Building Societies Act 1986 (Amendment) Bill

Debate between Natalie Elphicke and Bim Afolami

Committee stage
Wednesday 7th February 2024 Public Bill Committees

[Bim Afolami]

Exactly—an auspicious year for me.

The Bill amends section 7(3) of the 1986 Act to exclude three specified sources of funding from the 50% wholesale funding limit for building societies. By excluding these sources of funding from the wholesale funding limit, building societies will be able to raise additional wholesale capital, which strengthens their arms to compete with retail banks while promoting competition within the financial services sector.

[Mrs Natalie Elphicke (Dover) (Con)]

My hon. Friend the Member for Mid Norfolk mentioned Northern Rock, which was a bank, not a building society, when it failed. Does the Minister agree that the provisions being brought in will allow greater access to capital so that building societies can flourish, while keeping in place the checks and balances that have made building societies so much better at being able to respond to the financial crisis than we saw with some of the banks?

[Bim Afolami]

It is worth explaining the dynamic, because it is not straightforward. In essence, the point of the Bill is to level the playing field between building societies and retail banks in this key area. Resilience, in terms of capital, will not be lower for building societies than for any of the retail banks with which we are all very familiar. That is the first point. The controls that are applied to retail banks by sophisticated people with sophisticated mechanisms will have the same capital requirements as building societies—so I agree with my hon. Friend.

Building societies will still be required to hold specified sources of funding for regulatory purposes. That is the key point. The reason we have the capital limits is that, if a shock happens—however rare or unusual that might be—we need to make sure that there is enough of a buffer of capital so that the building society or, indeed, the retail bank does not go bust. Over the last 15 years, we have been through a huge programme of reform to broadly increase the levels of capital by many multiples of what was required in the 2000s, so that that does not happen. Building societies will adhere to that in the same way as our retail banks. Moreover, building societies will still be required to ensure that at least 50% of their funding comes from their members—again, that is a critical way in which buildings societies are different from a typical retail bank—which ensures that the Bill has no impact on building societies’ important and unique ownership model.

Secondly, the Bill amends the 1986 Act to allow the option of real-time virtual member participation at building societies’ meetings, which, as everybody can appreciate, now happens across the corporate sector—it does not happen in Parliament, but that is for another day. This amendment can help to modernise the day-to-day practices of building societies, promoting wider membership engagement by making such meetings more accessible to a greater number of members. That matters particularly for building societies, because they have a membership model; the point is that members find them accessible and know what is going on.

Given that members can do things digitally and more flexibly in other areas of their lives, this small measure can have quite a big and positive impact on participation, but it is worth stressing that the decision on whether to hold hybrid meetings will be up to the members of each individual building society; the Government are not imposing the requirement for endless Zoom calls. If that is what people want, they can have them—they just have to vote in favour of making the relevant changes to the society’s rules by special resolution, which, if I recall my company law properly, requires passing a 75% threshold.

Thirdly and finally, the Bill will provide the Treasury with the powers to further align the constitutional provisions in part 2 of the 1986 Act that concern common seals and the execution of documents with modifications to company law. I do not need to explain to the Committee that common seals have sort of fallen out of general usage—although I have often fancied having one, because I think it would be rather fun to stamp various documents, rather than sign them. But that is now the past and we are bringing building societies into the modern day, which is positive.

Overall, the Bill will help to deliver important amendments to the Building Societies Act 1986 by modernising the legislation so that building societies can compete with retail banks, better serve their members and, to be perfectly frank, better serve the communities they are set up to support. The Government are fully committed to ensuring that all subsequent secondary legislation, which will be subject to parliamentary timetabling, is enacted as soon as possible. I commend the Bill to the Committee.

Living Standards

Debate between Natalie Elphicke and Bim Afolami

Thursday 1st February 2024 Westminster Hall

[Bim Afolami]

I thank the hon. Member for that point. I have not seen the report, but, to take what he has said as read, the reason why, since the financial crisis in 2008-09, economic growth—trend growth—in all the western world, particularly in Europe, is down on where it was before the financial crisis, is due to the financial crisis. Indeed, it was this Government who had to spend years from 2010 clearing up the mess left by the Labour party when they were in office. That is the core explanation for the difference that the hon. Member describes.

Thanks to the efforts of the Bank of England, supported by the Chancellor, inflation is less than half of its peak, falling to 3.9% in November 2023—the lowest rate in more than two years.

But I do not deny that the outlook remains challenging. Nor do the Government. That is why we announced further action in the autumn statement in November to support the most vulnerable. In April, we will raise local housing allowance rates to the 30th percentile of local market rents. That will make 1.6 million low-income households better off, with an average gain of £800 in the 2024-25 financial year.

We will also uprate all working-age benefits in full for 2024-25 by the September 2023 consumer prices index figure of 6.7%. Now, why am I being so precise about that? Because that is three percentage points higher than forecast earnings for ’24-25. This will help to support the most vulnerable while inflation continues to fall; 5.5 million households on universal credit will gain an average of £470—almost £500—in the ’24-25 financial year.

We are maintaining the triple lock, too, to support our pensioners, whose hard work helped to build this country. They are on fixed incomes and need to be looked after. The basic state pension, new state pension and pension credit standard minimum guarantee—we need to find a better description of that because it is very wordy—will be uprated in April 2024 in line with wage growth of 8.5% in the usual reference period. Let me give a sense of what that means in cash terms: in the coming financial year of ’24-25, the full yearly amount of the basic state pension will be £3,750 higher than in 2010. To put it more simply, that is about £1,000 more than if it had been uprated in line with prices alone. For individuals needing further support, local authorities in England continue to provide it through the household support fund, which is backed by £1 billion of funding. That means that, from 2022 until 2025, total support to help households with the cost of living will be over £100 billion, which is roughly an average of £3,700 per household.

What is the principle here, because I know that I have just given the House a blizzard of figures? The principle is that this Government believe that the people of this country deserve to keep more of their hard-earned money and that, where we can, we should reduce their burdens, as long as it is fiscally responsible to do so and as long as we are supporting public services as we need to. This is not ideological; it is because it will reduce the cost of living and help to grow our economy. That is why, from the end of January 2024—it is 1 February—millions of employees across the country will see their main national insurance contribution rate cut from 12% to 10%. That means that the average worker on £35,400 will receive an annual tax cut of over £450 a year, and we are also cutting national insurance rates for the self-employed. This tax cut is worth over £9 billion a year, which is the largest ever national insurance cut to employees and the self-employed. I repeat: this helps with the cost of living and helps to grow the economy.

We are also delivering on our commitment to end low hourly pay. Although they may not have agreed with everything I have said, I am sure that Members across the House will support that. From 1 April, the national living wage will increase by almost 10% to £11.44, with the age threshold also lowered from 23 to 21 years old. That represents an increase of over £1,800 to the annual earnings of a full-time worker on the national living wage, and is expected to benefit more than 2.7 million low-paid workers.

These actions must be underpinned by a robust and growing economy. Only a healthy economy can spread jobs and opportunities through the country. Only a healthy economy allows the Government to make the long-term decisions needed to strengthen it. Growth is generated by providing individuals with the freedom to learn, the freedom to innovate and the freedom to succeed. That is why it matters so much to create the right environment for the private sector to thrive. That means prioritising the strengths of the UK and focusing on the biggest opportunities for growth.

How have we done that? We did that in the autumn statement, in which the Government set out plans to drive growth and productivity that the independent OBR has estimated will have increased business investment by £20 billion a year in a decade’s time. The OBR also estimated that the autumn statement would increase real GDP by 0.3%. That is one fiscal event! Key elements of the package include a new £2.5 billion “Back To Work Plan”. In combination with measures from the spring Budget last year, the OBR thinks that will add around 200,000 people to the labour market.

The hon. Member for Glasgow South made an interesting point about immigration and numbers and people and population. What I would say to him is that although one can always have a debate about the right level of migration—to some degree, it depends on the nature of an economy and what gaps need filling in the workforce—I think we can all agree that the primary aim of any Government should be to improve the prosperity of the people in the country by strengthening the economy. However, what we should not do is adopt the ideological position that it is inherently good to have high levels of migration, because we need to make sure that we have the right level for what our economy actually needs. Indeed, that should be the focus of our debate.

Making full expensing permanent represents a tax cut of over £10 billion a year for companies, meaning that they can invest for less—something that more than 200 businesses and trade bodies have called transformational for business investment. That is another example of the Government taking a long-term approach. The hon. Member for Rutherglen and Hamilton West playfully suggested that there are only weeks left of this Parliament, but we still have almost a year to go. I would not pre-judge the timing of any election, but I do think his suggestion may be a little premature. What I will say is that politicians often get accused of doing things for the short term—indeed, sometimes they do—but nobody can accuse this Chancellor and this Government of acting in that way.

Full expensing, a tax cut for businesses to improve their productivity over the long term, is worth about £10 billion a year. This is one of the most transformational long-term measures that will improve our country’s potential growth rate. That is a very good example of the measures I have been talking about. It underpins a strong, growing, robust economy, which allows us to provide the support for the vulnerable that I described at the start of my speech. Indeed, we have provided over £4.5 billion in funding for the UK’s strategic manufacturing sectors.

It is important to note that we are talking about the entire United Kingdom, not just London and the south-east. That is why we used a combination of local growth policy and national economic policy, taking into account the inequalities that exist at all levels of decision making—I do not deny that—to underpin our approach to tackling them. According to the Department for Levelling Up, Housing and Communities, the UK Government provided a package of cost of living measures worth £7 billion in Scotland, more than £3.5 billion in Wales and more than £2 billion in Northern Ireland to help households and businesses weather the impact of soaring energy prices between 2022 and 2024.

I am reminded of the point made by my hon. Friend the Member for Dover that a single Government Department should be responsible for housing and household costs. I do not think that we will do another reorganisation of government, but Ministers and my officials in the Treasury work very closely with DLUHC. I am happy to hear any ideas from her about how we can do that more effectively, but it is important that we do not spend too much time working out how to reorganise Departments, and that we focus on the issues at hand.

[Mrs Elphicke]

I am grateful to the Minister for addressing that issue directly, but does he acknowledge that the timeframes for the investment and spending settlements are not within the control of the Treasury, but within the control of the regulatory frameworks that are in place? The ability for either DLUHC or, indeed, the Treasury to bring them all together in a meaningful way is currently limited. It was in that spirit that I hoped he would reflect on the impact of all these things on households, and on how they build up for the individual household purse.

[Bim Afolami]

I thank my hon. Friend for that remark. I am very happy to think about and consider more deeply how we make sure that—whether it is a regulatory impact, is at national policy level or is legislation made in this House—we focus on achieving the right outcomes for the right people at the right time. I can give her that commitment today.

All households in Scotland, Wales, Northern Ireland and England were provided with support, but the poorest households gained the most. The average level of support was most generous in the devolved nations, compared with the UK average. Alongside that, we have announced a comprehensive levelling-up strategy that not only addresses the immediate challenges but lays the groundwork for sustained prosperity. As part of that, we are continuing to support local growth through funds such as the £2.6 billion UK shared prosperity fund and the £3.2 billion towns fund. The shared prosperity fund empowers local leaders who know their areas best to take the action that best meets the needs of their local labour markets. In addition, the refocused investment zones programme will catalyse high-potential knowledge-intensive growth clusters across the UK in our key future sectors, bringing investment into areas that have traditionally underperformed economically.

The three watchwords of the hon. Member for Glasgow South were prosperity, fairness and resilience. He expressed uncharacteristic pessimism about the idea that they would be addressed by this Government or in the coming weeks and months of this Parliament, but I want to make the case for why we are doing that. On prosperity, I mentioned full expensing, tax cuts in national insurance and various other measures that support all regions of the UK. They are designed to build long-term prosperity in our economy. They deal with our economic weaknesses and build on our strengths.

On fairness, I think I have comprehensively set out today the support that is being given to the most vulnerable —indeed, to a majority of households. That is done in order to be fair.

I should not stray out of scope and go into other policy areas, but the fundamentals for resilience are having a robust, sustainable economic growth strategy that, over time, increases the growth rate of our economy. Upon that foundation everything else is based.

In conclusion, these measures are a clear demonstration of the Government’s unwavering commitment to promote living standards and support households up and down the country. We firmly believe that the key to a prosperous future lies in creating opportunities for everybody. The boost to the national living wage and the historic reduction in national insurance are powerful tools in driving employment and improving living standards. By putting more money into the pockets of hard-working people, we are not just bolstering their financial wellbeing but fuelling economic growth.

As always, we need to balance support for households with fiscal sustainability. As I have said, the economic position remains challenging. Inflation has more than halved, but it remains too high: it is not at our 2% target. We are not complacent about that, which is why the Government remain steadfast in our support for the Bank of England as it acts to reduce inflation.

Our long-term objectives are crystal clear—increasing prosperity, improving the long-term growth rate of our country, improving our resilience, levelling up every corner of this country and fostering sustained economic growth. It is through these robust economic policies that we lift communities, create opportunities and enhance the quality of life of all our citizens.

Our commitment to growth is not about numbers in a spreadsheet. It is not for the short term; it is for the long-term, tangible improvements in living standards that result from a thriving economy. We continue to keep all options under review as we take tough decisions to drive down debt and inflation and increase our prosperity. These complex issues affect all our constituents, wherever we call home. I thank all Members for their constructive contributions.