, as my hon. Friend said, there were looser affordability requirements. They borrowed, in some cases, 125% of the property’s value, avoiding the need to save a deposit. Shortly after, their lender failed and had to be nationalised. The second borrower took out their mortgage following the financial crisis, when there were stricter affordability requirements. They saved a deposit of 5% or perhaps even 10%, and then were able to buy their home. Let us say that both those borrowers lost their jobs and now work in lower-paid jobs. They live in an area where property prices have not grown as much as they would have liked. Both try to keep up with their repayments, but ultimately fall into arrears, with the result that neither can easily access new deals. Neither of those borrowers has done anything wrong, and both deserve support from their lender and the wider financial system, but the Government cannot possibly agree with the idea that one should be supported by an unprecedented market intervention of this kind, and the other not. Both adhered to the prevailing conditions at the time.

I am also concerned that any cap on standard variable rates, including one only applicable to inactive lenders, would have unintended consequences for financial stability. The London School of Economics agreed and did not recommend a cap, noting that it could cause market harm. It would restrict lenders’ ability to vary rates in line with market conditions—the ability to vary SVRs allows lenders to re-price products to reflect changes to the cost of doing business—and could therefore create risks with significant implications for financial stability.

The second part of the amendment would require new fixed-rate deals to be offered to borrowers with inactive lenders, although it is unclear how that is to be achieved. Lending remains a commercial decision based on a variety of factors and it would not be right for the Government to compel lenders to provideproducts for specific groups. If the amendment is intended to require the current holders of these mortgages to offer new products, that would require firms that do not currently have the lending expertise, systems or regulatory permissions necessary to offer new mortgage products to do so. However, in opposing the amendment, I reiterate once again my commitment to continue to find further practical and proportionate options for affected borrowers, supported by facts and evidence, as I have over the past three years. Equally, I do not want to give false assurances, or false hope, for the sake of political expediency, especially when it is likely that there is a limit to what further action the Government can take to support such borrowers.

[Kevin Hollinrake]

Could we agree a basic principle that identical borrowers—the Minister uses the example of two similar borrowers in similar situations—should be treated exactly the same? One should not be treated better than the other. Will he agree to a principle that, if a person is a UK borrower and is in the same financial situation as others, whether they are with an active lender or an inactive lender, the treatment of those individuals should be the same: the options should be the same; the deals should be the same.

Financial Services Bill

Debate between Kevin Hollinrake and John Glen

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

[John Glen]

I thank the hon. Gentleman for his point. It really does stray beyond the provisions of this particular amendment. He makes an important point, but it is not one that I can address at this point. I would be very happy to write to him to answer his question more appropriately.

I shall now turn to the remaining amendments in my name, which ensure that the powers that the Prudential Regulation Authority and the Financial Conduct Authority have over holding companies function as intended. Amendments 25, 26 and 27 enable the PRA and the FCA to make rules directly over holding companies to void employment contracts and require recovery of remuneration paid to individuals when rules prohibiting them from being paid in a certain way are breached. This is important because, as a result of the measures brought forward in this Bill, responsibility for ensuring compliance with a banking or investment group’s capital requirements is moving from its operating companies to its holding company. This amendment ensures that the regulator can enforce breaches of the rules at the level at which they are set.

Amendments 15, 28, 29, 30 and 31 are a set of relatively small amendments that ensure that the PRA has the full suite of enforcement tools at its disposal for the supervisory regime over holding companies. Amendment 24 is a technical drafting point. Amendments 22 and 23 are clarificatory amendments, which are necessary to ensure that the investment firm’s prudential regime applies to the correct set of firms and does not have extraterritorial effect. I know that this is an important point for my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami). I thank him for his work on this and hope that he will welcome these amendments.

I shall now turn to the other amendments that have been tabled by Members of this House. First, there are a number of amendments that relate to criminality and money laundering. New clause 4 and new clause 30 would create a new criminal offence for FCA-regulated persons of facilitating and of failing to prevent economic crime. This is an important and complex topic, so I will seek to address it in detail.

The Government have taken significant action to improve corporate governance and culture in the financial services industry. We introduced the new senior managers and certification regime, which enables the FCA more easily to take action against the responsible senior manager where there has been a failure in a firm’s financial crime systems and controls. Separately, the Government have recently strengthened the anti-money laundering requirements on financial services firms.

In 2017, the Government issued a call for evidence on whether corporate liability law for economic crime needed to be reformed. Unfortunately, the findings were inconclusive and, as a result, the Government have tasked the Law Commission to conduct an expert review on this issue to report by the end of this year. That will ensure a more comprehensive understanding of any issues with current economic crime law, as well as the implications of any potential options if reform is considered necessary. Before any broader new “failure to prevent” defence for economic crime is introduced, there needs to be strong evidence to support it, as there was when similar bribery and tax evasion offences introduced in 2010 and 2017 respectively took place. A new offence will also need to be designed rigorously, with specific consideration given to how it sits alongside associated criminal and regulatory regimes and to the potential impacts on business.

The proposed new offences in this amendment would lead to a discrepancy in treatment between FCA-regulated businesses and other businesses under criminal law. The 2017 call for evidence did not provide any evidence to suggest financial services businesses should be specifically targeted with a new offence. Indeed, many of the examples provided related to businesses in other sectors.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

In terms of the corporate offence of failing to prevent economic crime, the Minister asked for evidence on that, but there is a wealth of evidence that the FCA is not holding either corporations or individuals to account for some egregious behaviour, particularly in the banking system and many other parts of corporate life. We are seeing fraud, but £9 billion of fines in the US in a 10-year period and only £260 million in the UK. Is that not proof alone that we need legislation in this area?

[John Glen]

It is easy to point to headline differences in rates of fines, but it is quite different to intervene with a new piece of legislation that is fit for purpose. That is why I am absolutely clear that the call for evidence this year will gather that evidence—I am sure that my hon. Friend will be keen to submit his evidence to that—and, in due course, we will look at it and examine what the implications are. However, I am not suggesting from the Dispatch Box that everything is perfect with respect to regulation, and of course, there are regulatory failures from time to time and criminal activity. The question is what the most appropriate legislative response is.

I turn to new clause 14, which would add a requirement for the Government to report on the effect of clause 31 on tax revenues. This does not reflect the effect of the provision that we have included in the Bill. The Bill provision merely ensures the continuation of, and the ability to vary in future, the original powers assigned to Her Majesty’s Revenue and Customs with respect to registration of overseas trusts. It does not make any change to taxes.

Similarly, it is not necessary to introduce a report on the impact on money laundering of clause 31, as proposed by new clause 19. Existing legislation already requires the Treasury to carry out a review of its existing provisions within money-laundering regulations and publish a report setting out the conclusions of its review by June 2022. This wider review will provide a more meaningful evaluation than the one envisaged in the amendment.

Amendment 7 raises a very important issue. This amendment would require the FCA to “have regard” to the promotion of ethical investments with reference to findings of genocide by the High Court and the International Court of Justice when making rules for the investment firm prudential regime. While I am extremely sympathetic to the issue raised by Members on both sides of the House, including the hon. Member for Bethnal Green and Bow (Rushanara Ali) and my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), this Bill is not the right place to address the issue. This amendment would require the FCA to make political choices about whether to associate itself and its rules with countries that are guilty of genocide or ethnic cleansing. These important decisions on UK foreign policy are for Government to take and not an independent financial services regulator.

I will now address a number of amendments that seek to bring new activities—

--- Later in debate ---

[Kevin Hollinrake]

Yesterday I was looking at a document written by a former lead analyst in that very market—someone who used to work for PIMCO. He very clearly sets out that the proposed change would have a transformational effect on tens of thousands of mortgage prisoners who will not be helped by any other measure that could be put in place. He says quite clearly:

“Introducing an SVR cap on closed, non-lending books would not disrupt the residential mortgage-backed security market”.

That is a direct contradiction of my hon. Friend’s position.

[John Glen]

Indeed, Martin Lewis, who does some excellent work in this regard and whom I met on this topic recently, looked at this very matter—he commissioned some work from the London School of Economics to look into it—and recommended that we should not take this cap on the SVR. There will always be a variety of views, but I have set out very clearly why I think this is the right position.

Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 1st December 2020 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

What recent estimate he has made of the number of loans provided through the bounce back loan scheme.

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

As of 15 November, the bounce back loan scheme has supported nearly 1.4 million businesses with facilities totalling over £42 billion. This includes the extra amounts received from our bounce back loans, which have been topped up to a higher amount, providing further help to businesses that are in need of monetary support.

[Kevin Hollinrake]

The scheme has been a huge success, but according to research by the all-party parliamentary group on fair business banking and Funding Xchange, about 250,000 businesses were locked out of the scheme because they banked with non-bank lenders and the banks that have liquidity to provide funds in this way either closed to new customers or have no appointments left until the end of January, when the scheme closes. What action is my hon. Friend taking to address this very important issue?

[John Glen]

The Government cannot force lenders to open to new bank customers for bounce back loans, but we have repeatedly encouraged lenders to open when it is operationally possible for them to do so. Indeed, nine lenders have managed to open to new customers for a period, and two are currently open, although for limited services. Their efforts, combined with the fact that accredited lenders account for a very high proportion of business in personal current accounts, mean that the vast majority of businesses should be able to get a bounce back loan through their existing relationship. Following the decision by the Chancellor to extend the scheme to 31 January, there are now two and a half months left to apply for a loan, after which we will be introducing a new guarantee scheme.

Financial Services Bill

Debate between Kevin Hollinrake and John Glen

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Monday 9th November 2020 Commons Chamber

[John Glen]

I am grateful to the hon. Gentleman for his intervention. The driving principle guiding the Government in bringing forward the Bill is to maintain the highest possible standards; indeed, our reputation globally relies on the maintenance of such standards. However, it will be in the role of our regulators, with their technical expertise, to determine how those standards are implemented.

Let me move on to the next part of the Bill.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

My hon. Friend mentioned the word “banks”, which obviously stimulated my interest as the co-chair of the all-parliamentary parliamentary group on fair business banking. He mentioned prudential risk around banks. Currently, the capital adequacy requirements for banks are all pretty much treated the same, which can deter competition from new entrants, such as regional mutual banks. Is he interested in looking at that issue in this legislation or in a future piece of legislation?

[John Glen]

My hon. Friend has unrivalled expertise and tenacity in bringing these matters before the House. He is right that there is a challenge to examine the relative regimes for different sized banks and institutions. That is something that regulators, subsequent to this Bill, will need to look at—indeed, they are keen to look at it—and I would welcome my hon. Friend’s further interventions in discussions in this place as we move forward on that legitimate question.

Eight years ago, the world was shocked by the LIBOR scandal. As the House will recall, traders at multiple banks attempted to manipulate that crucial benchmark, which contributes to interest rates for everything from complex derivatives to mortgages. Since then, significant improvements have been made to the benchmark’s administration. However, the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, has stated that continued use of LIBOR and other major interest rate benchmarks poses a serious source of systemic risk. That is because the decline in the inter-bank lending market has meant that such benchmarks depend increasingly on the judgments of panel banks rather than actual transactions. UK regulators have been encouraging firms to gradually shift away from LIBOR and are at the forefront of the global response to the transition, so to ensure that that transition was orderly, the FCA agreed with the LIBOR panel banks that they would continue to contribute to the benchmark for a temporary period. However, that temporary period will expire at the end of 2021, and after that point there is a risk that the benchmark will become unrepresentative of the market that it measures, potentially leading to disruption.

While we want firms to take the initiative in migrating from LIBOR, we recognise that there are some contracts that cannot be realistically amended to achieve that goal, so clauses 8 to 19, along with schedule 5, will give the FCA the powers that it needs to oversee the orderly wind-down of critical benchmarks, including LIBOR, and clause 20 will extend the transitional period for benchmarks with non-UK administrators from the end of 2022 until the end of 2025. This will avoid difficulties for our firms while the Government consider any changes required to our third country benchmarks regime to ensure that it is appropriate for the United Kingdom.

I will move on to the second objective of the Bill: to promote openness to overseas markets. I am delighted that clauses 22 and 23, along with schedules 6 to 8, establish a framework to provide long-term market access between the UK and Gibraltar for financial services firms. As many will know, Gibraltar boasts an array of thriving businesses in the sector, many of which are UK household names, including Admiral and Hastings, to name just two. The new Gibraltar authorisation regime in this Bill delivers on an earlier ministerial commitment and recognises our long-standing special relationship.

--- Later in debate ---

[John Glen]

This is a portfolio Bill of 17 measures, some of which I have been wanting to introduce for some while. It is the first step on a journey, and there will, if the authorities allow me, be further financial services legislation that we will need to make following the consultation on the future regulatory framework. We need to be ambitious for financial services. We live in a dynamic world where financial services are evolving all the time, and we need to have regulators that are nimble in developing world-class regulation that allows us to continue to grow, and that is reflected in our appetite for FinTechs, stablecoins, digital currencies and the right regulatory framework for firms of different sizes, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) referred to earlier.

The third objective of the Bill is to maintain the effectiveness of the financial services regulatory framework and ensure sound capital markets. Clause 28 introduces a streamlined process for the FCA to remove an inactive firm’s authorisation and position on the public register. That will improve accuracy, while reducing opportunities for fraudsters.

Clause 29 makes small changes to the market abuse regulation, making the regime more effective, while reducing some of the administrative burden facing firms. I draw attention to clause 30, which raises the maximum sentence for two kinds of financial market abuse from seven to 10 years in prison, bringing the penalties for those offences in line with other forms of economic crime, such as fraud. Clause 31 will ensure we can enforce the rules that apply to trusts. The Government are also taking proportionate and effective action elsewhere to prevent the misuse of these trusts, collecting a range of ownership information on those that have a connection to the UK.

[Kevin Hollinrake]

My hon. Friend mentions economic crime, the prevention of fraud and the penalties for fraud, but one of the things the Government are committed to doing is bringing forward a corporate offence for the failure to prevent economic crime. It is not within this Bill. Is there any reason why not? What timescale might we see around that kind of legislation?

[John Glen]

As my hon. Friend mentioned to me a few days ago, he is aware that the Ministry of Justice is conducting a consultation on that matter, and that will drive the Government’s response overall, but it is a matter we take seriously. Following the Financial Action Task Force review at the end of 2018, we needed to move forward a number of measures to improve and tighten our regime. It is critical for the integrity of the United Kingdom’s financial services industry to have in place the appropriate sanctions and the important regulations on reporting standards across the whole of financial services.

Let me turn to clause 32, which will strengthen our breathing space scheme that supports people with problem debt. That has long been a priority of mine as City Minister, and I put on record my gratitude to my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst), who introduced a private Member’s Bill on this issue, for all her efforts, and to Members across the House for the consensus on that legislation’s introduction. The Bill contains crucial amendments that are required to implement fully and effectively statutory debt repayment plans, which will help people facing problem debt to pay back what they owe within a manageable timeframe. The Bill’s measures will allow us to compel creditors to accept these new repayment terms, providing greater peace of mind to consumers, many of whom will be vulnerable.

Covid-19 Economic Support Package

Debate between Kevin Hollinrake and John Glen

Wednesday 14th October 2020 Commons Chamber

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

It is a privilege to close this debate on behalf of the Government. First, I thank hon. and right hon. Members across the House for their insightful and considered contributions. From listening to those contributions, it seems to me that we can agree about the nature of the challenge, which is to find a flexible and sustainable response to the twin health and economic emergencies caused by the virus. This Government have designed and implemented such a response. The Chancellor called for a toolkit to protect jobs and businesses over the difficult weeks and months to come, and in closing today’s debate, I will outline its newest elements and respond to some of the points made by Members across the House.

On Monday, the chief medical officer, Professor Chris Whitty, observed that we face two potential harms:

“a harm for society and the economy on the one hand and a harm for health on the other hand.”

In other words, the decisions we take are about finding that right balance. The need for balance as we evolve our economic response was expressed eloquently by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who has provided wise counsel over recent months and set out very clearly how the Government’s intentions are to keep as much open as possible for as long as possible. In formulating the Government’s economic response to the pandemic—the subject of today’s debate—my right hon. Friend the Chancellor has sought that balance. He said earlier that we must not shy away from the burden of responsibility to take decisions and lead. We have not, and we will not.

The primary goal of our economic policy remains unchanged: it is to support people’s jobs. That is why we have progressed the next phase of our winter economy plan with the express intention of laying the track for economic recovery by protecting jobs through the coming months. As the Chancellor said, the new phase of that plan has three key elements: the job support scheme; cash grants for businesses that are forced to close; and additional funding for local authorities. These more targeted measures will come into force as the furlough scheme winds down at the end of the month. That scheme has supported more than 9 million jobs, but the House will understand that it cannot continue indefinitely, as the Chancellor made clear from the outset.

First, we will expand the job support scheme. This will help to protect jobs in businesses that can continue to operate as well as in those that cannot. For those businesses that can open safely but where there is reduced or uncertain demand, the Government will directly subsidise employees’ wages, meaning that those employees can work shorter hours rather than being made redundant. Businesses that are forced to close will also be aided by the scheme. In circumstances where staff are unable to work for a week or more, they will still be paid two thirds of their normal wage up to £2,100 a month. This will be covered by the Government and will apply right across the whole of the United Kingdom. Crucially, because the scheme will run for six months, it will give people and businesses the certainty they need. We have intentionally designed the scheme so that there is no gap in support for employees. Staff can remain on the furlough scheme until 31 October and will benefit from the new job support scheme from the following day.

Throughout this crisis, we have not forgotten about the self-employed, which is why we are extending the existing self-employed income support scheme for a further six months. This is in addition to the support through initiatives such as business rates relief, bounce back loans and the local restrictions support grant. For those who question the generosity of the job support scheme, we have looked closely at schemes implemented by our friends in countries such as Germany and Italy, and they are very closely in line.

Importantly, businesses can also access a wide spectrum of other help that we have made available in recent months. As the City Minister, I have been most closely involved in the temporary loan schemes that have been rolled out at pace to meet the needs of businesses large and small and recently extended to ensure that businesses that still want to access them can do so. As of 20 September, more than £57 billion has been provided to businesses of all sizes through Government guaranteed loan schemes.

At the same time, the welfare safety net available to those most in need has become more generous and responsive. Treasury analysis shows that covid-19 welfare changes, together with Government interventions since March, have supported the poorest working households most of all, reducing the scale of losses for working households by up to two thirds. I note the comments made by the hon. Member for Glasgow South West (Chris Stephens), who is no longer in his place, about the continuing need to address carefully the needs of the most vulnerable. The universal credit standard allowance and working tax credit basic element have both been increased by £20 per week for 2020-21, and given the way in which universal credit replaces 63% of lost income for the lowest earners, this means that someone on the job support scheme at 67% of their original earnings will see universal credit make up at least 63% of the 33% they have lost. This will mean that they will end up, in many cases, with nearly 90% of their original income.

[Kevin Hollinrake]

Can I take the Minister back to the loan schemes, which were delivered at pace and were a fantastic success? Does he agree that we will need a new iteration of those loans scheme to take us through the next phase and that, wherever possible, we should make those loans available to all businesses, regardless of where they hold their business account, including those that hold that account with non-bank lenders?

[John Glen]

I very much agree with my hon. Friend. That is something that the Chancellor and I are working on as a live issue, and we will report back to the House in due course.

The second element of the winter economy plan is cash grants. Businesses in England that are required to close for health reasons can now claim a grant of up to £3,000 depending on the value of their property. That is a cash grant, not a loan, that they will never need to pay back and they can use for any business cost. Should the devolved Administrations in Northern Ireland, Scotland and Wales adopt a similar approach, we will make an additional £1.3 billion available to them to help—part of a £7.2 billion total package—further demonstrating the importance of the Union as we face these challenges together.

I turn to the third component: local authorities. I pay tribute to the efforts of local authority leaders and their officers throughout the crisis, and I pay particular tribute to my own in Wiltshire. Up to £465 million will be made available to those local authorities at high or very high alert to support public health and local economic initiatives. That is on top of the £1 billion to protect vital services, which itself is in addition to the £3.7 billion we have already provided since the spring.

Let me conclude by saying that, as we have throughout this crisis, we will continue to listen carefully to represent- ations of hon. and right hon. Members on behalf of their constituents, keep the whole of our support package under review and, where necessary, adapt and evolve our response. Members from across the House have made representations today, and the Government will reflect carefully on them.

I vividly recall coming to the House in March, 209 days ago, prior to the launch of the furlough scheme, to answer an urgent question on jobs. The House made its view plain on that occasion, as it has today. We were listening then, and we are listening now. We will do everything possible to carry this country through the crisis, in the knowledge that we can and we will succeed. We need what the Chancellor has called a consistent, co-operative and balanced approach. The Government will continue to strive for that crucial balance, protecting lives and livelihoods flexibly and sustainably for as long as it takes. That is why I urge the House to support the Government amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Co-operative and Community Benefit Societies (Environmentally Sustainable Investment) Bill

Debate between Kevin Hollinrake and John Glen

2nd reading & 2nd reading: House of Commons
Friday 11th September 2020 Commons Chamber

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

I congratulate the hon. Member for Cardiff North (Anna McMorrin) both on securing this private Member’s Bill and on highlighting the important issue to the House. I acknowledge the many significant contributions so far: from my hon. Friends the Members for Northampton South (Andrew Lewer), for Berwickshire, Roxburgh and Selkirk (John Lamont), the hon. Member for Croydon Central (Sarah Jones), my hon. Friends the Members for Clwyd South (Simon Baynes), for Grantham and Stamford (Gareth Davies), for Christchurch (Sir Christopher Chope), for Rushcliffe (Ruth Edwards), for Bolton West (Chris Green), for Sedgefield (Paul Howell), for Darlington (Peter Gibson) and for Gedling (Tom Randall). All of them have interrogated the Bill very carefully and thoughtfully with some interesting exchanges along the way.

I wish to put it on record that I fully agree with the ambitions of the hon. Lady’s Bill to support the growth and development of the co-operative and mutual sector and to tackle climate change; I have enjoyed our dialogue during the preparation of the Bill to get to this point. They are two key drivers of my tenure as Economic Secretary. I also wish to put it on record that the Government have taken significant steps to support the co-operative and mutual sector to reach its potential, and I will continue to champion mutuals of all kinds. Just last week, I was pleased to attend a roundtable on the topic of regional mutual banks chaired by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) who has also made contributions again today. I will be taking some of those thoughts from that discussion forward.

Treasury officials who work with me also hosted an innovative mutuals workshop with representatives from across the sector last year to drive practical changes to help co-operatives. In 2014, as has been mentioned, we passed the Co-operative and Community Benefit Societies Act to reduce legal complexity and, at the same time, we increased the amount of capital a member could invest in a society from £20,000 to £100,000.

[Kevin Hollinrake]

The Minister refers to the roundtable we held on mutual banks. One of the astounding figures in that roundtable was the SME lending by mutual banks in other countries throughout the financial crisis. In Japan, there was no reduction in lending to SMEs. In Germany, there was a 20% increase. In Switzerland, there was a 30% increase over that five-year period. In the UK, there was a 25% decrease in lending to SMEs. Does that not show the power of mutual banks as a solution to SME lending?

[John Glen]

It does show the considerable potential, but we must be clear about the different legal traditions and frameworks that exist in those different jurisdictions. Right now, we are looking at where we can examine ways of moving forward constructively from the basis that we have in this country.

I would like to move on and examine some of the other elements where the Treasury has made contributions to assist this broad agenda. Where we have identified barriers holding mutuals back, we have acted to remove them. This year, we worked with Her Majesty’s Revenue and Customs to ensure that companies converting to co-operatives are treated on a level playing field. At the Budget, the Government announced that the tax burden on housing co-operatives would be reduced. Most recently, the Treasury has worked closely with the Department for Business, Energy and Industrial Strategy to ensure that co-operatives can benefit from the Government’s covid-19 business support offer, including through the Corporate Insolvency and Governance Act 2020.

I am conscious that the interest of the hon. Member for Cardiff North is not just about the development of the co-operative sector. In our discussions, her passion for taking action to address climate change and her considerable experience in Wales prior to coming to this place have been abundantly clear to me. The Government share that ambition. As the House will be aware, we legislated to reduce emissions to net zero by 2050, becoming the first major economy to do so. In the Budget earlier this year, the Chancellor also announced a series of real, tangible measures to support green growth and tackle climate change. They were wide-ranging and included: committing to the carbon capture and storage infrastructure fund; fulfilling the manifesto commitment to tree planting and peatland restoration through a £640 million Nature for Climate fund; delivering on our commitment to increase the proportion of green gas in the grid by consulting on introducing a Great Britain-wide green gas levy to support biomethane production, alongside other measures to decarbonise heat; doubling the size of our energy innovation programme; and, at the summer economic update in July, the Government announced a further ambitious £3.05 billion package for housing decarbonisation designed to cut carbon, save people money and create jobs.

In my own area of responsibility at the Treasury, green finance is a priority. We published our green finance strategy in July last year. It sets out very clear objectives to align private sector financial flows with clean environmentally sustainable and resilient growth, and to strengthen the competitiveness of the UK financial sector. The tone of the debate and the content of colleagues’ speeches today has shown that there has to be an almost limitless ambition in terms of the dimensions of interventions. A number of contributions focused on the issue of green bonds and mobilising green finance. That means accelerating investments to support clean growth and our environmental ambitions. I think I would want to say that the issuance of green bonds will be an important part of the pathway to delivering the transition to net zero by 2050. It is something that the Treasury keeps under active and ongoing review as we approach fiscal events in the future.

I would like to turn now to the reasons the Government cannot support this Bill, despite sharing the ambitions of the hon. Member for Cardiff North. For the benefit of the House, it may be worth restating that societies can currently issue shares to raise capital and may also issue debt in much the same way as companies, as the Opposition Front-Bench spokesman, the right hon. Member for Wolverhampton South East (Mr McFadden) correctly set out. The current arrangement allows for a considerable amount of flexibility for co-operatives seeking to raise capital, while safeguarding their status as genuinely mutual member-owned and controlled entities.

The Government believe that the UK should have a strong and robust regulatory system which provides strong protection for consumers. Investment in mutuals, like any other investment, is not risk-free—a point that has been made by several hon. Members. Although it is for investors to make their own choices about risk—as has been pointed out, investments can go up and down—it is crucial that the Government ensure that appropriate protections are in place, particularly where a new type of investment instrument or product is being created.

The recent public and regulatory attention, following the failure of London Capital and Finance, to retail investments such as those that are often referred to as mini bonds highlights that care is needed when developing investment products for retail investors. From the beginning of this year, the Financial Conduct Authority took action to limit the promotion of a certain type of mini bond to certain retail investors, citing concerns about the high risk that capital invested would not be repaid and the illiquid nature of the investment. The FCA is now consulting on making those temporary rules permanent and extending them to some similar securities.

Unfortunately, we believe that the type of share proposed in the Bill may unintentionally—I do accept that it would be unintentional—create a capital instrument with characteristics similar to those of a mini bond, without ensuring that adequate protections for consumers were in place. Some of the significant issues with mini bonds arose as a result of their illiquid nature—the fact that they cannot easily be transferred—limiting investors’ ability to access their funds. Although the share proposed in the Bill is transferable, we believe that, in practice, it is likely that it would be highly illiquid. Mutual shares can ordinarily only be transferred at par value, which in turn limits the potential for the emergence of any secondary market for the shares, because the incentive to purchase existing shares is limited. In the case of the share proposed in the Bill, the opportunities for retail investors to recover their funds before the term attached to the share has expired, should they need to do so, may be extremely limited. That limitation could pose risks to retail investors with relatively low net worth who may need to access their capital.

Investment in mutuals is not risk-free. Many investors in mini bonds were motivated by the opportunity to support a brand or product that they had some relationship with, so they may not have fully considered the risks posed to their capital. That issue should be considered carefully in this case, because it is likely that individual socially minded investors may see investment in a green co-operative as an ethical use of their funds and may underestimate the associated risk.

That issue may be compounded by two further considerations. First, although the FCA is the registering authority for co-operatives, where they are not undertaking regulated activity they are not supervised by the FCA in the manner in which financial services firms are. We believe, therefore, that there is a significant risk of mistaking registration with the FCA to suggest a level of scrutiny that does not exist, and that may cause investors to underestimate the risk. Furthermore, as the investments are unlikely to be covered by the Financial Services Compensation Scheme, there would be no compensation available to consumers if the issuing co-operative were unable to repay the original investment. That has been a particularly contentious area with mini bonds.

More broadly, the Treasury’s review of the current regulatory arrangements for the issuance and marketing of non-transferable debt securities, such as some mini bonds, is ongoing. It is right that we consider carefully the outcome of that review before consideration is given to the creation of any capital instrument with similar characteristics. We do not want to have to do another review when we have not concluded this one yet. I hope I have made it clear to the House that the Government have significant concerns about the potential consumer detriment that may unintentionally arise as a result of the type of share proposed in this Bill.

[Kevin Hollinrake]

Does the Minister agree that the issue with mini bonds, and particularly with London Capital and Finance, was the misunderstanding around what was regulated? In that case, the product itself was not regulated, but the marketing of it was. That was very confusing for consumers, many of whom thought they were buying regulated products when they were not. Would it not be more straightforward to simplify and widen the regulatory framework to bring those kinds of products into it?

[John Glen]

My hon. Friend shows his usual grasp of these matters. He is right to say that the lack of clarity about the promotions regime and the regulation of the underlying instruments poses some real challenges. Alongside Dame Elizabeth Gloster’s review, which will report in November, we are looking carefully at the right joined-up response to deal with the risks that we have seen in the recent unfortunate situation arising from these mini-bonds.

Alongside protecting consumers, it is right that the Government consider the impact of any proposed changes to the shares issued by co-operatives on the sector. We have seen clear examples in other policy areas of legal forms being used to deliver investor benefits other than for the purpose they were intended, such as tax-advantaged venture capital schemes in energy generation. The FCA noted in response to its 2015 consultation that it had taken the decision not to register a number of energy societies as co-operatives. Those decisions were taken on a case-by-case basis, when it was determined that the conditions for registration as a co-operative were not met. In those cases, the relevant condition for registration was that the society must be a bona fide co-operative society.

Key to what makes mutuals distinct from other legal forms is their purpose-driven nature—one that the hon. Member for Cardiff North set out clearly in her opening speech and to which others have referred. I am concerned that the type of share proposed in the Bill may incentivise investors to inappropriately use the co-operative legal form as a vehicle to attract investment rather than to act for the benefit of its members or community, as co-operatives are intended to. Let me be clear: we are not opposed to community energy schemes, or for that matter any other business seeking to incorporate in the mutual model. However, it is right for the Government to be cautious in proceeding without the possibility for appropriate consultation and consideration, because we have seen real examples of where the model has been used in the wrong way, to considerable consumer detriment.

Finally, I note that there does not appear to be a clear consensus from the co-operative sector in support of the Bill as it stands. I will set out the position plainly as I understand it. In a briefing to MPs, the trade body Co-operatives UK noted that the Bill would be “impractical and counterproductive” and

“would restrict rather than expand the scope for societies to take on mission-aligned investment for environmental and social purposes.”

Co-operatives UK’s preferred approach, as the hon. Lady acknowledged, is to make amendments in Committee to remove the links to environmentally sustainable investment from most of the Bill. However, I believe that would fundamentally contradict the hon. Member’s intentions in drawing the scope of the Bill and is therefore not a viable way forward.

To conclude, let me reiterate my sincere gratitude to the hon. Member for Cardiff North for bringing forward this Bill. There has been a constructive discussion today, and it is important to highlight the value of the co-operative and mutual sector, both to the House and the public. I thank her for the way that she has engaged with me and my officials in recent months. Her passion to support the sector and tackle climate change has been clear throughout. As I have indicated to her previously, I will be happy to continue to work with her and representatives from the sector, of which there are a number across the House, to understand what more can be done. I will continue to champion the work of the co-operative sector more generally and address some of the themes of today’s debate, which have been very valid and worth while.

Stamp Duty Land Tax (Temporary Relief) Bill

Debate between Kevin Hollinrake and John Glen

2nd reading & 2nd reading: House of Commons
Monday 13th July 2020 Commons Chamber

[John Glen]

I thank the hon. Gentleman for his observations, which he made last week as well. Of course the Government look at all industries. The automotive industry is a key industry, and we are in dialogue with companies across the country looking at the appropriate interventions necessary. Obviously, commercial sensitivities sometimes prevent us from discussing those at the Dispatch Box.

With restrictions easing, the Government have been able to reopen the housing market, and there are signs of tentative movement. Transactions in May were 16% higher than in April. It is crucial to our recovery that we maintain this momentum. People should feel confident to move, to buy, to sell, and to renovate and improve their homes. This is why the Government are cutting stamp duty land tax by temporarily increasing the nil rate band for residential property from £125,000 to £500,000, with effect from last Wednesday—8 July—until 31 March 2021.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial interests. I am very supportive of these measures. One of the risks to the housing market is the withdrawal by the lenders of high loan-to-value mortgages, especially for first-time buyers. We know that 90% and 95% loans can become a self-fulfilling prophecy that damages the market. Will the Minister do whatever he can to make sure that our banks support high loan-to-value mortgages throughout this time?

[John Glen]

I am grateful, as ever, for my hon. Friend’s intervention. Of course, he has enormous expertise in this sector. He is right to say that there is a threat given the changes in the profile of LTV mortgages that are being offered. We hope that that will return to more of the normal schedule that we would have seen pre-pandemic. We will be actively looking at this, and I am in conversations with the banks and building societies about it.

Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 1st October 2019 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I welcome the introduction of the new business banking resolution service that will start to hear cases of historical problems later this year. In the previous Chancellor’s letter of 19 January, he stated that that scheme should carefully consider all cases that come before it. How is that possible when the research of the all-party parliamentary group on fair business banking determined that 85% of cases are excluded?

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

I thank my hon. Friend for his question. He is a powerful advocate for this redress scheme and I thank him for the work that he has done. In our conversation on 10 September, I reiterated the Government’s position that the scheme should not reopen complaints that have sometimes gone multiple times through the courts, but I welcome the fact that the new scheme will give access to 99% of those claims going forward, and I will continue to engage with him where I can to provide solutions on individual cases.

Mortgage Prisoners

Debate between Kevin Hollinrake and John Glen

Thursday 6th June 2019 Commons Chamber

[John Glen]

That is a reasonable point to make. This intervention has to be meaningful and it has to deal with the problem of mortgage prisoners. I am very clear about that, and we in the Treasury will need to look carefully at how we evaluate this. As I was saying, I see plenty of innovation across the mortgage market and I look forward to seeing what affordable options lenders can offer to mortgage prisoners who are looking to switch.

Let me turn to the Government’s sales of mortgage books to purchasers that are not active lenders. Much of this afternoon’s debate has focused on the firms that purchase these mortgage books. It is regrettable that the Government have not received any reasonable bids from active lenders, with feedback suggesting that they have limited appetite for these loans. However, I would like to make it clear to the House that the administrators of these mortgage books must be FCA-regulated, regardless of whether they are active lenders. Any consumer whose mortgage is held by one of these firms has full recourse to FCA protections, including treatment in accordance with the FCA’s “treating customers fairly” principles, and the ability to complain to the Financial Ombudsman Service.

I have heard the comments about borrowers having their reversion rates drastically increased. To safeguard against this during asset sales, the Government have put in place contractual protections that have been enhanced to ensure that the terms and conditions of the original loans are honoured and, in the latest asset sale, to ensure that future rate rises are in line with the rates charged by the largest active lenders. This means that a customer will be treated broadly the same as if their mortgage was with an active lender, with payments in accordance with their original contract terms.

[Kevin Hollinrake]

Will the Minister give way?

[John Glen]

I am running short of time, but I will give way to the chair of the APPG.

--- Later in debate ---

[Kevin Hollinrake]

The FCA’s own consultation on this states that where firms sit outside the FCA’s regulatory remit, the solution is more challenging. So whatever the Minister says, the FCA believes that we will be making the situation in which a debt is sold on to an unregulated inactive lender more challenging.

[John Glen]

My hon. Friend made reference in his speech to the distinction between business debts and mortgage debts, but I will clarify my remarks on that specific point to him in writing.

In these sales, the Government also stipulate that there must be no financial barriers put in place to harm a consumer’s ability to switch to a new deal with another lender. Once this FCA rule change is implemented, consumers will be in a better position to change their mortgage, provided that they are up to date with their payments and meet lenders’ risk appetites.

Let me also address the point that was raised regarding the sale of commercial loan portfolios to third parties. Since the financial crisis, it has been clear that the standards of behaviour across the financial sector must improve—I have said it in all the debates that we have held in the 17 months that I have been in office—and that banks must work to restore the trust that businesses have in their institutions.

I concede that I have some differences with my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) over some of his assertions about what would be the best solution, but we have tried to work co-operatively where there is common ground, and that work is going forward. I am pleased that banks are now committed, through the standards of lending practice, to ensuring that third parties who buy loans have demonstrated that customers will be treated fairly, and to allowing customers to complain to the original lender if there is a dispute that cannot be resolved. That will help to ensure that all businesses can resolve disputes if they arise.

I thank my hon. Friend the Member for Dover for calling this debate. I have tried to address the points that have been raised. I believe it is right that the Government and the regulator introduced more stringent rules after the financial crisis. Rigorous affordability assessments are an important factor in ensuring that a borrower has the means to pay back their loan, as well as maintaining the financial stability of the UK. Unfortunately, however, a minority of borrowers have since found that they can no longer pass those strengthened affordability assessments, despite being up-to-date with their repayments. That is why the Treasury did act, and is working with the FCA to remove the regulatory barrier.

I recognise the urgency associated with securing this solution, and I am urgently working to ensure that the FCA delivers on both what it wants to deliver and what we have asked it to deliver.

Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 21st May 2019 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

When Sally Masterton discovered a £1 billion fraud at Lloyds Bank the bank discredited her, constructively dismissed her and prevented her from working with the police investigation. Five years later Lloyds apologised for her mistreatment but nobody at the bank has been formally investigated or sanctioned for this mistreatment. Will the Minister use his powers to instruct the Financial Conduct Authority to carry out that investigation?

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

As my hon. Friend knows, the FCA is conducting two investigations into the events at HBOS Reading and Lloyds has instructed Linda Dobbs to look into who knew what when. It is absolutely clear now that such circumstances could not be repeated given the action we have taken with the senior managers regime, but I look forward to the outcome of those reviews and we will be taking action accordingly.

Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 9th April 2019 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

High street banks are regulated, but the loans they provide to SMEs are not. There is not even a requirement to treat such a customer fairly and reasonably. In the absence of regulation, should there be a clearer warning about the lack of protection if things go wrong?

[John Glen]

As my hon. Friend knows through his excellent work with the dispute resolution service, there are some avenues for businesses to go down. Many—virtually all—lenders have now signed up to the standards of lending practice, and that, alongside the expansion of the Financial Ombudsman Service’s jurisdiction, gives businesses the assurance they need.

Clydesdale Bank and SMEs

Debate between Kevin Hollinrake and John Glen

Tuesday 19th March 2019 Commons Chamber

[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.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I thank the Minister for all the work he has done in this area. I do feel that we are making progress, but, understandably, the jury is out until we get to the place we need to be. I also thank the hon. Member for Lanark and Hamilton East (Angela Crawley) for tabling such an important question today. There are many issues with this. The case concerned follows a typical pattern. Over 10,000 of these tailored business loans were sold to businesses. It may be impossible for these businesses to refinance because of the exit fees. Personal guarantees were then required, and finance was withdrawn despite the fact that the businesses had never missed a payment. The FCA has looked at this and has said that these cases should be considered by the new dispute resolution scheme, which is good news for many people. I ask the Minister to impress on UK Finance that it makes sure that it suspends any proceedings in any of these cases until they have been reviewed.

[John Glen]

Again, I thank my hon. Friend for the work he has done in this area. I met representatives of UK Finance just a few hours ago, and I am aware of his correspondence overnight on this issue as he joins the board imminently. The key concern I would have is the extrapolation of one case, or a few celebrated cases—tragic cases—to say that they are normative of practices across the sector as a whole. He smiles because he knows that is a conversation we have had frequently. This historical dispute resolution mechanism is not designed as some sop, but as a meaningful mechanism to interrogate wrongdoing in the past and seek resolution for those individuals who remain dissatisfied.

Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 11th December 2018 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Thank you, Mr Speaker. Banks that are guilty of the scandalous mistreatment of small businesses are allowed to design and oversee their own redress schemes, including determining the level of compensation paid to the victims. Does the Minister agree that Parliament and the regulator should take control of those processes?

[John Glen]

I have always said that the banks need to do more to restore their relationship with SMEs, and I welcome the scheme that UK Finance has announced to address unresolved historical complaints. I look forward to meeting my hon. Friend next week, with the Chancellor, to discuss the Government’s position.

Business Banking Fraud

Debate between Kevin Hollinrake and John Glen

Tuesday 9th October 2018 Westminster Hall

[John Glen]

I am grateful for the hon. Gentleman’s intervention, and I listened to his earlier remarks. I think that this is about co-ordination and the appropriate configuration of resources.

[Kevin Hollinrake]

The Minister rightly mentions resources, which are always tight, but does he see a potential opportunity here? HBOS has not yet been fined for its scandalous abuses of 2007 and 2008, which tore apart many businesses. Would it be appropriate to use that fine to pump-prime a crime agency to deal with these issues? That agency could then be self-funding, because it would constantly be levying fines for abuses.

[John Glen]

We clearly need to find an effective mechanism to deal appropriately with the scale of the unaddressed challenges, and I will look at all options for that.

The City of London police have secured funding from the Home Office police reform and transformation fund to provide training for 600 investigators across police forces. There is also now a national register of fraud specialists; I acknowledge that the sentiment in this Chamber is that that is insufficient, but I should point out that it exists.

The regulatory framework has changed considerably since the events of the crash 10 years ago. I will not go through the whole history, but we have now established a network of robust and specialised financial regulatory bodies, each with a clear mandate and a set of responsibilities. However, I understand the concern about the reach of those bodies to deal with outstanding historical matters that our constituents are still raising with us. As part of that network, the Financial Conduct Authority is focused on ensuring that the conduct of firms and the interests of consumers are placed at the heart of the regulatory system and given the priority they deserve. That statutory objective will continue to guide the FCA’s work as it ensures that the highest possible standards are applied to the sector.

On SME lending, I am acutely aware that concerns remain about past cases of misconduct, the effects of which are still being felt today. There has been a great deal of justified anger within Parliament and beyond about cases such as those of the RBS Global Restructuring Group, HBOS Reading and the mis-selling of interest rate hedging products. I have been clear that the inappropriate treatment of SMEs by RBS GRG was unacceptable; I have made that point personally to the chief executive of RBS. The issues surrounding RBS GRG are firmly on my radar in the Treasury and I continue to work on the matter. The case of HBOS involved criminal activity, and it was right that those responsible were brought to justice. RBS and Lloyds, which now owns HBOS, have rightly set up compensation schemes for businesses affected by GRG and HBOS Reading.

My hon. Friend the Member for Stirling (Stephen Kerr) and other Members raised gagging clauses and the need for transparency. I am very sensitive to the pattern of settlements being offered that are effectively gagging clauses, such as in the case of Mr Shabir that the hon. Member for Cardiff Central (Jo Stevens) raised. That does not seem an honourable way of dealing with legitimate complaints, so I will examine the matter carefully before I report back.

I am glad that to say that in response to direct loss claims relating to the GRG scheme, 978 outcome letters have been sent to customers and £15 million has so far been paid out in redress, on top of £115 million in complex fees. Offers have been also made to more than 90% of customers within the scope of the HBOS Reading review, and more than 85% of customers have accepted.

I am acutely conscious of time, but I think that it is important that I give a succinct update of what I will be doing over the next few weeks. I firmly believe that by increasing the emphasis on individual accountability, the senior managers and certification regime will prove hugely important in improving conduct standards in the financial services sector and allowing regulators to deal effectively with cases such as that of RBS GRG. The regime will be extended to the insurance sector in December and solo-regulated businesses will come in next year.

I look forward to Simon Walker’s review because it will allow me to reach a conclusion about what needs to happen. The Government have done a lot of work, but I accept that more is required. I have spoken to Andrew Bailey, to the retired High Court judge Sir William Blackburne, to Ross McEwan, to the chief executive of Lloyds, to the chief executive of the Financial Ombudsman Service and to UK Finance, and I have met members of the all-party group. I am keen to give my hon. Friend the Member for Hazel Grove the opportunity to reply, but let me confirm that there will be action and that I will come back in a matter of weeks.

Banking Sector Failures

Debate between Kevin Hollinrake and John Glen

Thursday 12th July 2018 Westminster Hall

[John Glen]

I was making it clear that, as a Minister, I do not make the operational day-to-day decisions about which individual branches should close. My responsibility is to see that consumers have access to the services they need, and I have done that through brokering the arrangement between UK Finance, which represents the banks, and the Post Office, which provides services when closures take place.

The hon. Member for East Lothian mentioned insolvency practitioners.

[Kevin Hollinrake]

The Minister is being very generous in giving way. He talks about the issues around bank closures. One of the things that banks are doing to substitute for bank availability is moving us all online, so we are transacting more online through apps and the like. Colleagues have written on behalf of constituents to the all-party group to tell us about authorised payments and online fraud. Yet the banks themselves and the Financial Ombudsman Service are attributing gross negligence to the customer, despite the fact that they have gone to some lengths to try to prevent fraud. For example, the person on the other end of the phone knows their password, their maiden name—a degree of information that would not make that giving away of information gross negligence, yet they are being disadvantaged, despite the fact that the banks have pushed them online.

[John Glen]

I am grateful to my hon. Friend for that intervention. The Payment Systems Regulator is doing a live piece of work to look at scamming and will report in September. It looks very much at culpability in such cases and I hope it will come up with a clear resolution that will give the public a better understanding.

If I may, given the luxury of additional time, Mr Hanson, I am going to try and reply to the points raised and then I will come on to substantive points. Insolvency practitioners are regulated by one of five recognised professional bodies. Legislation in 2015 introduced binding statutory objectives on these bodies, and the Insolvency Service has more sanctions available to it to deter and deal with poor conduct or performance. The insolvency code of ethics, raised through the Joint Insolvency Committee, is also expected to be revised and updated later this year, but I will be happy to enter into dialogue with the hon. Member for East Lothian about the specific issues and concerns that he has.

--- Later in debate ---

[John Glen]

I am glad that the hon. Gentleman has conceded the point on RBS. I want to focus on banks, and I was responding specifically on the matter of RBS.

I want to set out what the Government have done to address the issues that came to the fore during the financial crisis, because the regulatory framework and what has evolved over the past 10 years is a foundation for some of the outstanding challenges that we need to resolve. Since the crisis, the Government have reformed the UK system of financial regulation for the benefit of the industry and the people who rely on it. We have bolstered standards across the sector and taken strides to restore public trust in financial services. I acknowledge that there is more work to be done, and I shall come specifically to the issues raised in the report of the all-party group, and in other work. We have regulators armed with comprehensive powers and responsibilities co-operating to identify and address risks across the financial sector. The Financial Stability Board has praised the UK for its successful transition to a new regulatory regime, and the International Monetary Fund has applauded the UK’s more resilient system. We have implemented reforms to improve individual accountability in the financial services sector, and that includes the introduction of the senior managers and certification regime, which promotes individual responsibility.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) set out a list of individuals about whom he has outstanding concerns; and it must be right to hold people to account. Where evidence exists for individuals having behaved criminally or in a way that needs further analysis, it must be brought forward. I understand that the shadow cast over the issue by outstanding cases needs to be resolved by the regulator. However, the SMCR promotes individual responsibility, holding senior managers to account for misconduct that occurs on their watch. It ensures that individuals at all levels can be held to appropriate standards of conduct. Both those things were key recommendations of the post-crisis Parliamentary Commission on Banking Standards. The SMCR was implemented for all banks, building societies, credit unions and Prudential Regulation Authority-designated investment firms in 2016. The regime will be extended to cover insurance firms from December 2018, and all other Financial Conduct Authority-regulated firms in December 2019.

I want now to talk about the core issue of SME lending. Despite significant improvements to the system at large, I am acutely aware that concerns remain about misconduct within the sector.

[Kevin Hollinrake]

The senior managers regime is important, but it will not be effective unless the regulators or law enforcement agencies investigate, speak to victims, find out exactly what has gone on, establish the evidence and take prosecutions forward where guilt is demonstrated.

[John Glen]

I agree, and will discuss the implications of that.

Many of the concerns that are raised relate to small businesses—sometimes microbusinesses, and sometimes individuals who have been working hard, with a perfectly solid relationship with their bank. Those businesses form the backbone of our economy, as several hon. Members have said this afternoon, and there has been justified anger, both within Parliament and beyond, about Global Restructuring Group at RBS, HBOS Reading and the mis-selling of interest rate hedging products. The case of GRG, and other cases from the crisis period, are unacceptable and I will continue to push for action. I shall explain what is happening.

I mentioned at the Backbench Business debate in May that the chief executive of RBS had committed to modifying the GRG compensation scheme. RBS will set up an independent appeal process for consequential loss claims. I acknowledge that the hon. Member for Inverness, Nairn, Badenoch and Strathspey mentioned that in his speech. I shall discuss with Sir William Blackburne how that process will operate when we meet next week. I understand the concerns about the need for it to work effectively. As has been mentioned, the assessment of consequential loss is a tricky issue, and I need to be sure that the process will be expedited as well as possible.

Treasury officials receive regular updates from RBS on the compensation scheme, and I am glad that progress is being made on direct loss claims, with a further 200 complaints closed and a further £4 million paid out since the last debate in May.

[Kevin Hollinrake]

No one suggests that Sir William Blackburne at RBS or Professor Griggs at Lloyds are not decent people, trying to do the right thing, but is not the concern the fact that the compensation schemes are internal? It is not enough for justice to be done; it must be seen to be done.

Oral Answers to Questions

Debate between Kevin Hollinrake and John Glen

Tuesday 3rd July 2018 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The all-party parliamentary group on fair business banking is undertaking an important body of work on dispute resolution between banks and business. We will give it a parliamentary launch next week. Once the Minister has had time to digest the contents of that report, will he meet us to see how we can take the recommendations forward?

[John Glen]

I eagerly await the report’s launch next Wednesday. I will be happy to meet the all-party group and make a judgment about the best outcome on that issue, along with three other streams of work, in the autumn.