Health and Social Care Levy (Repeal) Bill

Richard Fuller Excerpts

2nd reading
Tuesday 11th October 2022 Commons Chamber

[The Economic Secretary to the Treasury (Richard Fuller)]

It is a pleasure to close this debate on behalf of the Government. I thank all hon. Members for their contributions to this relatively short debate. I think it is fair to say that none of us came here expecting to find a perfect consensus, but it was rather pleasing to hear the measure welcomed by the Opposition spokesperson, the hon. Member for Ealing North (James Murray), the SNP spokesperson, the hon. Member for Gordon (Richard Thomson), the Liberal Democrat spokesperson, the hon. Member for Richmond Park (Sarah Olney), and the hon. Member for Glenrothes (Peter Grant). I thank all those Opposition Members for their support.

I thank my hon. Friend the Member for South Suffolk (James Cartlidge) and my long-standing hon. Friend the Member for Macclesfield (David Rutley) for their speeches and my hon. Friends the Members for Winchester (Steve Brine) and for Salisbury (John Glen) for their interventions. If there was one message from the four of them, it was on the importance of fiscal responsibility. That was heard loud and clear, and it has been resonated by the Chancellor again and again, including today. Truly, it is the essence of conservatism, as my hon. Friend the Member for South Suffolk said. I noted what my hon. Friend the Member for Macclesfield said about the Treasury working more closely with the OBR and about the engagement requested by the Chair of the Treasury Committee. I assure him that the Treasury team will engage as he has suggested.

This has been a serious debate for the most part. It looked like it was getting into levity at one point, when the hon. Member for Arfon (Hywel Williams), who unfortunately is no longer in his place, volunteered to be a member of the anti-growth coalition. He said it was important that there was a free lunch. The hon. Member for Gordon spoke about not joining a club and invoked Marx, although not the Marx who was the favourite of the former Opposition spokesperson on finance.

At times, there were clear points of ideology in respect of the plan. It is clear that the purpose of the Chancellor’s growth plan is to improve lives across the country over the long term. Growing the economy must be our guiding mission, and with this Government it is. We will do so through lower taxes, through improved infrastructure, by supporting skilled employment, by removing barriers to investment, by getting the housing market moving, by making Britain an even better place to do business and by ensuring that people who earn money keep more of it so that they can make their own decisions—that includes our businesses.

I heard from the Opposition spokesperson that their plan comprises two aspects. First, it is the Government—a Labour Government—who should decide the right way to achieve growth in this country, rather than the wealth creators and businesses. Labour wishes to make those decisions on behalf of all of us. Many of us on this side of the House know where that sort of central planning ends up.

Secondly, those with the broadest shoulders should bear the burden. I just warn hon. Members to measure how broad their shoulders are. My fear is that it is not those with broad shoulders but anyone with shoulders who bears the burden. My point is this: the starting position for Labour’s plan is that this year, 2022-23, those in the top 1% of the income distribution are estimated to receive 13% of all income, but already pay 30% of all income tax liabilities. Those in the bottom 50% of the income distribution are estimated to pay only 8.3% of all income tax. When Labour says that it wants to fund its plans through general taxation, it is not looking for the 1% to pay; it is looking for people on average and low incomes to pay. The Conservative party does not think that is the right way to achieve growth.

[Peter Grant]

Will the Minister give way?

--- Later in debate ---

[Richard Fuller]

I will come to the hon. Gentleman if I have time.

The Liberal Democrat spokesperson gave a very good speech and raised important broader issues. She welcomed the measure and spoke about the costs that have been paid by people and businesses—she gave the figures £2.5 billion and £3.8 billion. That underlines the important contribution this measure will make by putting money back into the pockets of households as they face the winter crisis and into the hands of businesses as they make their investment decisions.

The hon. Lady kindly spoke about her past as an accountant—not everyone would necessarily volunteer their past as an accountant. She spoke about some of the disruption there has been. I assure her that I have spoken, as has HMRC, to payroll software companies to assess what the level of disruption has been and whether this additional change will cause further disruption. In my conversations with them, they have said that there have been minimal costs to date and that the reversal will have minimal costs for them. That is just a selection of payroll software companies—there are others—but I can give her some assurance that there has perhaps been less disruption than she feared.

[Sarah Olney]

I thank the Minister for that assurance, but the point I was making was not so much about the technical implementation; I totally take his point that it is a software change. The point I was making was more about headcount forecasts and how many staff businesses can afford to take on. Changing the national insurance contribution that businesses make has a material impact on those forecasts and will have had an impact on how many new jobs have been created.

[Richard Fuller]

That is an interesting point, and it probably is worthy of further investigation. On the day when we have announced that the country has more vacancies than unemployment, and unemployment is at a long-term low, one would think that that impact has not been significant, but it is an issue that is worthy of further investigation. The other point that the hon. Lady made about the impact that hospital discharges may be having on social care—she talked about the hospital in her constituency—is a relevant one, and I am sure that it will be taken up by my right hon. Friend the Secretary of State for Health and Social Care.

The hon. Member for Liverpool, Riverside (Kim Johnson) asked, as others did, whether the changes to the levy will change the funding previously announced. I can assure her that the levy change makes no difference to the funding outlined.

Other points were made, and we will have further discussions in Committee. My right hon. Friend the Chief Secretary to the Treasury made the point that the reversal of the levy is part of a much greater sum. Above all, it is about achieving the sustainable growth that this country needs and deserves. That is our mission as a Government, and it is the purpose of the Bill. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).

Further proceedings on the Bill stood postponed (Order, this day).

Health and Social Care Levy (Repeal) Bill (Money)

King’s Recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Health and Social Care Levy (Repeal) Bill, it is expedient to authorise:

(a) the payment of sums by the Secretary of State out of money provided by Parliament to His Majesty’s Revenue and Customs for payment into the National Insurance Fund, and

(b) the payment of sums out of the National Insurance Fund into the Consolidated Fund.—(Amanda Solloway.)

Question agreed to.

Oral Answers to Questions

Richard Fuller Excerpts

Tuesday 11th October 2022 Commons Chamber

[George Freeman (Mid Norfolk) (Con)]

8. What fiscal steps he is taking to support research and development.

[The Economic Secretary to the Treasury (Richard Fuller)]

At the 2021 spending review, the Government announced an increase in public expenditure on R&D to £20 billion a year by 2024-25, including funding for association to EU programmes.

[George Freeman]

I thank the Chancellor and his team for making the Treasury a growth Department. Do they agree that innovation-led growth is particularly important if we want to drive up productivity, competitiveness and inward investment, and that our high-growth sectors such as space, agritech and fusion have a big role to play? Will the Economic Secretary specifically reassure those in the R&D community that he will not be tempted to reduce the allocation for Horizon or for science and research in the comprehensive spending review? That would reassure the markets.

[Richard Fuller]

Very few Members can look back on a track record of commitment to R&D as significant as that of my hon. Friend, both as a Minister and as a Back Bencher. I am happy to confirm to him that we will abide by the spending review 2021 decisions, and that that includes funding for core Innovate UK programmes, for association to Horizon Europe and for the Advanced Research and Invention Agency.

[Valerie Vaz (Walsall South) (Lab)]

The Minister needs to be much more specific about the Horizon Europe programme. Is he aware that the Nobel laureate Sir Andre Geim has said that top academics are leaving the country in despair because the Government are not negotiating on Horizon Europe? When will the Government do something—now?

[Richard Fuller]

The right hon. Lady is right about the importance of this issue. The United Kingdom absolutely wishes to move forward, and we would hope that the European Union would move forward apace with us to reach an agreement.

[Mike Amesbury (Weaver Vale) (Lab)]

9. What estimate he has made of the revenue that will be raised by the loan charge.

[The Economic Secretary to the Treasury (Richard Fuller)]

The loan charge was announced in the 2016 Budget as part of a package of measures to tackle disguised remuneration tax avoidance. In the 2022 spring statement, it was estimated that the package would produce an overall Exchequer yield of £3.4 billion. The changes resulting from the 2019 independent review of the loan charge have reduced the Exchequer yield by an estimated £620 million.

[Mike Amesbury]

Too many ordinary people are facing huge bills, untold distress and, in some cases, personal harm and indeed suicide because of the loan charge scandal. Can the Minister and the Government now commit themselves to finally commissioning a truly independent review to deal with this mess?

[Richard Fuller]

I do not think that any Member who has met constituents who have been affected by the loan charge can have failed to be moved by the emotional and psychological impact that it has had on many of them. It is therefore right for me, as a Minister, to look at the issue carefully, and I can say to the hon. Member that I will engage all interested parties.

[Dan Jarvis (Barnsley Central) (Lab)]

12. What fiscal steps his Department is taking to fund the Government’s levelling-up agenda in the north of England.

--- Later in debate ---

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

14. What fiscal steps his Department is taking to encourage business innovation.

[The Economic Secretary to the Treasury (Richard Fuller)]

The Government are encouraging business innovation in many ways, of which I will enumerate four. As I mentioned to my hon. Friend the Member for Mid Norfolk (George Freeman), there is a significant uplift in R&D expenditure, with £150 million of innovation loans over the spending period, research and development tax relief, long-term investment in technology and science—a competition is providing up to £500 million in Government support—and the British Business Bank is supporting innovative businesses, including through the future fund.

[David Simmonds]

Owners and entrepreneurs behind small businesses such as Code Ninjas in Bridge Street in my constituency are a key part of the Government’s growth agenda. What steps does my hon. Friend have in mind to enable such small and medium-sized enterprises to create further jobs and growth?

[Richard Fuller]

I am not sure if I got the name quite correct. Was it Comms Ninjas?

[David Simmonds]

Code Ninjas.

[Richard Fuller]

Oh, right. Perhaps I can visit my hon. Friend’s constituency to learn what the company does.

More generally, the growth plan focuses on important measures to support small businesses that wish to grow, including by making the £1 million annual investment allowance permanent, by looking to expand the amount of money that can be given through the seed enterprise investment scheme to help small businesses to grow and, most importantly, through the Government’s energy price support this winter.

[Stephanie Peacock (Barnsley East) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

--- Later in debate ---

[Caroline Ansell (Eastbourne) (Con)]

T4. Early results from my local business survey strongly suggest that a lower VAT rate would increase investment, which would boost recovery and growth in the hospitality sector in my beautiful constituency. Will my right hon. Friend be reviewing the case for a lower rate, to bring us back into line with some of our international competitors?

[The Economic Secretary to the Treasury (Richard Fuller)]

Eastbourne is indeed beautiful, as are North East Bedfordshire and many other parts of the country. My hon. Friend is right to talk about the importance of VAT to the hospitality industry, particularly as we moved through the period of covid recovery. As we now move towards the growth plan, we need to look at the level of taxes on small businesses in general. That is a key part of the work I will be looking at as part of the tax simplification plan.

[Kirsten Oswald (East Renfrewshire) (SNP)]

T2. Push payment fraud losses increased by 71% in the first half of 2021, surpassing card fraud losses for the first time. What steps is the Chancellor taking to tackle this huge surge in fraud, and importantly, to ensure that victims, including my constituents, are reimbursed for their losses, instead of being unfairly penalised for falling victim to these increasingly sophisticated scams?

Interim Infected-blood Compensation Payments and the Welsh Government Jobs Growth Plus Scheme: Clarification of Tax Treatment

Richard Fuller Excerpts

Tuesday 11th October 2022 Written Statements

[The Economic Secretary to the Treasury (Richard Fuller)]

Interim infected blood compensation payments

Following Sir Brian Langstaff’s recommendation, the Government previously announced that infected individuals and bereaved partners currently registered on the existing UK infected blood support schemes, and those who register from now to the inception of any future scheme, would receive an interim compensation payment of £100,000¹.

The Government are today announcing that they will ensure that no income tax, capital gains tax, national insurance contributions or inheritance tax are charged on these payments. In addition, these payments will not be included as income for tax credit purposes. The Government will legislate to exempt these payments in due course.

In the interim, His Majesty’s Revenue and Customs will exercise its collection and management discretion and will not collect any tax on these payments once issued.

Jobs Growth Plus scheme

In addition, the Government will legislate in the Finance Bill 2022-23 to ensure that payments made under the engagement and advancement strands of the Jobs Growth Plus scheme by the Welsh Government will be exempt from income tax. This legislation will apply retrospectively from 1 April 2022, when payments from the scheme started.

HMRC will exercise its collection and management discretion and will not collect any income tax that may have been due on payments made from 1 April 2022 to the date the legislation takes effect.

These measures are being announced outside of the normal fiscal process in order to provide certainty regarding the tax treatment to those making the payments and the recipients.

¹ https://www.infectedbloodinquiry.org.uk/sites/default/files/2022-08/16082022_Minister%20for%20the%20Cabinet%20Office%20to%20Sir%20Brian%20Langstaff.pdf

[HCWS308]

Tax Exemptions for Compensation Payments by Post Office for Overturned Historical Convictions

Richard Fuller Excerpts

Friday 23rd September 2022 Written Statements

[The Economic Secretary to the Treasury (Richard Fuller)]

This House is aware that the Post Office Horizon scandal has had a devastating impact on the lives of many postmasters since it began over 20 years ago. The Government previously announced funding for final settlement compensation payments for postmasters who have had their convictions overturned. So far, the vast majority of postmasters who have had their convictions quashed have each received an interim compensation payment of up to £100,000. The Post Office, supported by Government, is now working towards agreeing final settlements with the claimants who have come forward.

The Government want to see these postmasters with quashed convictions compensated fairly and swiftly. That is why the Government are announcing today that victims will pay no income tax, capital gains tax, national insurance contributions, inheritance tax or VAT on compensation payments for overturned historical convictions, including on payments already made. The Government will legislate to exempt these payments in due course where necessary.

HM Revenue and Customs will not collect any tax that may have been due on payments made already up to the date the legislation takes overriding effect.

With the Government being the sole shareholder in the Post Office, we will continue to work across Government and with the Post Office to ensure the postmasters get the full compensation they deserve.

[HCWS303]

Health and Social Care Levy (Repeal) Bill

Richard Fuller Excerpts

Thursday 22nd September 2022 Written Statements

[The Economic Secretary to the Treasury (Richard Fuller)]

Today the Government have introduced the Health and Social Care Levy (Repeal) Bill.

This Bill delivers the Prime Minister’s promise to reverse the temporary 1.25 percentage point increase in national insurance rates from 6 November and will cancel the levy coming in as a separate tax from April 2023.

In cancelling the tax rise for employees, the self-employed and employers, the Government are acting to support individuals with the cost of living by allowing them to keep more of what they earn, as well as to support businesses to pursue growth, innovate and invest.

This will be an average tax cut of around £135 for workers this year and around £330 next year. Taking into account the increase to national insurance contributions thresholds at the spring statement and the levy reversal, almost 30 million people will be better off by an average of over £500 in 2023-24.

Around 60% of businesses with NICs liabilities will see a reduction in their NICs bill, with 20,000 of these businesses being taken out of paying NICs entirely due to the combination of this measure and the employment allowance. The average savings for businesses will be £9,600 for the 2023-24 tax year.

The Government are implementing the change as soon as possible, to maximise the cash benefit for people and businesses this year. Most employees will receive a cut to their national insurance directly via payroll in their November pay.

The self-employed will pay NICs at 9.73% on earnings between £11,909 and £50,270 per annum. The blended figure is equivalent to seven months at the higher rate 10.25% and the remainder at 9%

While the tax rise will be cancelled, funding for health and social care services will be maintained as planned. The additional funding used to replace the expected revenue from the levy will come from general taxation. The Government remain committed to ensuring fiscal discipline over the medium term.

[HCWS301]

Cryptoassets: Regulation

Richard Fuller Excerpts

Wednesday 7th September 2022 Westminster Hall

[The Economic Secretary to the Treasury (Richard Fuller)]

It is a great pleasure to serve under your chairmanship, Ms Rees. I join all hon. Members who have spoken in congratulating the hon. Member for West Dunbartonshire (Martin Docherty-Hughes), first, on securing the first parliamentary debate on this topic and, secondly, on his tour de force speech covering the opportunities and risks of crypto technology. I expect that this will be the first of many debates on the subject.

During today’s debate, hon. Members have rightly focused largely on the risks of the new technology, concerns about consumer protection and areas for regulatory clarity, but I suggest that we all share the hope that, through innovation and creating the right conditions, we can achieve opportunities for the crypto industry in the UK to contribute largely to the growth of the wider economy.

I hope to cover a number a points that the hon. Member made in his opening speech. I will start with three of them: financial inclusion issues, particularly with regard to central bank digital currencies; requirements for carbon neutral data centres; and enforcing the existing law against fraud. I hope to cover those points in my speech, but if I do not, I look forward to engaging with him, the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) and her APPG in the future.

Throughout the debate we have spoken about a wide range of related but distinct terms, and I would like to take a moment to separate some of them. First, distributed ledger technology is exactly what it says: it is a form of technology that allows ledgers to be kept up to date despite being in multiple places or distributed. Secondly, blockchain is a type of DLT that uses encryption, adding security and new functionalities. That is the technology that underpins crypto, although it also facilitates innovation in many other sectors, such as trade finance. Thirdly, cryptoassets are privately issued digital assets that rely on distributed ledger technology such as blockchain for their workings and security. So-called cryptocurrencies are the most well-known cryptoassets today. I will use the phrase “crypto technologies” to refer to cryptoassets and the blockchain that underpins them in the round. Stablecoins are cryptocurrencies that seek to maintain a stable price by pegging to a real commodity or a currency, but there are other forms of stablecoins that have their supply regulated by algorithm. Again, there are two separate terms under that overall heading.

I and other hon. Members have mentioned the central bank digital currency, which is a form of digital money issued by central banks. CBDCs are structurally different from cryptocurrencies, which are almost always decentralised whereas CBDCs are controlled by a central bank. The Government have already committed to issuing a public consultation on this topic, jointly with the Bank of England, later this year.

A number of hon. Members pointed to the issue of financial inclusion. There has been no decision on the issuance or design features of a CBDC, or indeed whether we will do one. In those decisions, considerations about financial inclusion and accessibility of central bank digital currencies will be at the heart of any technical design decision. I hope that addresses one of the concerns raised by hon. Members.

In all its forms, we are still on the cusp of the technology breaking through, and its uses are likely to evolve dramatically in financial services. As hon. Members have said, thousands of cryptoassets, including Bitcoin, have been issued, and together these have a total market capitalisation of around $1 trillion today.

[Martin Docherty-Hughes]

There is so much value. Does the Minister recognise that this technology is not new? It has been around for nearly three decades.

--- Later in debate ---

[Richard Fuller]

Absolutely. One of the issues, which the hon. Gentleman raised in his speech, is how pervasive the technology has become since 2008. We are still looking at the different applications and different levels of the technology, as I outlined at the start of my speech, both within financial services and more broadly within Government. He mentioned the issues in Estonia and in the economy as a whole. The technology has been around for a while, but it has many tentacles that have spread in many different ways through countries and international economies.

The hon. Gentleman will also know that in addition to that growth, as he and other hon. Members have mentioned, there has been substantial volatility. Notwithstanding those market fluctuations, the potential for DLT technology underpinning cryptoassets remains powerful in many ways. Across the world, NFTs are entering common parlance. The hon. Member for Erith and Thamesmead (Abena Oppong-Asare) talked about one that could have a revolutionary impact on the creative industries.

Blockchain technology is being used in healthcare to store patients’ medical records securely; in housing to record property rights; and in supply chains to track the path and safety of food throughout the farm-to-table journey. In Government, we are developing opportunities here in the UK to use distributed ledger technology for customs and international trade, to ease the import of goods. DLT has the potential to change how our financial markets work, too. That is why new have started work to understand how it might be applied to a UK sovereign debt instrument.

Even the fundamental architecture of the internet may undergo changes as Web3 becomes more popular, with blockchain offering the potential to drive a more decentralised, user-owned ecosystem. The innovation powered by DLT could spill across society, well beyond the scope of today’s debate, which rightly focuses on financial services.

As crypto technologies grow in significance, the UK Government are seeking ways to achieve global competitive advantage for the United Kingdom. We want to become the country of choice for those looking to create, innovate and build in the crypto space. We are already the leading European fintech hub, second only to the US worldwide. By making this country a hospitable place for crypto technologies, we can attract investment, generate new jobs, benefit from tax revenues, create a wave of groundbreaking new products and services, and bridge the current position of UK financial services into a new era.

[Dr Cameron]

I thank the Minister for his important points about taking things forward in a progressive way. Given the current uncertainty in the Government sphere, while the UK is still committed to making the UK the global home of crypto, what progress has been made in establishing the cryptoasset engagement group that was announced in April, to bring on board leaders from the sector and engage positively?

[Richard Fuller]

The hon. Lady is right to mention the importance of bringing people together. I will refer to that. May I also take the opportunity to re-emphasise the work that her APPG is currently doing on regulation for consumer protection in this space? There are multiple participants and interests, so I echo her point.

At the forefront of this is something that we have talked a lot about when it comes to the culture. We have highly driven entrepreneurs with great skills. Having their teams in the UK enables us to build the wealth and experience that can power further discoveries and growth in a constructive way.

As is always the case with innovation, there are risks that need to be managed. For one, cryptoassets can be used to hide ill-gotten gains through corruption or organised crime. Since January 2020, cryptoasset firms operating in the UK have been subject to the money laundering regulations. We recently brought forward legislation to implement the financial action taskforce travel rule for the transfer of cryptoassets.

Cryptoasset firms must conduct customer due diligence checks, just as banks do, including sanctions screenings. Through the Economic Crime (Transparency and Enforcement) Bill, we will give law enforcement new powers to seize and recover cryptoassets. As would be expected of a global financial centre, we will put a very robust system in place, and will never compromise on our high standards. That was the key point made by the SNP spokesman, the hon. Member for Glenrothes (Peter Grant).

Separately, there are legitimate concerns, highlighted by the hon. Member for West Dunbartonshire and echoed by my hon. Friend the Member for Rother Valley (Alexander Stafford), about the energy intensiveness in the process of creating some types of cryptoassets. As a global centre for green finance, we are already looking closely at energy usage associated with certain crypto technologies, and I will take away the point the hon. Member for West Dunbartonshire made about carbon neutral data centres regulation.

We have also said that we will seek to protect consumers by legislating to bring certain cryptoassets into the scope of financial promotions regulation, because it is essential that investors understand the risks they are taking and that there is more transparency from firms. I know that some firms are concerned about the way in which this regime might be implemented, to the possible detriment of UK firms. We are looking very seriously at that issue.

I say in reply to the hon. Member for Erith and Thamesmead that the UK’s approach on a lot to do with financial services is to have an agile system that relies robustly on the regulators to write their rules as things are brought within the regulatory perimeter. That underpins our approach. It underpins the work in the new Financial Services and Markets Bill, and that is distinct from the perhaps more legalistic approach of the European Union trying to define in statute right from the start what the regulations should be. In the United Kingdom we trust regulators to work at speed and effectively to write the rule books that are right at that point in time.

[Abena Oppong-Asare]

I thank the Minister for his answers. He said that it is the regulator’s responsibility to address this, but the Government also need to take responsibility. I would be grateful if the Minister could let us know whether the Government will produce a comprehensive framework. Can he also tell us what work the Government have done to check that the FCA has the capacity and expertise to look into this?

--- Later in debate ---

[Richard Fuller]

I am grateful to the hon. Lady for emphasising those additional points. She will know that the Bill that we are discussing in the House later today will bring stablecoin within the regulatory perimeter. There are two other aspects of cryptoassets that I think she is referring to. One is central bank digital currencies, on which there will be a consultation towards the latter part of this year. The other is the broader aspect of cryptoassets, which has been part of the discussion today. That will be consulted on, both by Her Majesty’s Treasury and the FCA, in the months ahead.

The hon. Lady’s second point was about the resources available, and the skills in the FCA. I have full confidence in both of those. The FCA has had increasing resources; I meet its head regularly and discuss these matters with them, so I am confident that the resources and the skills are in place.

[Abena Oppong-Asare]

Will the hon. Gentleman give way?

[Richard Fuller]

I am conscious of time, and I have a few more things to say. I have mentioned a few of the known risks that we face, and they present real challenges. We will, however, be better placed to shape the sector and lead it to social and economic good if we actively engage with it from the outset, and that is what the Government are doing. The role of the Government is to be on the front foot to achieve a global advantage. To do that, we in Government must provide a solid framework, so that decision makers can take decisions in a risky environment, and we are bringing forward a number of reforms, through carefully tailored regulation. Informed by the sector, and after a consultation that is open to anyone, we will create a dynamic regulatory landscape; that is how we will tackle issues ranging from fraud to volatility and environmental considerations.

The Government are legislating to bring certain stablecoins, where they are used for payment, within the regulatory perimeter by expanding the payments and e-money regulatory frameworks. Increased competition between stablecoins and existing UK payment systems could lead to lower costs and improved services in the long run. Through the Financial Services and Markets Bill, we will build into our regulatory framework an ability to harness those benefits of stablecoins. At the same time, we will protect consumers by ensuring that the face value of stablecoins is backed by the underlying funds, and that consumer funds will be safeguarded if a stablecoin provider becomes insolvent.

In the first instance, we wanted to focus on areas of immediate potential and concern, but the market has changed sufficiently for us to look at regulating a broader set of cryptoassets. Earlier this year, we committed to consulting on this broader regulation, including the trading of unbacked cryptoassets such as Bitcoin. We will continue dynamic engagement with industry; for example, the FCA’s recent CryptoSprints brought together over 100 industry participants to discuss future regulation. We know how important it is that there remains strong co-ordination between the UK authorities as we develop the regime; that is why the Cryptoassets Taskforce, launched in 2018, continues to have a vital role in informing where regulation can drive forward UK objectives.

As we build a regulatory regime that delivers safe, sustainable and—I hope—value-creating innovation, we will ensure that we are at the cutting edge of legal innovation, so that the UK has a strong legal foundation for this technology. Following a request from the Government, the Law Commission recently published new proposals for reforming property law relating to digital assets and smart contracts. The Government have asked the Law Commission to consider the legal status of decentralised autonomous organisations, which the hon. Member for West Dunbartonshire referred to. They are a new form of online, decentralised organisational structure. We are exploring ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market in the United Kingdom.

We are undertaking this work because we have a choice: the UK can either be a spectator as this technology transforms aspects of life, or we can become the best place in the world to start and scale crypto technologies. The Government choose the latter course. We want the UK to be the dominant global hub for crypto technologies, and so will build on the strengths of our thriving fintech sector, creating new jobs, developing groundbreaking new products and services—

Motion lapsed (Standing Order No. 10(6)).

Financial Services and Markets Bill

Richard Fuller Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[The Economic Secretary to the Treasury (Richard Fuller)]

I beg to move, That the Bill be now read a Second time.

The provisions of the Bill create the conditions for the United Kingdom to roll back or reform all European Union legislation for financial services that remains on our statute book. The Government will move at pace to implement a more agile and more internationally competitive set of rules that will harness the potential of UK financial services to stimulate growth across the United Kingdom.

Financial centres in the European Union, in the United States and across Asia are engaged with the United Kingdom in a global competition to attract financial services expertise, and to be the most successful in adopting the benefits of technology-driven change that may radically alter the shape and reach of financial services. The Bill will enable the United Kingdom to assert its leadership, and to drive forward change to capture a greater share of the global market for financial services. As the Prime Minister has said, the financial services sector is the

“jewel in the crown of the UK economy”,

and we are committed to supporting its ability to realise its full potential. An effective, efficient and easily accessible financial services sector is a vital foundation for the ease of daily life and for the national economy. The Government are therefore taking forward an ambitious set of reforms in this landmark Bill.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Bill contains a new statutory objective on competitiveness and growth, which ranks those elements above the UK’s legally binding nature and climate targets. Given that a thriving economy depends on a thriving environment, will the Minister look at this again and consider introducing a climate-and-nature-specific statutory objective as well, so that there are two statutory objectives rather than a statutory objective and a regulatory principle, which are not the same thing?

[Richard Fuller]

The hon. Lady is right to point to the importance of the objectives that are set for the regulators in financial services, but surely she will accept that the most fundamental principle for each of them should be the stability of financial services in the United Kingdom, and we pay regard to that in the Bill. We have added, as she pointed out, some focus on global competition and on achieving growth across the United Kingdom. Those are the fundamental demands that the British people have of the financial services sector. However, it is important that we have regard to the issues that the hon. Lady has mentioned, and I am sure we will discuss them, and the priority that should be attached to them, in more detail in Committee.

[Chris Grayling (Epsom and Ewell) (Con)]

May I pursue the point about environmental issues? I take my hon. Friend’s point about the need to secure the stability of the sector—that is not in dispute—but one of the things we have not done in this country is to take steps to place a duty on financial institutions not to invest in businesses that support deforestation around the world. Our combat against deforestation has run through a range of policies that the Government have pursued, and it should be continued. I will be asking my hon. Friend, as we go through this process—ahead of, possibly, tabling amendments on Report—to consider placing such a duty on the financial services sector, so that before it invests internationally, it at least asks the question “Will this lead to deforestation?”

[Richard Fuller]

I am grateful to my right hon. Friend for that addition to the debate. It is clear that there is interest in the House in debating the priority that is given to these particular issues, and I look forward to hearing the contributions of my right hon. Friend—and those of Opposition Members—in Committee, to establish whether we have got these matters right.

[Dame Angela Eagle (Wallasey) (Lab)]

Will the Minister give way?

[Richard Fuller]

I will give way one more time, and then I will make a little progress.

[Dame Angela Eagle]

There is much on the Bill for which I think there will be cross-party support, but there are some elements that worry me, and I wonder whether the Minister can reassure me about them. I refer to the Henry VIII powers, and the fact that a great deal of extra power will be given to the regulators and the Treasury. I worry about a lack of appropriate accountability to the House. Can the Minister give us some reassurances on the Henry VIII powers, and can he give us proper undertakings that he is not creating a system that will leave the House out?

[Richard Fuller]

Not surprisingly, the hon. Lady has put her finger on one of the most fundamental elements of the debate that we need to have on the Bill, which is the accountability of regulators, as expressed through the House and, if I may say so, through the Government. I can assure the hon. Lady that that will be a fundamental part of our debate throughout the Bill’s progress, and, indeed, I will say more about it later in my speech.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Will the Minister give way? This is further to that point.

[Richard Fuller]

If it is further to that point, of course I will.

[Emma Hardy]

I think that one of the points made by my hon. Friend the Member for Wallasey (Dame Angela Eagle) was not just about regulation post-Brexit, but about the power grab in the Treasury. Clause 3 deals with the Treasury’s powers during the transition, and it states that the primary legislation in schedule 1 will be bypassed, with powers given directly to the Treasury because of the need to move EU regulations speedily into domestic law. That, I think, is where one of the problems lies. It is a question of how much power is going directly to the Treasury and bypassing Parliament entirely.

[Richard Fuller]

The hon. Lady has made a useful point. She has identified the fact that there is an extensive amount of change in this Bill. As we repeal EU legislation, there will clearly be some measures on which there is a common view that they can easily be repealed and are unnecessary. It is right that the Treasury, and the Government, should be able to take those actions directly. Equally, there will be measures that will require full consultation by the House through secondary legislation, and I can give a commitment that that will be done apace, but with the ability for parliamentary colleagues to debate those measures fully. It is important that we achieve the primary objective of the Bill, which is to make the United Kingdom a solid global financial service centre.

In fact, the Bill has five objectives. They are to implement the outcomes of the future regulatory framework review, which involves reshaping our regulatory and legislative regime as an independent state outside the EU; to bolster the competitiveness of UK markets and promote the effective use of capital; to promote the UK’s leadership in the trading of global financial services; to harness the opportunities of innovative technologies in financial services; and to promote financial inclusion and consumer protection. I will take each of those in turn.

Let me deal first with the implementation of the outcomes of the FRF review. Clause 1 and schedule 1 repeal retained EU law for financial services so that it can be replaced with a coherent, agile and internationally respected approach to regulation that has been designed specifically for the UK. This will build on the existing model established by the Financial Services and Markets Act 2000, which empowers our independent regulators to set the detailed rules that apply to firms. They do this while operating within the framework and guard rails set by the Government and by Parliament.

Schedule 1 contains more than 200 instruments that will be repealed directly by the Bill. While in some cases these rules can simply be deleted, in many areas it is necessary to replace them with the appropriate rules for the UK, in our own domestic regulation. These instruments will therefore cease to have effect when the necessary secondary legislation and regulator rules to replace them have been put in place.

As we have already heard from Members today, giving these measures effect will require a significant programme of secondary legislation to modify and restate retained EU law. I can confirm that in most cases, this will be subject to the affirmative procedure in the House.

[Peter Grant (Glenrothes) (SNP)]

I welcome the Minister to his new post. Is it not a fact—I mention this partly for the benefit of those watching our proceedings who may be unfamiliar with it—that the House has the choice of taking or leaving each piece of secondary legislation that is presented to it, and Parliament will have no opportunity to amend secondary legislation if it does not think it is good enough?

[Richard Fuller]

As the hon. Gentleman will know, there will be plenty of opportunities for him to review each of the 200 measures in Committee, should he so wish, and to make recommendations. He will also be aware that the Government have already undertaken significant consultations with industry and others, and that there are ongoing reviews of a number of measures that are in place, some of which are contained in schedule 2. I do not feel that what he fears will actually be the case. There will be a process of consultation on a number of these measures, and there will be ample time for questions to be asked in the House as those consultation proceed.

As I have said, we have already undertaken fundamental reviews in some areas to ensure that we are seizing the opportunities of leaving the European Union, and this Bill delivers their outcomes. Let me touch on these briefly.

The Bill gives the Treasury the powers to implement reforms to Solvency II, the legislation governing prudential regulation for insurance. The Government are carefully considering all responses to their recent consultation and will set out their next steps shortly. The Bill also allows the Government to deliver on the outcomes of the UK’s prospectus regime review, taking forward key recommendations from Lord Hill’s UK listings review. These reforms will ensure that investors receive the best possible information, help to widen participation in the ownership of public companies and simplify the capital raising process for companies on UK markets. This can help to boost the UK as a destination for initial public offerings and optimise its capital raising processes.

The Bill also delivers, through schedule 2, the most urgent reforms to the markets in financial instruments directive—MIFID—framework, as identified through the wholesale markets review. It will do away with poorly designed and burdensome rules, such as the double volume cap and the share trading obligation, which will allow firms to access the most liquid markets and reduce costs for end investors. We intend to bring this into effect shortly after Royal Assent.

In reforming our regulatory framework, it is right to think about the regulators’ objectives so that they reflect the sector’s critical role in supporting the UK economy. For the first time, the Prudential Regulatory Authority and the Financial Conduct Authority will be given new secondary objectives, as set out in clause 24, to facilitate growth and international competitiveness. The FCA and the PRA will do this within an unambiguous hierarchy that does not detract from their existing objectives.

It is critical that these new responsibilities for regulators are balanced with clear accountability both to the Government and to Parliament. This is addressed in clauses 27 to 42, alongside clause 46 and schedule 7. The Bill includes new requirements for the regulators to notify the relevant parliamentary Committee of a consultation and to respond in writing to formal responses to statutory consultations from parliamentary Committees. The regulators are ultimately accountable to Parliament for how they further their statutory objectives, so these measures recognise the importance of the Committee structure for holding the regulators to account. While I welcome the new Treasury Select Committee Sub-Committee, it is ultimately for Parliament to determine the best structure for its ongoing scrutiny of the financial services regulators.

[Mark Garnier (Wyre Forest) (Con)]

I was on the Treasury Committee a number of years ago when we were looking at the Financial Services Act 2012, when competitiveness was not properly addressed. Is my hon. Friend convinced that the Treasury Committee will be able to instil a sense of urgency in the regulators and convince them that competitiveness is incredibly important? It is one thing to hold the regulators to account, but another to be able to drive them to implement the will of Parliament.

[Richard Fuller]

My hon. Friend opens up what was an area of particular personal interest to me when I was a Back Bencher, and I therefore feel tempted to stray, during what might be my rather temporary position on the Front Bench—[Hon. Members: “No!”] That was a cheap attempt for a laugh, but if I may just say this without straying too far, I think it is recognised across the House that the role of Parliament in holding regulators to account needs further investigation. The Bill is quite remarkable because we are building on a structure from the year 2000 that put tremendous power in the hands of the regulators. We think that is right. We do not think that we should have the same prescriptive statute-based approach as the European Union, because we feel that is too rigid, does not promote competition and does not help growth. But we must recognise, as we take the Bill through the House, that we have a responsibility carefully to ensure that those structures of parliamentary oversight are appropriate.

[Alison Thewliss (Glasgow Central) (SNP)]

I very much enjoy serving on the Treasury Committee, but it has an incredibly busy agenda. What the Government are doing here is taking a huge amount of scrutiny of incredibly important structural issues relating to financial services from 650 Members of Parliament and giving it to a Committee of 11 and a perhaps yet smaller Sub-Committee. Does the Minister really think that is adequate?

[Richard Fuller]

The hon. Lady tempts me to talk beyond what is really the responsibility of the Government. She is raising questions that are correctly and appropriately for the parliamentary authorities to respond to. On her more general point about whether the system is correct to rely on the regulatory framework that was established in 2000, I think the answer is absolutely yes. As I have just mentioned, it provides the ability for an agile, pro-growth, competitive set of financial services regulations, and I believe that Parliament itself is capable of providing that democratic oversight over the regulators. If she is concerned about that, I encourage her to take it up with the parliamentary authorities in the usual way.

So I welcome the Treasury Sub-Committee. I have said that ultimately it is for Parliament to determine the best structure for the ongoing scrutiny of financial services regulators. The Bill also includes a new power for the Treasury to require the regulators to review their rules when that is in the public interest. Following any such review, the final decision on potential action would be for the regulators to make.

Following the repeal of retained EU law, the Government will have no formal mechanism to bring public policy considerations directly into rule-making. It is right for the democratically elected Government of the day to be able to intervene in a matter of financial services regulation where there are matters of significant public interest. The Government’s intention is therefore to bring forward an intervention power that will enable Her Majesty’s Treasury to direct a regulator to make, amend or revoke rules where there are matters of significant public interest. The Chancellor will take a final decision on the precise mechanics of the power and the Government will table an amendment in Committee.

Let me now turn to the Bill’s second objective: bolstering the competitiveness of UK markets and promoting the effective use of capital. I have already spoken about the improvements to the UK’s regulation of secondary markets in this Bill through reforms to the MIFID framework in the wholesale markets review. These changes will lower costs for firms and align our approach with that of other international financial centres such as the United States. To improve the smooth functioning of markets, we will introduce a senior managers and certification regime for key financial market infrastructure firms. We will expand the resolution regime for central counterparties to align with international standards, and enhance the powers to manage insurers in financial distress.

The next objective of the Bill is to strengthen the UK’s position as an open and global financial hub. Outside the EU, the UK is able to negotiate our own international trade agreements, including mutual recognition agreements—MRAs—in the area of financial services. The Government are currently negotiating an ambitious financial services MRA with Switzerland. Clause 23 enables the introduction of any necessary changes through secondary legislation to give effective to this and to any future financial services MRAs. Schedule 2 contains measures that enable the United Kingdom to recognise overseas jurisdictions that have equivalent regulatory systems for securitisations classed as simple, transparent and standardised, allowing UK investors to diversify their portfolio while maintaining the level of protections they currently enjoy.

The Bill takes the UK further forward as a centre for financial markets technology. Clause 21 and schedule 6 extend existing payments legislation to include payments systems and service providers who use digital settlement assets that include forms of crypto-assets used for payments, such as stablecoin, backed by fiat currency. This brings such payments systems within the regulatory remit of the Bank of England and the payments system regulator, allowing for their supervision in relation to financial stability, promoting competition and encouraging innovation.

To foster innovation, clauses 13 to 17 and schedule 4 enable the delivery of a financial markets infrastructure sandbox by next year, allowing firms to test the use of new and potentially transformative technologies and practices that underpin financial markets, such as distributed ledger technology. In parallel, the Bill promotes the finance sector’s resilience by allowing the financial service regulators to oversee the services that critical third parties provide to the sector.

Let me turn to the Bill’s final objective, which I know will have the commendable focus of colleagues throughout the House: the promotion of financial inclusion and consumer protection. The Government will continue to foster an industry that supports everyone so that individuals do not feel left behind by the rapid advancement in financial technology. There is an extensive programme of ongoing work related to consumer protection, especially in the areas that were legislated for in the Financial Services Act 2021, such as buy now, pay later agreements and the FCA’s rules on the consumer duty.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

The Minister is relatively new to his role, but he cannot help but be aware that it is now almost two years since this House recognised the real threat to our constituents’ bank balances posed by buy now, pay later and its lack of regulation. There is agreement throughout the House that these legal loan sharks must be regulated. The Minister may say that this is a complex policy area, but political will and the cost of living crisis demand fast action. Why is the necessary regulation not in the Bill? It could have been the perfect vehicle, ahead of Christmas, when these companies will profit again, to act to protect our constituents.

[Richard Fuller]

The hon. Lady is right to talk about the urgency and complexity of the issue. She understands that it is complex and will invigorate us all to move as quickly as possible. I note that even as recently as 19 August the FCA has followed up with the buy now, pay later companies to remind them of the rules that they have to operate under, and that the Government have committed to bring forward the consultation on the draft legislation before the end of the year. I look forward to discussing matters further with the hon. Lady.

The 2021 Act made legislative changes to support the widespread offering of cashback without a purchase by shops and other businesses. Clause 47 and schedule 8 go further and give the FCA the responsibility to ensure reasonable access to cash across the UK. The FCA will have regard to local access issues and a Government policy statement on access more generally. The Treasury will designate banks, building societies and cash co-ordination arrangements to be subject to FCA oversight on this matter.

[David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)]

I very much welcome the provision in the Bill, because access to cash is an extremely important issue not only for rural communities that I represent but for deprived areas. Will the Minister make sure that when the various reviews and mechanisms are put into place they focus on the specific needs of rural and deprived areas in their determination of cash requirements?

[Richard Fuller]

My right hon. Friend is absolutely right. He will know that the question of access in urban areas is very different from that in rural areas. I can give him the assurance that he seeks.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

I, too, welcome all the provisions, but will the Minister confirm that when he says “access to cash” what he actually means is free access to cash, not paid-for ATMs.

--- Later in debate ---

[Richard Fuller]

When I say “access to cash” I mean access to cash. My hon. Friend raises the question of whether that access should be free; that is a matter to which we will return in Committee, but I cannot give him that assurance at this stage.

As the country faces cost of living pressures, we must ensure that the door to affordable credit is open to all. The credit union sector plays a crucial role in this respect by delivering for its members and providing an alternative to high-cost credit. Clause 63 allows credit unions in Great Britain to offer a wider range of products and services to their members. To improve consumer protection, the Bill will strengthen the rules around financial promotions. Clause 62 enables the Payment Systems Regulator to mandate the reimbursement of victims of authorised push payment scams by payment providers, for all PSR-regulated payment systems, and places an additional duty on the regulator to mandate reimbursement in relation to the faster payments service specifically.

Clause 48 and schedule 9 give the Bank of England new powers to oversee wholesale cash infrastructure, to ensure its ongoing effectiveness, resilience and sustainability. Clause 47 and schedule 8, on cash access, will ensure that the FCA has regard to local access issues and a Government policy statement on access more generally. The Treasury will designate banks, building societies and cash co-ordination arrangements to be subject to FCA oversight on this matter.

[Emma Hardy]

rose—

[Richard Fuller]

I am afraid I am going to conclude.

This is a significant Bill and I look forward to the House considering each measure in detail as it makes its passage through Parliament. The Bill has a single vision: to tailor financial services regulation to the UK’s needs, to promote global competitiveness and innovation, and to contribute growth in our economy. I commend it to the House.

[Several hon. Members rose—]

--- Later in debate ---

[The Economic Secretary to the Treasury (Richard Fuller)]

With the leave of the House I would like to speak for a second time, and I will start by thanking right hon. and hon. Members for their contributions to the debate. As the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) has just said, I welcome the broad support across the House for the Bill.

As has been clear throughout the debate, I am really a small person standing on the shoulders of the two giants responsible for the Bill—my hon. Friend the Member for Salisbury (John Glen) and my right hon. Friend the Member for Richmond (Yorks) (Rishi Sunak). I will seek to address what I can of what has been said in the time available—[Interruption.] Shush. Where I am not able to, I shall write to colleagues where I feel that I can add something meaningful. I also look forward to Committee, where I will be able to address some of the points in more detail.

As I said in opening the debate, this is an important and ambitious Bill that seizes opportunities afforded by EU exit to make important reforms to the regulation of financial services. As my right hon. Friends the Member for Richmond (Yorks) and for South Northamptonshire (Dame Andrea Leadsom) and my hon. Friend the Member for Salisbury said, the resilience of the United Kingdom financial services market as we exit Brexit has been much stronger and greater than the naysayers said. Once again, people who talked down our country have been proved wrong.

There were questions on a number of areas, but I will start with access to cash, which was raised by a several Members. The UK Government remain absolutely committed to protecting consumers and supporting inclusion. The impact of bank branch closures should already be understood, considered and mitigated where possible so that all customers, wherever they live, and especially the most vulnerable, continue to have appropriate access to face-to-face banking services. Meanwhile, innovative, shared bank hubs allow customers of participating banks to withdraw and deposit cash and seek support from a representative of their bank in person. It was pleasing to hear the contribution from my hon. Friend the Member for Cleethorpes (Martin Vickers) regarding the hub at Barton-upon-Humber, and that of my hon. Friend the Member for Mid Derbyshire (Mrs Latham) about Belper. She mentioned the knock-on benefits that banking hubs can have on high streets both in Belper and in other parts of the country. My hon. Friend the Member for Vale of Clwyd (Dr Davies) and the hon. Member for Mitcham and Morden (Siobhain McDonagh) spoke about the importance of financial hubs in their constituencies.

Those are an important part of access to cash, but the Bill also provides the FCA with powers to protect access to cash specifically. Where appropriate, the FCA could exercise the powers in the Bill to prevent a branch closure where in doing so it is seeking to ensure reasonable provision of cash access services. That may be the case, for example, if a closure would result in a significant adverse impact in relation to accessing cash in that area. The Government expect such situations to be exceptional and temporary while alternative arrangements to meet cash needs are put in place, but ultimately that access to cash must and will be protected.

The Bill allows the FCA to determine standards to ensure reasonable access to cash access services. In determining reasonable access, the FCA may take into account factors that it considers appropriate, which may include appropriateness of facilities for vulnerable users, including cost, security availability and accessibility for, for example, disabled people. The FCA is developing its regulatory approach for access to cash and will consult in due course.

[Tulip Siddiq]

Does the Minister support free access to cash—yes or no?

[Richard Fuller]

I was about to come to that. As I said earlier, while I cannot give an assurance on free-to-use ATMs, I do expect us to return to the matter in more detail in Committee. I tried to write down those right hon. and hon. Members who used those four letters—F, R E and E—in describing their wish for access to cash. They included my hon. Friends the Members for Blackpool North and Cleveleys (Paul Maynard), for Cleethorpes and for Mid Derbyshire as well as the hon. Members for Kingston upon Hull West and Hessle (Emma Hardy), for Feltham and Heston (Seema Malhotra), for Richmond Park (Sarah Olney) and for Mitcham and Morden. As I said, we will return to these issues in Committee, particularly given the level of interest in them.

I turn to other matters. The shadow spokesperson, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), asked about the new secondary objectives for growth and competitiveness and whether they were aimed at advancing long-term growth in the real economy. Those secondary growth and competitiveness objectives will enable the PRA and the FCA to make rule changes to advance the long-term growth and competitiveness of the UK economy, including the financial sectors. The new objectives refer to the UK economy as a whole, including in particular the financial services sector.

The hon. Member for Richmond Park, who is in her place, and the hon. Member for Brighton, Pavilion (Caroline Lucas), who I do not think is in her place, talked in an intervention about whether the regulator should have a green objective. Including the net zero target specifically in the regulatory principles ensures that the Government’s commitment to reach net zero will be embedded in regulator considerations. Therefore, it is more appropriately progressed by regulators as a regulated principle, which means they will consider the Government’s target when they advance their own objectives. We heard a lot about what the Government are doing on green finance which did not pay enough regard to the progress the Government have made already on that. Let me just list it. The UK is rated No. 1 globally in the Z/Yen Global Green Finance Index. The UK has had the largest green gilt instruments globally. The UK had the first green savings account issued with the national savings fund. The UK is the first major economy to implement fully the taskforce for nature-related financial disclosures across both financial services and the real economy. The UK is the largest donor to multilateral climate investment funds. That is a record this Government can be proud of. That is a record that this country can be proud of as well.

The hon. Member for Kingston upon Hull West and Hessle asked about having regard to financial inclusion. The Government believe that the FCA’s current and ongoing initiatives around financial inclusion demonstrate that it can already effectively support the Government’s leadership of this agenda through its additional operational objectives and regulatory principles.

The shadow spokesperson asked how seriously Parliament should take the speculated proposals to merge the regulators. There are no plans to merge the PRA and the FCA. Again, she asked about the independence of regulators and how we can ensure the continued independence of our regulators. The legislative framework underpinning financial services regulation in the UK provides for the regulation to be independent of the Government.

My hon. Friend the Member for Wimbledon (Stephen Hammond), who I think may be in his place, asked about whether we could commit to an annual report on the key performance indicators of the regulators. Both regulators, I am pleased to say, will be required to report on their performance against their growth and competitive objectives on an annual basis. This will be similar to the PRA’s current reporting requirements for its secondary competition objective. My hon. Friend also asked about the important issue of cost-benefit analysis panels and what the accountability of the regulators will be. The Government expect that the panel will operate in the same way as other statutory panels, where they appoint external members. Ensuring the right membership of panels is crucial to their success in promoting and challenging a range of expertise.

The Chair of the Treasury Committee, my right hon. Friend the Member for Central Devon (Mel Stride), asked an important question about the Bank of England’s independence. I can tell him and the House that the Chancellor today met the Governor. I refer him and other hon. Members to Her Majesty’s Treasury’s statement on that meeting. The Chancellor affirmed that the UK’s long-standing commitment to the Bank of England’s independence and its monetary policy remit. The Chancellor and the Governor agreed that getting inflation under control quickly is central to tackling cost of living challenges.

My right hon. Friend the Member for Richmond (Yorks) asked whether the European regulations on PRIIPS will be reformed. Yes, the Bill will repeal and retain EU law for PRIIPS. He also asked about ringfencing and whether ringfencing will be reformed. The Treasury welcomes the comprehensive set of recommendations to the Independent Panel of Ring-fencing and is committed to publishing a Government response later this year.

There were many other questions, particularly on MRAs—mutual recognition agreements—crypto-assets and other issues. I will have to write to Members, given the amount of time available. On the important issue of scams and fraud prevention, which was raised by many Members, I acknowledge the seriousness of the issues we face, but I do not accept that the Government and regulators are not taking action to prevent fraud, both in relation to financial services and more widely. The Government are clear that prevention is better than cure and that a multifaceted approach is needed to tackle fraud. The shadow City Minister asked what we were doing beyond financial services. I point to the Online Safety Bill, which the Prime Minister committed to in the House today.

There were many, many issues also raised that I have not had time to refer to today, but that just indicates the wide breadth and importance of the Bill. The Bill capitalises on our freedoms outside the EU by bringing forward an ambitious set of reforms that assert the UK’s global leadership in financial services, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022

Richard Fuller Excerpts

Monday 18th July 2022 General Committees

[The Economic Secretary to the Treasury (Richard Fuller)]

I beg to move,

That the Committee has considered the draft Money Laundering and Terrorist Financing (Amendment) (No.2) Regulations 2022.

It is a particular pleasure to serve under your chairmanship, Ms Ali. This Government recognise the threat posed to the United Kingdom by economic crime and are determined to do whatever it takes to combat money laundering and terrorist financing. Money laundering can undermine the integrity and stability of our financial markets and institutions. It is a global problem and represents a significant threat to the United Kingdom’s national security. It is a key enabler of serious and organised crime, which costs the UK at least £37 billion every year. Global leadership is vital and must be underpinned by strong action here at home. While our domestic action must be strong, it must also be proportionate in order to minimise the burden on legitimate customers and businesses. Striking that balance is the reason why the Government continue to review and amend the money laundering regulations.

In January 2020, the Government transposed the European Union’s fifth money laundering directive, which provided for the addition of art market participants, letting agents and cryptoasset businesses into the regulated sector, and set out discrepancy reporting requirements to improve the accuracy of the UK’s beneficial ownership registers. Since leaving the European Union, we have had the opportunity to ensure that the money laundering regulations go further in protecting the United Kingdom’s reputation as a safe place to conduct business. We made several changes to the money laundering regulations earlier this year in relation to high-risk countries and trusts, which allowed us to respond to the latest economic crime risks and protect the United Kingdom from overseas illicit finance flows. However, as we all know, there is more work to be done, which is why the Government are making further necessary updates to the money laundering regulations through today’s secondary legislation.

Anti-money laundering regulation must keep pace with the rate of technological change so that no part of our financial system is open to exploitation by criminals. This instrument therefore extends the Financial Action Task Force’s recommendation 16, known as the travel rule, to cryptoasset firms. It will require information on the identity of the originator and beneficiary of a transfer of funds or assets to be sent and recorded by the firms making that transfer. This supports the detection and investigation of money laundering and terrorist financing, as the transfers of cryptoassets will become subject to the same rigorous anti-money laundering requirements as bank transfers. We are also closing a gap in the regulations by requiring proposed acquirers of already registered cryptoasset firms to notify the Financial Conduct Authority ahead of such acquisitions. That will allow the FCA to object to such changes in control before they take place, enabling it to make sure unregistered firms cannot gain access to the United Kingdom.

The instrument also makes several other discrete, targeted changes that are intended to ensure that the regulations are appropriately aligned with updated risk assessments and new international standards. For example, it will ensure that we are aligned with the FATF standards on proliferation financing by introducing a requirement for supervised persons and the private sector to identify and assess risks of potential breaches, non-implementation or evasion of the targeted financial sanctions related to proliferation financing.

The instrument will go further by strengthening and clarifying how the anti-money laundering regime operates and by ensuring that the United Kingdom’s anti-money laundering supervisors have the right powers available to them to respond to new and emerging threats. For example, the instrument will expand the requirements in the regulations to report discrepancies between the information gathered by regulated firms and that held at Companies House, both in the course of ongoing business relationships and for entities in scope of the new register of overseas entities.

To support the objectives of upcoming limited partnership reform and to improve the transparency and integrity of the companies register, the instrument amends the definition of a trust and company service provider—TCSP—to cover the formation of all business arrangements, not just companies, that are required to register at Companies House and to ensure that customer due diligence is conducted for customers of TCSPs.

The instrument makes several technical and clarificatory changes to the regulations to ensure that they are up to date and continue to work in the best way possible. I hope that I have shed light on the main element of this instrument, and I thank hon. Members in advance for their examination of the issues. I hope they will join me in supporting the instrument, and I commend it to the Committee.

--- Later in debate ---

[Richard Fuller]

I thank the hon. Lady for her wise words about the import of the instrument we are considering and for the Opposition’s overall support for it. She asked a series of questions, and I will reply to them directly. If I miss any, she may want to come back on them.

The hon. Lady asked about the timetable and particularly about cryptoasset firm regulations. One reason why that is coming later is that firms require a technological solution, and in order to get robust solutions, we felt it was appropriate to give time. She also asked specifically about a risk from Russian kleptocrats, but I will write back to her on that point because it covers issues beyond the one I have just made. I will also get back to her on regulation 10.

On the bank account portal, the issue is that the UK has several pre-existing capabilities, such as customer information orders. However, the hon. Lady asked a specific question about the assessment of the costs. I will get back to her on that, but I think the issue has to be seen in the context of what is already in place, rather than an assumption that we have to build something from scratch. The hon. Lady also asked about working with our equivalents in the Crown dependencies and about a potential way around the regulations. That is an important point, and I will continue the normal dialogues with my equivalents in the Crown dependencies.

The hon. Lady asked about the issues around the timetable for the economic crime Bill. I am afraid I am not in a position to advise her any further on that today, but I am sure I will be able to as the Bill comes forward. I think I have answered most of the questions. If I missed any, the hon. Lady can advise me subsequently. On those that I have not answered today, we will respond in writing in due course.

--- Later in debate ---

[Richard Fuller]

The SNP spokesperson makes interesting points, some of which echo those made by the Opposition spokesperson. On the timetable, I will get back to him. He asked about the merits of two additional offences—failure to prevent sanctions evasion and conspiracy to commit sanctions evasion. I have no comment on that, but I would be interested in anything the hon. Gentleman has to send to me to look at.

The hon. Gentleman asked about a full Companies House reform, and he expressed some of the frustration that hon. Members on both sides of the House have expressed. He will be aware that the Treasury has provided Companies House with £60 million, I think, to begin those reforms, but he is right to draw the Committee’s attention to the issue and to hope that further reforms will be forthcoming. Some of those reforms feature in these regulations—for example, the further tightening of some of the restrictions, particularly around TCSPs.

Question put and agreed to.

NHS Pensions and Staffing

Richard Fuller Excerpts

Wednesday 13th July 2022 Commons Chamber

[The Economic Secretary to the Treasury (Richard Fuller)]

Thank you very much, Mr Deputy Speaker.

Let me begin by thanking my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) for securing the debate and for the points that he has raised. I also note the contributions of the hon. Members for Central Ayrshire (Dr Whitford), for Strangford (Jim Shannon), for Llanelli (Dame Nia Griffith), for Carmarthen East and Dinefwr (Jonathan Edwards) and for East Dunbartonshire (Amy Callaghan), who made, forcefully, the point that this is an issue that affects all parts of the United Kingdom.

Because these issues are complex and my hon. Friend rightly set them out in full in order to put them on the record, I am rather short of time, so, if I may, I will move rather quickly in responding to some of my hon. Friend’s recommendations. Let me add that I shall be happy to follow this up with other Members who have spoken if they want to raise specific constituency points.

I think that everyone present has noted the pressures on our NHS. Indeed, before taking on my new role, I spent a considerable amount of the last six months with my own GPs. I know that the issues relating to pressures on GPs are complex, including the overall questions of compensation and burnout, and my hon. Friend rightly mentioned the issue of abuse of NHS staff, which has occurred to a shameful degree over the last six months and which no member of our health service should ever have to deal with.

However, my hon. Friend focused on the issue of pension tax and the NHS, and made three specific recommendations. The first concerned the differential use of CPI figures, and he was right to raise that issue, because it is the spike in inflation that has laid bare some of the problems in the way in which calculations are made. The issue relates to the disparity between the CPI figure used for uprating the opening value of a member's benefits and the CPI figure used to assess revaluation in public service schemes. This effect is particularly notable in the NHS pension scheme, where accrued benefits are adjusted upwards each year by CPI plus 1.5%—which, to be fair, makes it one of the most generous pension schemes available.

I understand that this difference in figures will lessen the headroom that scheme members have in their annual allowance calculation. That may cause more members to exceed the annual allowance, and cause those who already routinely exceed it to exceed it by more, with the result that some may receive annual allowance tax charges. The British Medical Association has asked the Government to amend the Finance Act 2004, so that the CPI figures used in uprating the opening value and the figure used for revaluation in public service schemes are the same. However, there are some further issues that must be considered in this discussion, which my hon. Friend may not have mentioned.

First, the Government have a duty to balance support for all pension savers across the United Kingdom. The use of September CPI to measure inflation in the year before the tax year is a well-established feature that is used across the tax system. Any changes would impact all pension savers, not just NHS staff.

The current approach provides certainty to individuals at the start of the tax year about what their opening pension value will be for annual allowance purposes. I appreciate that, for those with a defined benefit pension alone, this certainty may not be seen as much of an advantage. However, for others across the country who may have some defined benefit accrual but are now saving into a far less generous defined contribution scheme, this certainty allows them to plan their finances and pension contributions for the coming year.

[Dr Whitford]

Will the Minister give way?

--- Later in debate ---

[Richard Fuller]

I really cannot; I have only two and a bit minutes left.

Secondly, there is a perception that the use of different CPI figures will disproportionately hit senior NHS staff. This is said to be because the revaluation of accrued rights in the 1995 and 2008 sections of the NHS pension scheme will lead to a large pension input amount for clinicians, while the annual allowance calculation will use a lower CPI figure when calculating their opening value. This is the so-called pseudogrowth that my hon. Friend mentioned. I am afraid that this point ignores the fact that, for most NHS employees in the 1995 and 2008 sections of the NHS pension scheme, their accrued benefits remain linked to their final salary, which means that they do not have their benefits revalued each year.

Thirdly, I have heard concerns over so-called negative accrual that cannot be used to offset positive accrual in later years. This point conflates actual pension accrual that benefits pension savers with notional accrual used for the purposes of the annual allowance calculation. It is a fact that defined benefit schemes are more difficult to compare against the annual allowance than defined contribution schemes. In a given year, where individuals accrue rights to future annual pension payments, it is necessary to calculate a comparable figure for their savings to test against the annual allowance to ensure fairness between those in defined contribution and defined benefit schemes. On this point, my hon. Friend and other hon. Members have raised an important issue this evening, and I will go away and consider it further.

In response to my hon. Friend’s second recommendation, I know that the BMA and others have said that the action taken at Budget 2020 on the tapered annual allowance was not enough. However, the cost of this intervention was £2.2 billion over five years, and it was targeted at the very highest earners in society. It will be hard to justify focusing more Government support on them, especially in the current climate. This includes replicating the temporary scheme used in the 2019-20 tax year.

My hon. Friend’s third recommendation for an unregistered scheme was also mentioned by the hon. Member for Carmarthen East and Dinefwr. I understand the comparison that senior clinicians draw with the position of the judicial pension scheme 2022, which is unregistered for tax purposes. However, I believe that a distinction remains to be drawn between NHS high earners and the judiciary, and that there are unique circumstances relating to judicial appointments—in particular, that judges are unable to return to private practice after taking up office, and that many judges take a significant pay cut to join the judiciary. However, we all recognise that there are significant issues around doctor and GP retention, and the points raised this evening have struck a chord with me. I look forward to discussing them further with hon. Members.

Question put and agreed to.

UK Gross Domestic Product

Richard Fuller Excerpts

Monday 13th June 2022 Commons Chamber

[John Glen]

Perhaps unsurprisingly, I cannot give the hon. Gentleman that figure at the Dispatch Box at this point, but we have introduced timely, temporary and targeted interventions. We recognise with a real sense of empathy the fact that people will be struggling. We have been very clear from the time we made this series of announcements and over the past six months that we will not be able to ameliorate the impact of every single additional cost. The key intervention we need to make is to encourage that growth and productivity in the economy in the context of fiscal responsibility and the commitments we have made to intervene so far.

[Richard Fuller (North East Bedfordshire) (Con)]

My right hon. Friend has rightly spoken about the importance of growth in bringing together people, capital and ideas, but there is a fourth element, which is regulation. What Conservatives want to see is a comprehensive Government strategy for light-touch, pro-growth deregulation. Can he tell me what he is doing in his Department to set an example to other Departments of achieving better regulation that will support growth?

[John Glen]

Yes, I can. In a few weeks’ time I shall introduce to the House a financial services and markets Bill that will fundamentally reset the way that our financial services industry, which constitutes 10% of the economy, will be regulated into the future. That will be underpinned by strong, independent world-class regulators in the Prudential Regulation Authority and the Financial Conduct Authority, but with an obligation to look at competitiveness and global growth as a secondary objective. That is absolutely imperative. We must make sure that we have an economy that takes account of what is going on elsewhere and regulates accordingly.