Oral Answers to Questions

Debate between Roger Williams and Mark Hoban

Monday 20th May 2013 Commons Chamber

[Mr Hoban]

We have brought together various aspects of the energy sector in a single department. That bringing together of complementary skills is a sensible response to the increased diversification of the energy sector. I can assure the hon. Gentleman that there is no slackening of focus on the offshore sector; indeed, we are recruiting more offshore inspectors.

[Roger Williams (Brecon and Radnorshire) (LD)]

5. What assessment he has made of the effects of planned changes to the state pension on women born between April 1952 and April 1953.

Financial Services (Rural Communities)

Debate between Roger Williams and Mark Hoban

Tuesday 29th March 2011 Westminster Hall

[Mr Hoban]

We were keen to ensure that the ICB has a focused remit to enable it to deliver its work on time, so that we could take forward some of the lessons that should be learned from the financial crisis, when large banks posed a greater risk to the economy. UK banking was consolidated, partly as a consequence of the Lloyds and HBOS merger, and the building society sector became more concentrated. That is different from imposing additional social obligations on banks, which the hon. Gentleman seems to favour.

The hon. Gentleman also touched on independent financial advisers. He should be aware that their advice is not free; it is paid for through commission, and it is not always entirely transparent how much is being paid. A move to a fee-based system will help improve transparency. It is important that consumers receive good quality advice. We live in a complex world of financial services, and as a Minister I deal with too many cases of consumers being given bad advice and paying a high price for that. There is a strong consumer-friendly element in the reforms.

The hon. Gentleman also talked about the financial services compensation scheme levy. It pays for the cost of failure among IFAs. It is an important part of the mechanism to give consumers confidence that if something goes wrong, the bill is picked up so that they are not left out of pocket. If the hon. Gentleman believes that the Financial Services Compensation Scheme should be reformed, and that someone else should pick up the levy, he should be clear which sectors should do so. My experience is that people are keen to offload the responsibility to someone else, but never clear who that should be. The scheme ensures that the sector swallows its own smoke.

Turning to the main issues raised by my hon. Friend the. Member for Brecon and Radnorshire, I recognise his concerns about the significant impact of branch closures in his constituency, and the fact that the HSBC branch in Rhayader has only limited opening hours. I also recognise that although people in rural areas experience the same financial challenges as people in towns and cities, living in a rural area may bring additional challenges. Exclusion from financial services may be less visible in many ways in rural areas compared with urban areas.

My hon. Friend referred to micro-managing banks’ activities. I am not interested micro-managing them, and that is as true for the banks in which the state has a significant stake as for those in which we have no shareholding. However, banks and building societies should serve the economy, and we are committed to improving access to banking, and transparency of financial products for consumers. Decisions on opening and closing branches are taken by the management team of each bank and building society on a commercial basis, and the Government do not intervene in such decisions.

My hon. Friend should recognise that the role of banks is not just about branches. They play a much a wider role in helping the UK economy, and we reached agreement with them earlier this year to encourage them to work in partnership to support the recovery, to increase the amount of money they lend to small and medium-sized enterprises, and to pay out lower bonuses than last year. They are more transparent about their pay, and are making an additional contribution to support business growth and the big society bank of £1.2 billion. However, there is more work to do to improve access to financial services, certainly among the most vulnerable groups, by supporting financial mutuals, and improving competition in the banking sector.

We are committed to improving access to basic financial services, especially for those who are vulnerable to exclusion, and we are working actively to ensure that all consumers can access an appropriate mix of financial services. Bank and building society branches are not the only channels for accessing financial services, nor are they necessarily favoured by consumers on low incomes. For many people, the barriers are significantly greater than simply having no local bank or building society branch to visit.

It is important that financial services adapt so that they fit the grain of how people run their lives. For example, many consumers without bank accounts express a preference for managing their finances in cash. They want direct control over their spending, and often believe that a bank account takes that away from them. For many, the financial services with which they engage most often are not in bank branches.

That brings me to the post office network, which has more branches than all the retail banks put together. An important part of the Post Office’s future sustainability will be the continued growth of revenue from financial services. The Government have promised that there will be no programme of post office closures, and in last year’s spending review we promised to provide £1.34 billion for the Post Office to modernise the network and to safeguard its future, making it a stronger partner for the Royal Mail. We have also said that expansion of accessible and affordable personal financial services available through the Post Office should be a priority. Our ambition is that all UK current accounts should be accessible through the post office network, making post offices the convenient place for people to access their cash.

[Roger Williams]

I thank the Minister for his comments on the debate. On a practical issue, people tell me that the one thing they value about banks is that they can talk in private about their financial concerns. That facility is not available in post offices. If the Post Office is to deliver more financial services, it must address that issue, as well as availability, with the public.

[Mr Hoban]

My hon. Friend makes an important point. As it expands the financial services that it offers, the Post Office will have to think about how to encourage take-up, and how to provide support and advice, if that is the route that it wants to take. I was about to acknowledge that the range of services that the Post Office will offer will not be the same as a community bank, which is an idea that he outlined.

There is a real challenge in putting in place the right model of financial services in rural communities. It is not right to mandate a particular model as being right. The impetus for new ways of developing services should come from the financial services sector. The hon. Member for Arfon complained about the HSBC branch that has become highly automated. The challenge there is whether that meant that the branch could stay open, and whether new technology is being used to keep more branches open by changing the way in which services are offered. There are some interesting challenges, and banks must work their way through them.

When thinking about how financial services best support families and businesses, particularly in rural areas, we must think more carefully about their changing nature. There is a risk of getting stuck in a particular view of how banking should work. People are turning increasingly to prepayment cards or e-money. For example, Tesco is making payment to short-term employees with an e-money card, instead of paying money into a bank account. We can learn from other countries how they have tried to get around lack of bank branches. We should think about developing new safe and convenient financial services using different channels.

Mutuals were mentioned a couple of times, and I am conscious of the excellent work done by credit unions, particularly in the constituency of my hon. Friend the Member for Brecon and Radnorshire. Mutuals can be more accessible for those who cannot or do not want to access banks. The coalition is committed to a strong mutual sector that should have the capability to enrich British society. It is in everybody’s interest to do whatever we can to help the mutual sector prosper and grow, and for that to be achieved sustainably. Over the past few months, I have had the opportunity to start a meaningful dialogue with the mutual sector about its ambitions, looking at what services it can offer and how it can overcome the hurdles that have been holding it back.

Although mutuals benefit from not having to pay dividends to their shareholders, they have an obligation to their members. They have to strike a balance between meeting their wider obligations and providing returns to their members through higher returns on savings or lower borrowing costs, ensuring that they remain viable and competitive. Such considerations are at the heart of every decision made by a building society.

As a consequence of the financial crisis, there is clearly an appetite for change in the way financial services operate, and mutuals stand well placed to respond to that challenge. To help achieve it, the Government are implementing several legislative reforms to help create a more equal playing field in financial services, thus promoting diversity and providing a challenge to banks.

The legislative reform order on industrial and provident societies and credit unions has been a long time coming. It will be re-laid before Parliament shortly, and will introduce basic yet far-reaching reforms that will enable credit unions to modernise and grow. We will also take forward the implementation of the Co-operative and Community Benefit Societies and Credit Unions Act 2010 after the legislative reform order comes into force. That will bring the industrial and provident society name into the 21st century, and modernise the powers available to update legislation in the future.

My hon. Friend the Member for Brecon and Radnorshire asked about reducing the burdens on building societies. We will shortly lay an order that gives mutual societies—including building societies—the option to use electronic communications to engage with members and distribute certain statutory information, as opposed to sending it by hard copy. That will reduce costs to businesses and enable them to invest more in services.

In recent years, credit unions have made great progress in providing affordable financial services to people who could not otherwise access them. They provide an alternative to payday lending, loan sharks and home credit, and I want them to continue to develop and strengthen. We are providing additional support to those institutions outside the regulatory legislative process. Building on the financial inclusion growth fund, the Department for Work and Pensions will continue to support credit unions for four years through a new expansion and modernisation fund worth up to £73 million. The fund will seek to extend access to basic, appropriate financial services to many people on lower incomes, through modernising delivery and customer support systems.

[Roger Williams]

One concern relayed to me by mutual societies, particularly building societies, is about the burden of reporting that has to be done on a regular basis, presumably to the Financial Services Authority. That seems to be out of proportion to the risk that building societies present, and certainly to that presented by large commercial organisations.

[Mr Hoban]

My hon. Friend makes an important point to which I should have responded earlier. He lays down a challenge about the burden imposed on building societies and other financial services organisations. The FSA has looked carefully at the regulation of building societies. He will be aware that building societies were affected during the financial crisis, and there were several rescues as they had to consolidate. The concern is that a number of them moved into areas in which they were not entirely comfortable or well resourced to deal with, and that put the building society and depositors at risk. We need to ensure a proportionate regime for regulating building societies that recognises the risks posed to members and financial stability.

One area in which the Government are taking forward further work to support building societies, and an issue building societies have raised as a consequence of the financial crisis, is the need to find new sources of capital. We are working closely with building societies to identify an instrument that enables them to raise capital markets, will help absorb losses if they occur in the future, and is consistent with enhancing the stability and security of the building society sector. We are taking active measures to strengthen the mutual sector because we believe that its diversity can act as a spur to further challenges to the banking sector. It is an important part of the architecture of financial services, not just in terms of providing mainstream products, but in trying to provide greater access to groups that are harder to reach.

I have been fortunate to have enough time to expand on the subject at some length. I hope that my hon. Friend will recognise that although the Government cannot intervene in the individual decisions taken by banks and building societies to close branches, we are committed to taking further steps to improve access to financial services throughout the country, in rural and urban areas alike. We recognise that particular challenges face financial services in rural areas, and we will continue to look carefully at those issues and listen to concerns raised by hon. Members.

Oral Answers to Questions

Debate between Roger Williams and Mark Hoban

Tuesday 21st December 2010 Commons Chamber

[Mr Hoban]

I am not going to be lectured by the hon. Lady about attitudes towards banks. Labour is the party that gave Fred Goodwin his knighthood, so I will not take any lessons from Labour politicians. They talk tough, but they did nothing when they were in government. This Government are taking real concrete measures to tackle bankers’ pay and to introduce the bank levy, which they refused to introduce. In Europe there will be a most stringent application of the Financial Stability Board principles on bankers’ remuneration.

[Roger Williams (Brecon and Radnorshire) (LD)]

8. What recent discussions he has had on the introduction of a Government-backed sovereign sukuk.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

As chairman of the all-party group on Islamic finance and diversity in financial markets, my hon. Friend is well known for his close interest in Islamic finance. The Government believe that sovereign sukuk issuance would not offer value for money at the present time, but the situation remains under review.

[Roger Williams]

I thank the Minister for that reply. A sovereign sukuk issued by the Government might lead to two benefits: first, providing funding for the Government’s borrowing requirement, and secondly, giving readier access to liquidity for the growing number of Islamic banks that operate in this country. Will he agree to meet a small group from the all-party group on Islamic finance and diversity in financial markets to discuss this matter in more detail?

[Mr Hoban]

My hon. Friend makes an important point. We recognise the benefits that a sovereign sukuk could bring to improving liquidity in the sector, but significant costs would arise from sovereign sukuk issuance. However, I am sure that my noble Friend Lord Sassoon, who leads on this matter, will happily meet him and his colleagues.