Barlow Clowes International
Mark Hoban Excerpts(13 years, 9 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
The Barlow Clowes group of companies collapsed in 1988, following the misappropriation of investors’ funds, which had been routed through approximately 50 related companies and entities in 16 jurisdictions. In the same year the Le Quesne report was published on regulatory functions in this matter. In 1989, the Parliamentary Commissioner for Administration published the report “The Barlow Clowes Affair”, which criticised the Department of Trade and Industry for maladministration in the handling of Barlow Clowes.
The Government disputed the main findings in the report but made a decision to make substantial ex gratia payments to Barlow Clowes investors. This was based on an exceptional combination of circumstances and was not to be regarded a precedent. At the same time the Government gave a clear assurance to Parliament to try and recover the cost of the ex gratia payments. The Government subsequently paid £153 million in ex gratia payments to 14,250 investors who suffered a loss as a result of the collapse of the Barlow Clowes group.
Since 1988, successive Governments have followed a policy of vigorously pursuing all claims in relation to the Barlow Clowes companies which showed any prospect of cost-effective recovery, in order to reduce the cost to the taxpayer of the ex gratia payments scheme.
The court-appointed receivers and liquidators to the Barlow Clowes companies have now concluded the last outstanding litigation in this case and will take no further action.
On 9 December 2010 the Supreme Court of Gibraltar granted the release of the receivers and liquidators of the various offshore portfolios previously promoted by Barlow Clowes International Limited, with effect from 6 January 2011. This brings to an end the Barlow Clowes affair.
As at 19 January 2011, from the recovery of assets and proceeds of legal action, the Government have recovered £120 million and £36 million was recovered and paid to investors. In total the investors, including the Government under their assigned rights, have been repaid £156.5 million, net of all costs.
Mortgage Market (Consumer Protection)
Mark Hoban Excerpts(13 years, 10 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
Today the Government have announced a package of measures intended to enhance consumer protection in the mortgage market. These measures will:
transfer the regulation of new and existing second-charge residential mortgages from the Office of Fair Trading (OFT) to the Financial Services Authority (FSA);
ensure consumer protections are maintained when a mortgage book is sold by a mortgage lender to an unregulated firm; and
extend the current regulation of the sale and rent back market to all providers.
An additional measure relating to a devolved matter—providing an exemption from FSA regulation for registered housing associations in Northern Ireland—is also included in the package.
This package is part of the Government’s wider programme to reform financial regulation, to improve consumer protection and strengthen financial stability. It will simplify the mortgage regulation landscape by making the FSA responsible for all residential mortgages.
The statutory instruments will be published later in 2011. In advance of this, the Government expect the FSA to begin work immediately to implement these measures.
Independent Commission on Equitable Life Payments (Report)
Mark Hoban Excerpts(13 years, 10 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
On 22 July 2010, I announced that the Government would establish the Independent Commission on Equitable Life Payments. This was in line with the Government’s pledge to
“implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure”.
Following the spending review, the Commission was asked to carry out two tasks. The first was to advise on the fair allocation of funds totalling £775 million among all policyholders, with the exception of with-profits annuitants (WPAs) and their estates. We had already announced that there should be no means-testing and that the estates of deceased policyholders should receive payments. The second was to advise on any groups or classes of policyholders that should be paid as a priority with regard to the timing of payments, again with the exception of WPAs and their estates.
The Commission has met with various interested parties, including the Equitable Members Action Group and Equitable Life, as well as receiving representations from a wide range of individual policyholders.
I would like to thank Brian Pomeroy, John Howard and John Tattersall for all their hard work on this issue. They have taken the time and care to find out policyholders’ concerns and have used this knowledge to help form their very useful advice. The work that the Commission has carried out helps bring us a step closer to resolving this issue.
Today, I am publishing the Commission’s advice and depositing a copy in the Library of the House. The Commission has recommended the following for the allocation of funds:
a pro rata allocation of the available funds, in proportion to the size of relative losses suffered. This equates to 22.4% of each policyholder’s relative losses;
a single policyholder view, wherever practicable, offsetting relative gains against relative losses where policyholders have multiple policies; and
a de minimis amount, in the region of £10, beneath which payments should not be made. This reflects the Commission’s view that administering very small payments below this sum would be disproportionate to the administrative costs of making them while being of negligible significance to recipients.
The Commission recommends that the following groups be prioritised for payment, subject to the practical constraints laid out in the Commission’s advice:
the oldest policyholders, as they are least able to wait for payment and are also least likely to be in a position to mitigate the effects of a delay; and
the estates of deceased policyholders and, as far as possible, the estates of those who die, before receiving a payment, in the next three years.
The Government accept the principles recommended by the Commission. Our task now is to work out how best those principles can be applied in practice to groups of policyholders while allowing us to begin making payments as soon as possible.
The Government will publish a detailed scheme design document that includes the practical application and delivery implications of the Commission’s recommendations. I will make this available for parliamentary scrutiny in the spring.
Banking Act 2009 (Reporting)
Mark Hoban Excerpts(13 years, 10 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
The Treasury has laid before the House of Commons a report required under section 231 of the Banking Act 2009 covering the period from 1 April 2010 to 30 September 2010. Copies of the document are available in the Vote Office.
Basic Bank Accounts (Scotland)
Mark Hoban Excerpts(13 years, 10 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Financial Secretary to the Treasury (Mr Mark Hoban)
I congratulate the hon. Member for Edinburgh East (Sheila Gilmore) on securing this important debate tracking progress on basic bank accounts and on what more needs to be done to encourage financial inclusion.
I confirm the coalition Government’s commitment to improving levels of financial inclusion. I have been involved and interested in the issue for some time. We believe that banks should serve the economy and that they should be committed to improving access to banking and the transparency of financial products for consumers.
Tackling unnecessary exclusion from banking services can help to alleviate some of the problems faced by low-income families who are currently unable to access mainstream banking services. As the hon. Lady has said, the benefits include being able to receive payments through different channels, having a more secure place to keep money and reducing the cost of household bills.
That is why the Government are committed to improving access to basic banking services and to helping people to use those services responsibly. That can only be achieved through collaboration between a number of parties, including the Government and the financial services industry, as well as a range of local partners, such as the devolved Governments, local authorities, social landlords, advice agencies, credit unions and others.
It is important to acknowledge, as the hon. Lady did, the real progress towards financial inclusion in recent years, and to note that such progress is due to the openness and support of many in the financial services sector. In her speech, the hon. Lady highlighted the reduction in the unbanked over the course of the past few years. Since 2002-03, the number of adults living in households without a transactional bank account has decreased from 3.57 million to 1.54 million in 2008-09. That number continued to fall in the last year for which we have information, with 200,000 fewer adults living in households without access to a transactional bank account. However, we cannot afford to be complacent. There is still scope to bring more households into banking services and to encourage the banks to maintain strong standards of customer service for poorer households.
I want to say a little more about the project to which the hon. Lady has referred to improve access to basic bank accounts.
Chris Evans
Before the Minister moves on, what does he believe that banks can do to manage people who are currently running their basic bank accounts very well on to mainstream banking, so that they can have credit facilities? What action can move people on to mainstream banking?
Mr Hoban
That is an important point. Banks should see the opportunity to encourage and enable people to get greater access to mainstream services, moving them from a basic bank account to a more fully functioning current account.
I will touch on the issue later, but we need to go with the grain of how people want to live their lives. Many people are comfortable with access to a bank account without an overdraft facility, for example. A challenge for policy makers is that we think of things that we might like as a function, even though sections of the community might not want such functionality in their accounts. We need to think carefully about that, although we should be clear that moving to a fully functioning current account ought to be open to those with basic bank accounts. Banks need to look at credit histories and how people manage their accounts as part of that process.
At the request of the financial inclusion taskforce, eight of the major retail bank account providers have collaborated to provide management data on their basic bank accounts. That allows us to look at levels of take-up in different local authority areas and wards across the country. At local level, there are financial inclusion champions, such as the group in Scotland funded by the Department for Work and Pensions. They are looking at how best to work in deprived areas to raise awareness and encourage more people to open bank accounts. We can continue to make effective use of up-to-date regional data to help tackle the issue in areas of financial exclusion.
The hon. Lady referred to the financial inclusion taskforce report that was published in December. That is a timely piece of work that gives us the opportunity to take stock of where we are. It raises a number of issues referred to by the hon. Lady and her colleagues, and I encourage hon. Members to read the report on the Treasury website.
The taskforce found that the experience of banking services for poorer households has been mixed. Many households have made savings on services and retail purchases, but some have lost money through bank charges. The taskforce found that the remaining unbanked are generally the poorest and most deprived people, and it recommended a number of minor changes to existing basic bank accounts to make them more accessible and easier for poorer households to use. It also highlighted the scale of the challenge of extending bank accounts to those who currently do not have them.
The research found significant indicators of relative disadvantage among the unbanked: eight out of 10 of the unbanked are in receipt of income-related benefits; more than a third have major health conditions; and a quarter have numeracy or literacy problems. As more people open bank accounts, we see the unbanked becoming concentrated in hard-to-reach, more deprived groups. We must think carefully about how to work closely with those groups to get people to open bank accounts and access the benefits that they bring.
Interestingly, we should not assume that those who do not have a bank account have not previously held one. Six out of 10 unbanked people have previously held a bank account. The research does not give reasons why those people do not currently have a bank account, but some may have had issues with managing their account and decided not to keep it open, or the account may have been closed. We are not necessarily talking about people with no experience of bank accounts. Some people may have opted not to have an account for a particular reason.
Let me reiterate the point about going with the grain of how people run their lives. Many unbanked consumers express a preference for managing their finances in cash. Some low-income households employ a number of strategies to ensure that money is available for essential living expenses, which include not withdrawing all their benefit payments at once, leaving a small amount of money as a buffer, or perhaps putting cash towards a particular purpose. We are well aware of the number of people who join holiday clubs or Christmas clubs to try to keep money in a defined account that is kept for a specific purpose, and a lot of people on low incomes find that to be a more effective way of having control over their money. They want direct control over their spending and feel that a bank account takes that away from them. Unbanked people are more concentrated in particular groups, but not having a bank account could be a conscious decision as much as a matter of exclusion, and we must therefore have a more flexible approach.
In the long term, the taskforce believes that the introduction of new models and channels for the delivery of financial services may be necessary to address the difficulties that poorer households can experience with banking. It has called on the Government to engage further with banks, e-money service providers, bill payment organisations, retailers and post offices to pursue new ways to improve the opportunities for low-income households to make the most of their money. We are in danger of getting stuck by thinking about a model of banking based around bank accounts. Increasingly, people are turning to prepayment cards or e-money as a way of controlling their finances or paying bills online.
Sheila Gilmore
The Minister has correctly identified one concern of the financial inclusion taskforce—that of bank charges that are very high in relation to the sums of money that people are dealing with. Does the Minister have any proposals to address the banks on that issue, given that by definition, people cannot run up unnecessary debt on those accounts? Perhaps bank charges should be reduced for that customer group.
Mr Hoban
The coalition agreement commits us to tackling the issue of bank charges, and we are working closely with colleagues in the Department for Business, Innovation and Skills.
I want to respond to a couple of specific points. Hon. Members have discussed bankrupts not being able to open bank accounts, and the hon. Lady was right to say that Barclays and the Co-operative bank allow undischarged bankrupts to open accounts. A number of banks are currently reviewing their policies and, in response to a call by the Government in July for banks to reconsider the issue and recognise the problem, the Insolvency Service is working with the British Bankers Association to decide how to address the issue.
The guidelines in law on identification are high level, and banks and financial services institutions have a great deal of flexibility in deciding how to prove someone’s identity. It is not only about having a driving licence or a passport, because there are other ways of doing it. In one of my constituency cases, a letter from the local council addressed to the person who was seeking to open a bank account was deemed to be sufficient proof of identity. I encourage banks to make their staff more aware of the rules and flexibility, and we will continue to raise that matter with the banks and the BBA.
The hon. Member for Islwyn (Chris Evans) asked whether banks are open to people opening basic bank accounts. The work of the financial inclusion taskforce, which sent mystery shoppers into banks, demonstrated that 80% of bank managers are much more open to people opening basic bank accounts. That issue has been a problem in the past, and we must maintain pressure on the banks to ensure that they offer basic bank accounts and do not turn customers away. We must tackle the barriers to people opening bank accounts.
Community investment tax relief is an important way of providing support. That tax is due for review shortly, and we will work with a full range of stakeholders to consider the options available for reform.
Ian Murray (Edinburgh South) (Lab)
I am grateful to you for giving way, Mr Hood, and I apologise for missing the start of the debate.
Ian Murray
Thank you, Mr Hood. I will get used to the conventions of this place eventually. The Minister has responded to my hon. Friend the Member for Edinburgh East (Sheila Gilmore) on the subject of basic bank accounts. One point that I regularly heard from the BBA, the Royal Bank of Scotland and HBOS, as it was at the time, was that if the staff in local branches were not able to offer a full bank account to potential customers, they did not then offer a basic bank account. Will the Government consider issuing guidance on that through the BBA to ensure that people who do not meet the criteria for a full bank account are automatically offered a basic bank account?
Mr Hoban
I do not want to get bogged down in what banks should or should not do. Through its mystery shopping exercise, the taskforce looked at the offering of basic bank accounts, and it will publish a more detailed report this year that will help inform those processes. Obviously, the Banking Code Standards Board will also have an interest in how such accounts are offered.
The hon. Member for Edinburgh East also asked about support for credit unions and post offices working together. There has been much discussion about that in recent months, and there is already a lot of co-operation between post offices and credit unions. For example, credit union current account holders can access their accounts through the post office, and more thought is being applied to that area.
We take financial inclusion seriously, and we want to ensure that more people have access to a bank account and the benefits that that brings. It is important to ensure that bank accounts and financial services work with the grain of how people live their lives. We must look at new technological approaches and the barriers to opening bank accounts. Together, we will take forward the work of the financial inclusion taskforce in conjunction with our partners not only in government but in the financial services sector. If I have not replied to any of the hon. Lady’s points I will happily respond to them by letter.
Sheila Gilmore
It appears from the Minister’s words that the financial inclusion taskforce will be continuing.
Mr Hoban
The previous Government committed the financial inclusion taskforce to a five-year life. The problem is ensuring that inclusion becomes a mainstream financial services issue and is not seen as something on the margins. That is why I will work closely with the financial services sector and other interested parties to see how we can best take forward the work of the financial inclusion taskforce. It is not an issue for those on the margins; it is an issue that should be taken seriously from bank boards to bank branches.
Mortgage Regulation
Mark Hoban Excerpts(13 years, 10 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I congratulate my hon. Friend the Member for Poole (Mr Syms) on securing this debate on the important issue of the future regulation of the mortgage market. As he said, the FSA is conducting a wholesale review of mortgage regulation in the UK. He and I share the aims of that review. We want to see
“a mortgage market that is sustainable for all participants”
and
“a flexible market that works better for consumers”.
I think we should all be able to agree on those sensible aims.
It is vital to address those issues in the light of the failed regulation of the mortgage market before the financial crisis, when there was a huge expansion in the availability of credit and the number of lenders in the mortgage market. That led to a rapid increase in house prices without an accompanying increase in home ownership, and put more people at financial risk because of the greater debts that were taken on. My hon. Friend was absolutely right to highlight the current low levels of arrears and repossession, but that reflects the low interest rate environment, lower than expected unemployment and, as he pointed out, forbearance by lenders. We cannot be sure that the same conditions will occur in any future housing downturn.
There is a lot of concern about the mortgage market review, but there is also a lot of misinformation. I welcome this opportunity to set out clearly the FSA’s plans for the review. The FSA is conducting the review under the powers of the Financial Services and Markets Act 2000 to meet its statutory objectives, which include market confidence, financial stability and consumer protection. We must remember that Parliament set the framework for regulation, but that the FSA is operationally independent, although accountable to Parliament.
Mortgage lending plays a vital role in ensuring a stable and accessible housing market. As the Minister for Housing and Local Government has set out, it is the ambition of this Government to create a housing market with stable prices that does not exclude many from home ownership. Owning a home is an important ambition for many people in this country. It brings social benefits such as stronger and more committed communities. A flexible mortgage market is important for labour market mobility. Although the link between lending and building is complex, mortgages must be available to encourage the home building industry to provide the new homes that we need. Perhaps most importantly, an open mortgage market promotes fairness between generations and helps to smooth out the differences between the housing haves and the housing have-nots. It allows young people to buy their own homes, which in turn helps older people to trade down as they move into retirement.
However, increased lending can force up house prices beyond the reach of those who want to get on to or move up the housing ladder, putting home ownership further and further out of reach for many people. High prices can cause inequality, indebtedness and inertia, with young people having to take out bigger and bigger debts to buy their own homes or give up on the dream of home ownership.
It is therefore important to strike the right balance. A properly regulated mortgage market is needed to ensure that house prices remain affordable and that consumers are protected. It is worth remembering that consumer groups such as Which?, Citizens Advice and Shelter have warmly welcomed the mortgage market review. Those organisations highlight the number of people they see every day who struggle to make their mortgage payments.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
Does the Minister agree that an important element of financial provision in the mortgage market is diversity? I would welcome his views on possible recommendations by the FSA review that might impact disproportionately on small building societies and restrict such a diverse flow of funds to the market.
Mr Hoban
I know that the hon. Gentleman is a keen supporter of financial mutuals. He will recognise that there was a commitment in the coalition agreement to diversity in the ownership of businesses in the financial services sector, and that we are taking action to support mutuals. A mutual should be as safe and sound as a big or small bank. The customers of mutuals deserve the same protection as customers of other financial institutions. I want to see a level playing field in the regulation of the financial services sector, not just the mortgage market.
The boom and subsequent crash in the mortgage market cast doubt on the prudential soundness of lenders, and on their ability to take on appropriate risk. There need to be adequate controls over lending to ensure that the requirements for the retention of capital are proportionate. Without reform of the rules on mortgage lending, banks would need to hold more capital, thus restricting their ability to lend. We do not want lenders to put their solvency at risk through aggressive lending. We are working internationally to agree a new framework of prudential regulation, and capital and liquidity requirements. It is important that all these regulatory reforms are seen as one wide-ranging package to strengthen the stability and sustainability of our financial system and our economy.
I wish to give a few statistics about the mortgage market, to illustrate some of the challenges that we faced during the boom years. The volume of lending was fairly consistent from the early 1980s to the mid-1990s, at about £50 billion a year, but from the late 1990s there was a steady rise in lending, with the boom peaking at £360 billion a year in 2007. Many assume that the rapid expansion in mortgage lending during the boom allowed more people to become home owners, but the rate of owner-occupation actually fell between 2003 and 2008. That may reflect the fact that house prices grew very rapidly from the mid-1990s until 2008, matching the boom in lending, but for many, neither their income nor deposits grew at the same rate. The number of mortgages granted to first-time buyers decreased steadily over the period from 2000 to 2007.
After the boom, mortgage lending fell rapidly from mid-2007 through to 2009, and it remains below peak levels. That reduction reflects a reduction in both demand and supply. Banks now realise that they overstretched themselves and underpriced risk in the boom years, and are therefore increasing deposit requirements and tightening credit checks. On the demand side, household debt is historically high, so people are reluctant to borrow more and add to their debts. People are cautious about the economy and their jobs, and many expect house prices to fall this year.
We know that during the boom, a huge proportion of mortgage lending—about 40%—was for remortgaging. In 2007, of the £360 billion in gross mortgage lending, £150 billion was for remortgaging. Surveys suggest that about 60% of remortgages also entailed equity withdrawal. Although mortgage lending for house purchase has reduced to some extent since then, the 72% fall in remortgaging has made the most significant contribution to the fall in gross mortgage lending over recent years. With interest rates at historically low levels and house prices flat, there is little incentive for borrowers to release equity or switch their mortgage.
I acknowledge that the reduction in mortgage availability has hit everyone hard, particularly first-time buyers. The proportion of first-time buyers reliant on help from friends and family to put together a deposit has reached 85%, compared with 45% in 2006, which is not an equitable or sustainable state of affairs.
I turn to the details of the mortgage market review. In October 2009, the FSA published a discussion paper setting out its high-level objectives for the review. That has been followed by a number of discussion and consultation papers over the past year. In the course of the review, the FSA has produced a range of options and proposals for consultation and consideration, and it is considering the responses carefully and will publish further proposals later this year. Nothing is set in stone. The FSA has made it absolutely clear that it will assess fully the potential impact on the market before implementing any rule changes. Later this year, it intends to publish an impact assessment that will take into account the cumulative impact of all its final proposals.
The FSA is also committed to ensuring a smooth transitional period, to minimise the impact of changes and keep the mortgage and housing market stable. It has made it clear that it will not implement any rule changes until the market is back on a stronger footing. Its review process is an ongoing consultation, and it is important that all interested parties engage constructively in it. I encourage everyone with an interest in the debate to do so.
I shall respond to some of the points that my hon. Friend the Member for Poole made. Traditionally, self-certification was a route for the self-employed to take a mortgage, but that has been abused by people for whom the scheme was not designed. The FSA’s proposals would required greater disclosure by the self-employed. For example, a borrower could submit their tax returns to prove their historical income, giving lenders better information on potential borrowers and enabling them to assess risk, and therefore price, more accurately.
As I set out earlier, in the run-up to the crash many first-time buyers were frozen out of the market. My hon. Friend the Member for Nuneaton (Mr Jones) highlighted the fact that the low loan-to-value ratios that we see today act as a barrier to those who want to get on to the housing ladder. Those ratios are a response to the crisis, not the MMR. The MMR’s emphasis on affordability should help in the long run to create a stable market with stable house price growth, which will bring home ownership within the reach of many more people.
The MMR should have no impact on the shared equity sector, as there is no in-built prejudice against it, but again, borrowers will need to demonstrate that they can afford to pay both the mortgage and the rent.
My hon. Friend the Member for Poole also raised the issue of European proposals on mortgage lending. He is right to say that the Commission intends to publish proposals on responsible mortgage lending and borrowing in the coming months. The Treasury and the Financial Services Authority have held a number of discussions with the Commission on those proposals, and we expect them to be broadly consistent with the principles of mortgage regulation in the UK. However, the FSA has acknowledged that it will need to consider that European initiative as it refines its proposals. It will ensure that the timetable for refining the MMR is consistent with developments at European level.
It is clear that mortgage regulation failed by allowing an unsustainable boom in lending and increasing house prices, followed by the inevitable crash. We do not want to see that repeated. We have a clear objective to create a sustainable and accessible housing market that sees a gradual rise in prices in line with people’s salaries. The mortgage market is a key part of creating that, but unregulated lending will not help us to achieve that aim. The MMR is an essential step to ensure that both consumers and lenders are protected, but that will always be balanced with the need to ensure innovation and competition in the mortgage market. The FSA will take a proportionate and balanced approach in order to help to build a stable and sustainable mortgage market for the future.
Question put and agreed to.
Financial Assistance for Ireland
Mark Hoban Excerpts(13 years, 10 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I have today placed in the Libraries of both Houses copies of the agreement providing a credit facility to Ireland of £3,226,960,000. This agreement was negotiated between HM Treasury and Ireland and signed on the 22 December following enactment of the Loans to Ireland Act, which received Royal Assent on 21 December 2010.
Oral Answers to Questions
Mark Hoban Excerpts(13 years, 11 months ago)
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Phil Wilson (Sedgefield) (Lab)
7. What recent steps he has taken to reduce bonuses paid by banks to their staff.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The Government have taken decisive action to tackle unacceptable bank bonuses. The Financial Services Authority has revised its remuneration code and new rules will be in place by 1 January 2011. In addition, the Government have introduced a levy that incentivises less risky banking activities, and we will continue to investigate the cost and benefits of a financial activities tax. In combination, those and other measures will ensure that remuneration is consistent with effective risk management.
Phil Wilson
The Minister will be aware that the Business Secretary has said that a big argument is going on in Government about the banks. He says that he wants a very tough approach but
“our Conservative friends don’t want to do that”.
Is the Business Secretary right?
Jesse Norman (Hereford and South Herefordshire) (Con)
May I remind the House that no hospital PFI contract was signed under the—[Interruption.]
Richard Fuller (Bedford) (Con)
While the Minister reviews the undoubtedly well-stuffed stockings of certain bankers to determine whether they have been naughty or nice, will he acknowledge the significant amount of tax that they pay, and the institutions that choose London as their domain? Will he recognise that, as far as their choice of domain is concerned, the airports of this country will not always be closed?
Mr Hoban
My hon. Friend makes an important point. At the time of the spending review the Chancellor made it very clear that we want banks to pay the maximum sustainable tax. That is why on 1 January we will introduce a bank levy, which the Opposition rejected when they were in government. That levy will raise £2.5 billion more than the net amount raised by their bonus tax.
Ms Angela Eagle (Wallasey) (Lab)
Will the Minister now admit that the more noise the Government make about this issue, the less action they appear willing to take? Will he confirm today that amidst all the PR and bluster, the Chancellor has decided not to go ahead with Labour’s requirement that all bankers’ bonuses over £1 million be published? He may be willing to ignore the Business Secretary’s nuclear option, but the millions of Britons who are paying the real price of his austerity measures will never forgive him if he lets his friends in the banks off scot-free.
Mr Hoban
I am not going to be lectured by the hon. Lady about attitudes towards banks. Labour is the party that gave Fred Goodwin his knighthood, so I will not take any lessons from Labour politicians. They talk tough, but they did nothing when they were in government. This Government are taking real concrete measures to tackle bankers’ pay and to introduce the bank levy, which they refused to introduce. In Europe there will be a most stringent application of the Financial Stability Board principles on bankers’ remuneration.
Roger Williams (Brecon and Radnorshire) (LD)
8. What recent discussions he has had on the introduction of a Government-backed sovereign sukuk.
The Financial Secretary to the Treasury (Mr Mark Hoban)
As chairman of the all-party group on Islamic finance and diversity in financial markets, my hon. Friend is well known for his close interest in Islamic finance. The Government believe that sovereign sukuk issuance would not offer value for money at the present time, but the situation remains under review.
Roger Williams
I thank the Minister for that reply. A sovereign sukuk issued by the Government might lead to two benefits: first, providing funding for the Government’s borrowing requirement, and secondly, giving readier access to liquidity for the growing number of Islamic banks that operate in this country. Will he agree to meet a small group from the all-party group on Islamic finance and diversity in financial markets to discuss this matter in more detail?
Mr Hoban
My hon. Friend makes an important point. We recognise the benefits that a sovereign sukuk could bring to improving liquidity in the sector, but significant costs would arise from sovereign sukuk issuance. However, I am sure that my noble Friend Lord Sassoon, who leads on this matter, will happily meet him and his colleagues.
Barbara Keeley (Worsley and Eccles South) (Lab)
9. What assessment his Department has made of the effects of the outcome of the comprehensive spending review on the provision of local services in deprived areas.
Stephen Timms (East Ham) (Lab)
10. What recent discussions he has had with his Irish counterpart on measures to reduce budget deficits.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The Government welcome Ireland’s effort to bring its fiscal deficit under control, and support the international assistance package currently being agreed to deliver stability.
Stephen Timms
The Chancellor used to speak of the Irish miracle as a shining example of economic policy making. Are there not, though, important lessons to learn from the misery that we are seeing in Ireland today? Is it not clear that simply increasing VAT, making large-scale public sector redundancies and cutting welfare does not add up to a successful path out of the global crisis?
Mr Hoban
Let me remind the right hon. Gentleman what he said about Ireland on 8 May 2007:
“The Irish economy has enjoyed a good deal of success over the past few years. The corporation tax regime has contributed to that, but there have been a number of other factors”.––[Official Report, Finance Public Bill Committee, 8 May 2007; c. 19.]
The truth is that the Irish economy, like our economy under the previous Government, had a banking sector that was poorly regulated and out of control. It is because we have tackled the legacy of the Labour Government that we are in a position to help Ireland.
Mr Edward Leigh (Gainsborough) (Con)
Given the misery that economies on the periphery of Europe, such as Ireland, are suffering from the imposition of a single currency throughout Europe, will my hon. Friend advise his European partners that any future plan should be motivated by what the markets demand, and not what grandiose politicians want?
Mr Hoban
My hon. Friend makes an important point. He may have read the shadow Chancellor’s remarkable statement last week, that the euro had had no impact on the problems in Ireland. It is important that the right mechanisms are in place to tackle the problems in the eurozone, and that those solutions are owned by the eurozone. That is why the permanent mechanism that will replace the financial stability facility will be a eurozone-only body.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
17. What plans his Department has to ensure greater transparency in remuneration in the financial services sector.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The Financial Services Authority has revised its remuneration code for disclosure rules to incorporate provisions in the EU capital requirements directive, CRD3, which comes into force on 1 January 2011. The directive requires firms to make narrative and quantitative disclosures on pay policy and practices. Those requirements are at the forefront of global practice and will help ensure greater transparency in remuneration in the financial services sector.
Gregg McClymont
In reply to my hon. Friend the Member for Sedgefield (Phil Wilson), the Financial Secretary suggested that the Government were united in their approach to banking reform. Am I to conclude from that that the Business Secretary speaks for the Government when he says that the Conservative party is a roadblock to banking reform?
Mr Hoban
I hardly think that a Government who have embarked on a programme of radical regulatory reform of the financial services sector, introduced the bank levy, and set up the independent banking commission to consider the structure of banking in the UK could be viewed by anybody other than the Labour party as a roadblock to reform.
Henry Smith (Crawley) (Con)
18. What estimate he made of the effect on public finances of the introduction of a graduate tax.
Stuart Andrew (Pudsey) (Con)
20. What discussions he has had with his international counterparts since the G20 Seoul summit on co-ordination of efforts to reduce Government deficits.
The Financial Secretary to the Treasury (Mr Mark Hoban)
At the G20 summit in Seoul in November, advanced countries committed to developing plans, which reflected their situations, to tackle their deficits and promote growth. The Chancellor has been actively involved in discussions with international and European counterparts since the Seoul summit. As was the case with previous Administrations, it is not the Government’s practice to provide details of all such discussions.
Stuart Andrew
Has my hon. Friend discussed with his counterparts the fact that the key to securing low interests rates for the long term is to take effective and decisive action on Government deficits?
Mr Hoban
My hon. Friend is absolutely right. We are very fortunate in this country. Because the Government took difficult decisions to tackle the deficit when we came into office, we are in a much stronger place now—consider the turbulence in the eurozone. The difficult decisions that we took ensured that we stepped back from the brink of bankruptcy.
Alison McGovern (Wirral South) (Lab)
Global action on regulating the financial services sector through groups such as the G20 is vital. The House of Lords Economic Affairs Committee recommended a pre-funded deposit insurance scheme. It said:
“The Government should move towards pre-funding of the Financial Services Compensation Scheme as soon as”
possible. Why has the Treasury turned its back on that important measure?
Mr Hoban
If the hon. Lady speaks to building societies, which are finding it difficult to lend at the moment, she will hear their concern about the amount that they pay towards the financial services compensation scheme. Contributing to a pre-funded scheme would add to that burden and reduce the ability of banks and building societies to lend to support the recovery.
Mr Peter Bone (Wellingborough) (Con)
Government Members, including me, believe that the Chancellor and his team are doing an exceptionally good job for the country. May I suggest another policy to reduce the deficit in this country? A freeze on our contributions to the EU would save us £22 billion over the next five years, which should be given back in tax cuts.
Kate Green (Stretford and Urmston) (Lab)
22. What his estimate is of the number of single-income families which will be affected by the decision to end child benefit for households with a higher-rate taxpayer.
Damian Hinds (East Hampshire) (Con)
T2. The anticipated provident societies and credit unions legislative reform order will bring great advantages to credit unions, including the ability to pay fixed interest on savings and to offer services to community groups, social enterprises and companies, but it has been rather a long time in coming. Will my hon. Friend update the House on the expected arrival date of that LRO?
The Financial Secretary to the Treasury (Mr Mark Hoban)
My hon. Friend takes a close interest in that matter as chairman of the all-party group on credit unions, a position he took over from the hon. Member for Bristol East (Kerry McCarthy). He is right that that LRO will bring significant benefits to credit unions. Following comments by the relevant parliamentary Committees that scrutinised the draft laid by the previous Government, amendments need to be made, and I hope to lay the amended regulations in late January or early February.
Chris Bryant (Rhondda) (Lab)
T4. The Chancellor of the Exchequer seems to take a particular delight in playing the role of Baron Hardup. May I say to him, in the nicest, most Christmassy way possible, that all his austerity talk provokes real anxiety in many of my constituents, who worry about their winter fuel allowance, the VAT increases in January and the major losses in construction jobs in the new year? May I encourage him to play, just sometimes, Prince Charming instead?
Jo Swinson (East Dunbartonshire) (LD)
While travelling on a gap year in New Zealand, one of my constituents had a nightmare experience when she was left with no access to money after her bank cancelled her card, despite her having informed it that she would be abroad. In an increasingly globalised world, will the Government consider whether banks can be made to offer a better service for UK customers living, working or studying abroad to avoid problems such as that faced by my constituent?
Mr Hoban
The hon. Lady makes an important point, and I am sorry to hear about the situation that her constituent experienced. It is important that banks ensure a good service for those travelling abroad, and I would encourage her to suggest to her constituent that she writes to the Financial Ombudsman Service to raise a complaint. However, I am sure that the banks will have heard what she said and take heed of her comments.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
What specific equality impact assessment did the Treasury carry out on the potential effects on women of the two-thirds reduction in Warm Front scheme funding next year announced in the comprehensive spending review?
Consumer Credit Regulation
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
Today the Government have published a consultation document on transferring consumer credit regulation from the Office of Fair Trading (OFT) to the new Consumer Protection and Markets Authority (CPMA). The Government announced the creation of the CPMA as part of their wider reform of the financial regulatory architecture in July, and committed to consult on the merits of transferring responsibility for consumer credit regulation to this new body.
The consultation document sets out the Government’s proposed approach of bringing the regulation of consumer credit into line with that of financial services generally. This proposal is part of the Government’s wider programme to reform financial regulation, to improve consumer protection and strengthen financial stability.
Copies of the consultation document have been placed in the Libraries of both Houses, and are available on the websites of HM Treasury and the Department for Business, Innovation and Skills.
European Union Finances White Paper
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I am today laying before Parliament the annual European Union finances White Paper “Statement on the 2010 EU Budget and measures to combat fraud and financial mismanagement” (Cm 7978). It is the 30th in the series.
The White Paper gives details of revenue and expenditure in the 2010 EU budget and covers recent developments in EU financial management and measures to counter fraud against the EU budget. It also includes updated details on the budget review, own resources decision, the UK consolidated statement on the use of EU funds in the UK and the European economic recovery plan and changes related to the entry into force of the Lisbon treaty.
Looking forward to future years’ budgets, and particularly in the current economic and financial climate, the Government remain determined to ensure better value for money in EU budget spending, to oppose unacceptable budget increases, and to push for improvements in EU financial management.