Oral Answers to Questions

Neale Hanvey Excerpts

Monday 13th May 2024 Commons Chamber

[Mel Stride]

I think the Government have already said they are not minded to pursue the scheme to which the hon. Gentleman refers, but that is not the same thing as saying that we do not take the issue extremely seriously. That is why we have extensive training provision such as SWAPs—the sector-based work academy programmes—and the WorkWell provision that we are rolling out, to which my hon. Friend the Minister for Employment has just referred.

[Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)]

6. What recent assessment he has made of the potential merits of providing compensation to women born in the 1950s affected by changes to the state pension age.

[The Secretary of State for Work and Pensions (Mel Stride)]

The ombudsman’s report has been laid before Parliament and it is under active and considerable consideration at the present time.

[Neale Hanvey]

A report in today’s Scottish Daily Express notes that seven in 10 members of the public support financial compensation for women born in the 1950s. If the Government will not act on the final report of the Parliamentary and Health Service Ombudsman, which recommended compensation, will they now listen to the voice of the people and provide the proper financial redress that the Women Against State Pension Inequality absolutely deserve and are entitled to?

[Mel Stride]

There are a variety of opinions as to what the outcome of the ombudsman’s report should be. There are the ombudsman’s recommendations themselves, to which some people take a counter-view while others believe that there should be more by way of payments. We are potentially looking at very large sums indeed. It is important, therefore, and only fair to those on all sides of the argument, that we take an appropriate amount of time to consider the report thoroughly, which the ombudsman has also invited Parliament to consider.

--- Later in debate ---

[Mel Stride]

My hon. Friend is right. The scheme is being rolled out in Greater Manchester, in parts of London, in Cambridgeshire and all the way to the Isles of Scilly and parts of Cornwall. It brings together healthcare support and work coach support to ensure that we do everything we can to help into work those who face barriers to work.

[Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)]

T3. It is an unavoidable fact that the United Kingdom has one of the lowest pensions in the developed world, and pensioner poverty is a very real issue. I meet constituents who are pensioners reasonably frequently, and all the increases that the Government have provided for them have been lost through taxation. For example, Peter’s private pension will be cut by £681 a year, while Mr and Mrs Clark’s modest private pension has been slashed by nearly 50%. They did the right thing and put away a little extra for their retirement; will the Government now do the right thing and correct the position so that they can enjoy it?

[Mr Speaker]

Order. May I just say to everyone that I have a lot of Members to get in on topical questions, and they are meant to be short and punchy? I really do need to get other Members in.

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

Neale Hanvey Excerpts

2nd reading
Tuesday 8th June 2021 Commons Chamber

[Guy Opperman]

Clearly, it is not possible to comment on specific future events, but Ministers are liable for the actions of civil servants, through vicarious liability, and we would expect regulators to take a similar approach and, putting it simply, to own the problems they are trying to solve. If that is a lesson learned from this sorry saga, in my humble opinion that would be a good thing. Clearly, it is for the FCA to take a good long, hard, look at itself, and other regulatory bodies, and decide how it will run itself going forward, with suitable input from Government.

[Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)]

Will the Minister give way?

[Guy Opperman]

I will not give way any more. I apologise, but we are trying to do this whole debate in 58 minutes. Please bear with me.

As the House will be aware, on 19 April the Economic Secretary to the Treasury provided a written ministerial statement on the Government’s approach to setting up a compensation scheme for London Capital & Finance bond holders who lost money following the firm’s collapse in 2019. LCF was an FCA authorised firm, which sold unregulated non-transferrable debt securities, commonly known as mini-bonds, to investors. Sadly, 11,600 bond holders lost around £237 million when LCF went into administration. For some investors that will have formed part of an investment portfolio, but for others it will have represented a significant proportion of their savings.

Following LCF’s collapse, the Economic Secretary to the Treasury directed the FCA to launch an independent investigation into its regulation and supervision of LCF. As we have discussed, Dame Elizabeth Gloster led the investigation and concluded that the FCA did not effectively supervise and regulate LCF. The LCF business model was, it is accepted, highly unusual in both its scale and structure. In particular, the firm was authorised by the FCA, despite generating no income from regulated activities. That allowed LCF’s unregulated activity of selling non-transferrable debt securities, known as mini-bonds, to benefit from the impact of being issued by an authorised firm. While other mini-bond firms have failed, LCF is the only mini-bond firm that was authorised by the FCA and sold bonds in order to on-lend to other companies.

In response to the regulatory failings detailed in Dame Elizabeth’s report and the range of interconnected factors that led to losses for bondholders, the Government announced two things: first, they would establish a compensation scheme, and secondly, they would accept all of Dame Elizabeth’s report, as did the FCA. It is, however, important to emphasise that the circumstances surrounding LCF are unique and exceptional, and the Government cannot and should not be expected to stand behind every failed investment firm. That would, with respect, create the wrong incentives for individuals and an unacceptable burden on the taxpayer.

Clause 1 of the Bill, which is the LCF measure, covers two key elements. First, it provides parliamentary authority for the Treasury to incur expenditure in relation to the scheme. Secondly, it makes a minor technical change that disapplies the FCA’s rule-making processes for the purpose of the LCF compensation scheme. The Treasury intends to use part 15A of the Financial Services and Markets Act 2000 to require the Financial Services Compensation Scheme to administer the scheme at speed on the Treasury’s behalf. The scheme will be available to all LCF bondholders who have not already received compensation from the FSCS and represents 80% of the compensation that they would have received had they been eligible for FSCS protection.

Around 97% of LCF bondholders invested less than £85,000 and will not reach the compensation cap under either the Government’s scheme or the FSCS. The Government expect to pay out around £120 million in compensation to around 8,800 bondholders in total and are committed to ensuring that the scheme has made all payments within six months of this Bill securing Royal Assent.

As colleagues will be aware, this is a two-measure Bill, the second clause of which concerns the Department for Work and Pensions and involves loans to the board of the Pension Protection Fund. Clause 2 amends the Pensions Act 2004 by inserting a new section that will give the Secretary of State a power to lend money to the board of the Pension Protection Fund.

The Pension Protection Fund manages the Fraud Compensation Fund, which pays compensation to occupational pension schemes that have lost out financially due to dishonesty. When set up in 2004 by the Blair Government, the PPF and the FCF did not envisage that pension liberation schemes were in scope for FCF payments. This clause will allow compensation to an estimated 8,806 individuals who have been defrauded following the pronouncement of the recent Court judgment in the Dalriada case.

Pension liberation fraud involves members being persuaded to transfer their pension savings from legitimate schemes to fraudulent schemes, with promises of high investment returns or access to a loan from their pension scheme before the age of 55 without incurring a tax charge. The Pensions Regulator has now placed professional pensions trustees in charge of the affected schemes. Those trustees are seeking compensation on behalf of scheme members through the Fraud Compensation Fund.

Following receipt of a significant number of applications, the Pension Protection Fund sought guidance from the High Court in a test case on which schemes should be eligible for the Fraud Compensation Fund. The Court judgment in the case of the Pension Protection Fund vs. Dalriada was pronounced on 6 November 2020, and the High Court concluded that such pension liberation schemes would be eligible, subject to meeting eligibility criteria. The Government have decided to fully accept the Court’s judgment on this and are committed to ensuring that all those who have been victims of pension liberation schemes are able to claim through the Fraud Compensation Fund. However, it is estimated that claims will exceed £350 million, which is far greater than the £26.2 million of assets currently held in the Fraud Compensation Fund, hence the requirement for clause 2 of the Bill and the action that the DWP and the Government are taking.

This is a necessary, urgent and important Bill which will ensure financial protection and fair outcomes for those falling victim in these particular circumstances. My hope and expectation is that the Bill will receive widespread support, and I commend its contents to the House.

--- Later in debate ---

[Mr McFadden]

I am grateful to my hon. Friend, and I do think it ill behoves any Member, given the scale of the losses and given the necessity of the Government to bring in this Bill to compensate people for their losses, to profit from this either directly or indirectly. I think that should be clear to all of us.

The Government are legislating on this because of the litany of regulatory failures set out in the report on this issue carried out by Dame Elizabeth Gloster. These failures included failures to respond to repeated warnings from investors and potential investors, LCF repeatedly running promotions implying its products were regulated by the FCA, and failures of communication between different parts of the FCA, all in the end leading to this collapse and financial loss. Had the FCA acted earlier, far fewer people would have invested through this firm, losses would have been lower and the taxpayer would not be faced with the £120 million we are talking about today.

[Neale Hanvey]

Will the right hon. Gentleman give way?

[Mr McFadden]

I will give way once more.

[Neale Hanvey]

I would like to ask the right hon. Gentleman’s view about a couple in my Kirkcaldy and Cowdenbeath constituency who invested £10,000 each—or £20,000 in total—and did so because the FCA backed the scheme. They feel that the real responsibility lies with FCA and the derogation of its responsibility in ignoring warning signs, while many responsible lenders such as them have lost money they can ill afford to lose. Does he not find it, as I do, a bit rich for the Minister now to say that the Government cannot back every scheme when actually the regulator was at fault in encouraging other people, as he has just said, to invest in that scheme?

Universal Credit: Court of Appeal Judgment

Neale Hanvey Excerpts

Thursday 25th June 2020 Commons Chamber

[Will Quince]

I thank my right hon. Friend for his question. He is a firm champion of universal credit and the benefits of it, and I certainly join him in paying tribute to all the staff at Harlow jobcentre who have done incredible work during this most difficult and unprecedented time. He raises an important point about childcare. One of the fundamental principles of universal credit is that work should always pay. That is why, under universal credit, childcare is at a higher rate of 85% as opposed to 70%. I will look at the case that he raises in detail and meet him at our earliest possible convenience.

[Neale Hanvey (Kirkcaldy and Cowdenbeath) (SNP) [V]]

While I welcome the Government’s decision not to draw this matter out further, it seems that it is always someone else’s fault. This week in the Court of Appeal, the Department could not offer a single reason for its flawed and, in the words of Lady Justice Rose, “irrational” approach to universal credit’s monthly assessment period. This is not the first time that this Government have been found wanting, only to be dragged through the courts to do the right thing. If they will not tell the courts, the Minister must advise the House: what exactly was their alleged defence this time?

[Will Quince]

I gently suggest—[Interruption.]—as my right hon. Friend the Member for Forest of Dean (Mr Harper) says from a sedentary position, that the hon. Gentleman reads the judgment, because the Court of Appeal accepted our interpretation of the universal credit regulations. Nevertheless, we accept that there may be people who face budgeting pressures, and that is why we are committing to take this action.