Draft Capital Requirements (Amendment) (EU Exit) Regulations 2018 Draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Debate between Richard Bacon and John Glen

Wednesday 12th December 2018 General Committees

[John Glen]

I acknowledge how it sounds, but this is a regulatory change to enable the discretionary power. The Government’s intent is to make prudential assessments in a non-politicised way.

[Mr Richard Bacon (South Norfolk) (Con)]

May I say how delighted I am that the Government are taking an approach that allows discretion? That was one enormous problem at the time of the financial crash, which was also a sovereign debt crisis. The hon. Member for Stalybridge and Hyde forgot to mention who was in charge at the time. That crisis was exemplified perhaps most clearly by Gordon Brown standing outside the shiny new Lehman Brothers office when it opened, shortly before the crash. The capital regime was so inadequate at the time under that regime—

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[Mr Bacon]

Yes indeed. Part of the problem with the sovereign debt crisis—perhaps the biggest problem—was the equal treatment of lots of different kinds of sovereign assets, such as Greek Government bonds, when in fact they were nothing like equal. That led to the distortion that helped to cause the problem.

[John Glen]

The Government and regulators are clear on the imperative to work closely with industry to ensure that change is not disruptive for firms. UK regulators will be given the ability to phase changes in over the next two years. We will treat all third countries similarly, which means, to answer the point made by the hon. Member for Glasgow Central, continuing to co-operate through international crisis management groups to plan and resolve issues with cross-border firms. The UK’s participation, and enthusiasm to participate, in such forums will be undiminished. Nothing in the draft regulations will change how the UK co-operates with third countries.

The hon. Member for Stalybridge and Hyde raised the bank recovery and resolution SI and concerns around the appearance of disengagement. There is no intention whatsoever for the UK Government or regulators to be isolated in any way. We will continue to participate. However, these steps are necessary to domesticise our regulations in the context of a no-deal scenario.

The hon. Member for Glasgow Central has on several occasions, and perfectly sensibly, mentioned the regulatory burden and additional costs. She is right to draw attention to the £1.7 million assessment for the capital requirements SI and the £400,000 for the bank recovery SI. I point out to her that those are one-off familiarisation costs. For the 1,000 companies she mentioned, they are one-off costs of around £1,700 and £1,200 for some of the very biggest institutions. I accept that it would be desirable for them to not have those costs, but it will be necessary in a situation in which we do not secure a deal.

Draft Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018

Debate between Richard Bacon and John Glen

Monday 19th November 2018 General Committees

[John Glen]

The Government believe that claims management companies fuel speculative claims for redress, that consumers struggle to understand the services that they offer, that there is a lack of transparency around how they operate, and that they offer poor value for money.

[Mr Bacon]

That is an answer to a question, but not the question, “Why aren’t they just banned?” I mentioned not the ICO, but the Solicitors Regulation Authority—

[John Glen]

I will come on to that.

[Mr Bacon]

Good, because I would still like to hear an answer to whether, in making the phone call, the person, who plainly has my name and number and who refers in the opening sales pitch of the conversation to an accident that did not take place, is committing a crime now, or will be under the new regulations.

[John Glen]

I will move on sequentially through the points made.

On the question about why the Government are not banning all cold calls, which I think is behind all this, we are determined to tackle CMC cold calling and pensions cold calling, but a balance needs to be struck between ensuring that consumers are adequately protected and providing the right conditions for the legitimate direct marketing industry to operate. I recognise that there is a debate about the extent of the coverage and which sectors should be covered, but we took a view about what should be included at this time so that we could make progress and lay the order. We are actively prepared to consider further sectors that should come under the order.

The hon. Member for Oxford East raised the issue of the interim regime’s funding. The FCA is making a one-off levy from April 2019, and it will continue to collect fees from industry. Having recently closed a fees consultation, it will release a policy statement later this year about the funding mechanism for that transition period.

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[Mr Bacon]

On the Minister’s previous point, when he said that calling would be an offence, he did not say whether it would be a criminal or a civil offence. Could he do so?

[John Glen]

It would be a criminal offence, but I will be happy to clarify the situation exactly in a letter to my hon. Friend subsequently. I think that I have covered the point about the SRA and regulatory arbitrage.

A point was raised about other sectors—this point came through a lot in the passage of the main legislation —by the hon. Member for Garston and Halewood. The Government are actively examining the extent of the coverage. According to my initial statistics, in 2017-18 financial products and services claims made up 79% of CMC turnover and personal injury made up all the remaining turnover. A point that has often come up is about coalminers. If they do not already come under personal injury, we will be able continually to observe, and possibly extend, coverage, based on whether a discrete additional category is needed.

In relation to the next steps on this regulation, if the Committee approves the order today, the regulation will transfer to the FCA on 1 April 2019. The FCA regularly updates its rulebook. It is a robust regulator, which I have frequent dialogue with, and is subject to scrutiny.

Armed Forces Pensions

Debate between Richard Bacon and John Glen

Tuesday 16th October 2012 Commons Chamber

[John Glen (Salisbury) (Con)]

The purpose of calling this evening’s debate is to bring to the Minister’s attention a group of former spouses who, due to miscalculations in their pension provision by the Ministry of Defence, now face very uncertain futures. It seems that there is a group of 126 women who have been affected by the mistake. I believe it right and proper for the MOD now to take the steps necessary to ensure that this does not happen again and to compensate the individuals affected, particularly where their financial situation and life circumstances have been substantively impaired.

Three constituents came to see me in March this year. In accordance with their wishes, I shall not be disclosing their names to the House. However, their experiences are fairly representative of the group of women affected. One individual, having made the difficult decision to divorce, asked for the details of her former husband’s pension pot from the SPVA—the Service Personnel and Veterans Agency, which administers military pensions—in March 2010. Her husband’s pension was in fact already in payment. The SPVA gave details and confirmed, both on the telephone and in writing, that my constituent would be able to take her pension from the age of 55 with no actuarial reduction being applied. Therefore, in April 2010 the judge was able to finalise her divorce, relying on the information provided by the SPVA, which had been confirmed in writing.

The pension for my constituent came into payment and she undertook a number of financial obligations, feeling certain of a definite and defined monthly income payment for the rest of her life. She bought a property and undertook renovations on it, as she sought to start her new life. It has since been discovered that in November 2010 the MOD was contacted by the Department for Work and Pensions and made aware that an error had been made in the way it had interpreted DWP legislation. It meant that actuarial reductions should have been applied to those former spouses who took a pension at the age of 55. However, none of the affected spouses was informed of the error, and their pensions continued to be paid from November 2010, when the MOD was first notified that an error had occurred, to spring 2012, when the MOD communicated the error to those affected and my constituent first approached me.

On 1 March 2012, 16 months after the mistake first came to light, my constituent was notified by phone that she would receive a reduction in her pension of over 40%, which was to take effect in three months’ time. A letter confirming that arrived a few days later, on 5 March. The stress and worry must have been unimaginable. Illness followed and she lost half a stone very quickly. She sold her car, as she was so worried about the reduction in her income and felt that she had to downsize her lifestyle rapidly. Obviously she also felt under an enormous degree of strain.

Then, two months later, on 13 May 2012, my constituent received a further communication from the SPVA informing her of another mistake, which meant that she would receive more than the reduced amount but still a 16% reduction on the amount on which her divorce settlement had been based, from which she had been receiving payments for the previous 18 months.

I am sorry to say that that individual is not an isolated example. A constituent of my hon. Friend the Member for South Norfolk (Mr Bacon), who is in his place this evening, had a similar experience. She took actuarial advice based on advice from the MOD before finalising the divorce, and acting on that advice, the judge awarded a clean break settlement comprising 40% of her former husband’s pension pot. On the basis of that guaranteed income, she secured a mortgage. She now finds herself with a 20% reduction in her income due to the miscalculation and is looking at losing her house. She has been in hospital for emergency operations and has been treated for stress, and she is now on sleeping tablets.

[Mr Richard Bacon (South Norfolk) (Con)]

I am grateful to my hon. Friend for raising this subject and for mentioning my constituent. Does he agree that although one can understand that the principles of good administration require that public authorities such as the Ministry of Defence and the SPVA do not make irregular payments, they also require public authorities to be held to their promises, especially when they have created a legitimate expectation upon which people have acted, as in this case? Does he therefore agree that the right route in these circumstances is generous compensation?

[John Glen]

Absolutely. I fully endorse what my hon. Friend says, and I will come on to some specific points to which I hope the Minister will respond.

In what is an exceedingly traumatic time for anyone—going through a divorce and facing up to a new life—it is absolutely imperative that any agency of a Government Department gets the facts right first time, particularly when dealing with issues that have painful and far-reaching implications. My constituent has told me that since the mistakes have been known, the SPVA, to its credit, has done its best to provide as much information as it can, for which she is sincerely grateful. Information is one thing, but we now need action, leading to justice.

The bottom line is that former husbands and wives, the courts, actuaries and mortgage companies all relied on the information provided to them by the MOD. They had no reason to believe it to be in any way incorrect, particularly in my constituent’s case, in which the SPVA was asked directly whether there would be an actuarial reduction if she took her pension at 55. The SPVA wrote back in black and white on 6 April 2010 to say that that would not be the case.

The mistakes have had serious repercussions for a number of divorce settlements, which were decided on the basis of erroneous information. That means that the lifestyles that the judges thought it fair for both parties to have after the divorce are now not sustainable. In most cases of a so-called clean break divorce, the court will not hear the divorce case again, so the former wife—it usually is the wife—has no legal recourse. It may be possible to go back to court under ancillary relief proceedings to re-examine the finances, but the former husband may have to agree to that. Even if a court agreed to a rehearing, which is expensive in itself, many husbands would not, quite rationally and understandably on one level.

I have figures provided by an actuary from Actuaries for Lawyers, specialising in armed forces pensions, who has estimated what my constituent’s loss will be over her expected life span. I would be happy to let the Minister see those figures, and the actuary himself would be happy to meet him and representatives of the relevant agency in the Department to explain how he arrived at them.

This evening, I would like to ask the Minister a number of questions. When exactly was the mistake made? Who notified the SPVA of the mistake? Who is accountable for it? I do not wish to have a witch hunt, but as yet I have not received a satisfactory account of why the mistake was made, and I am not yet confident that it will not happen again. I also want to know what actions the Minister and SPVA officials have taken, or will take, to ensure that there is no recurrence of the same mistake.

My most pressing question is why it took so long for the MOD to contact those affected by the error. There was a 16-month window from when the mistake was discovered to the point at which those affected were contacted. That wait was unacceptable. The strategic defence and security review has been completed and, from my recent Defence Committee experience, I know that many complex changes have taken place within the MOD, but the SPVA still had a duty of care to get things right. That is its job. The argument that it “had a lot on” cannot be used.

As I have tried to stress, this error has had a huge effect on the victims. Some have become ill, and chronic illness has ensued. Some have found it hard to cope with the paperwork involved as they try and get to the bottom of what has happened. Some are facing the risk of repossession. Many have committed themselves to expenses that they cannot now maintain, or would not have entered into had they known what was going to happen. Many face adjustments to their living arrangements that they would not have had to contemplate, had their settlements been agreed on the correct basis.

I cannot do justice tonight to the misery and upset of so many families, but I hope that the Minister will reflect fully on the circumstances of my constituent and others. I want him to give a categorical assurance that compensation will be awarded, not only to those who are able to challenge this decision, through me or other MPs, but to the whole group of women involved. My constituent was awarded the well-meant but token amount of £250 to cover the “inconvenience and uncertainty”, in a letter dated 13 September 2012. However, not everyone has been given that. Why not? Did she receive it just because she was able to pursue the MOD? Some others have not been strong enough to do so, perhaps because they have been ill or simply not as persistent. There is a principle at stake here. The MOD made a mistake and the miscalculations directly affected the choices made by this group of women and their former partners.

I am aware, from previous correspondence I have had with the MOD on this issue, that a hardship fund is available to those in need. That is welcome, but it does not address the real issue, which is one of justice. The MOD ought to honour the assumptions made by the court, which decided on what it thought to be a fair and just distribution of assets based on figures given to it by the SPVA. That decision has now been compromised through errors made not by the individuals concerned but by the MOD.

If we assume an average shortfall of £50,000 per person over their lifetime, we find that the MOD would need to find approximately £6 million in compensation. Given the lifetime of service that those spouses have given through supporting their husbands and, in some cases, forfeiting their own chances of a career through the frequent relocations necessary for many service households, I hope that the Minister will order full and complete compensation from the hardship funds. That should include all reasonable legal costs, and it would be helpful if the recoverable costs could be defined.

The Minister should also take whatever steps are necessary to establish where the error was made and to ensure those responsible are retrained to make certain that this does not happen again. This Government have taken great steps with the military covenant during their time in office, but this matter tests both the letter and the spirit of the covenant. I have the highest personal respect for the Minister. He has been in post for only just over 40 days, but he has already cultivated widespread respect among many veterans’ organisations. I now look forward to hearing his sympathetic and effective response.