Oral Answers to Questions

Sajid Javid Excerpts

Tuesday 11th March 2014 Commons Chamber

[Nick de Bois (Enfield North) (Con)]

5. What steps he plans to take to reduce youth unemployment.

[The Financial Secretary to the Treasury (Sajid Javid)]

Youth unemployment is falling, and the rate for the number of young people not in education, employment or training is at its lowest since 2008. However, we are not complacent. We are helping up to 500,000 young people into education and employment through the Youth Contract, funding jobcentres to help young adults who are not at school to find work through training, and piloting a new mandatory skills scheme for young jobseekers without basic maths or English.

[Nick de Bois]

When the Chancellor came to my constituency—where youth unemployment has fallen 32% since the general election—to launch his employment allowance, he met representatives of the excellent Ridgeway Garages, who told him that they would be employing more people and hoped to employ more young people. They also came to last week’s job fair and recruited five people, including young people. However, many businesses were unaware of the existence of the employment allowance. What steps will the Chancellor take to promote that excellent scheme?

[Sajid Javid]

Let me begin by praising my hon. Friend for holding another successful job fair in his constituency. It is a concept that he pioneered, helping many young people to find jobs. HMRC has already held discussions with businesses, charities and payroll software providers about the employment allowance, and will use its key publications and communications to advertise it further. It will also work with key stakeholders to ensure that the abolition of employer national insurance contributions for under-21s, which will come into effect in April 2015, is delivered effectively.

[Ian Austin (Dudley North) (Lab)]

The Government clearly oppose the implementation of a national youth jobs guarantee, but given that long-term youth unemployment is twice as high in the black country as it is elsewhere, surely the Minister must accept the case for a specific, targeted plan to guarantee young people in the area the chance of a job or training so that they can start their careers.

[Sajid Javid]

When the last Government were in office, unemployment among young people rose by 45%, so we are not going to listen to any ideas that Labour Members may have about it. The best way of cutting unemployment, whether long-term or otherwise, is to establish a growing economy that creates jobs. In the last four years, our economy has seen 1.3 million jobs created, and more people employed than at any other time in history.

[Charlie Elphicke (Dover) (Con)]

Youth unemployment in Dover and Deal has fallen by 25% in the last year, having increased by 50% in the last Parliament. Does that not show that it is important for us not just to have a long-term economic plan that is working but to do more to repair the damage done by the last Labour Government?

[Sajid Javid]

My hon. Friend is absolutely right. We need to stick to our long-term plan to ensure that we have a growing economy that creates jobs and gives people the financial stability that they need, and the biggest risk to that plan would be our adoption of Labour’s policies of more borrowing, more spending and more debt.

[Andy Sawford (Corby) (Lab/Co-op)]

Unemployment among young people in my constituency remains stubbornly high, at just under 500, but under-employment is also a big issue. Many people are in insecure employment, on zero-hours contracts, and barely managing to struggle on the minimum wage. Will the Minister make an assessment of under-employment and develop a strategy to address it?

[Sajid Javid]

Unemployment in the hon. Gentleman’s constituency rose in all categories under the last Government, and youth unemployment has fallen by 33% so far under the present Government. I hope that the hon. Gentleman will join me in welcoming that. He is right to point out that we must do much more to deal with the problem, but I am sure he supports the efforts that the Government have made in regard to apprenticeships. There have been 1.5 million apprenticeship starts over the last four years.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

6. What consideration he has given to reforming the membership of the Monetary Policy Committee of the Bank of England.

[The Financial Secretary to the Treasury (Sajid Javid)]

The Government are protecting the incomes of low-income households by freezing fuel duty and taking 2.7 million people out of tax by increasing their personal allowance. The best way to raise—[Interruption.]

[Mr Speaker]

Order. I think that the Minister is a tad confused. We are on Question 6, which is about membership of the Monetary Policy Committee of the Bank of England.

[Sajid Javid]

I beg your pardon, Mr Speaker.

The Monetary Policy Committee consists of the individuals who are best qualified to make the decisions necessary to achieve the Government’s monetary policy objectives: the Governor of the Bank of England, the two deputy governors, two members of the Bank with responsibility for monetary policy and market operations, and four external members who are appointed by the Chancellor. All appointments are made on merit.

[Jonathan Edwards]

Diolch, Mr Speaker.

Regardless of the result of the referendum in Scotland, it seems inevitable that the devolved Governments will have more fiscal responsibility over the coming years. Fiscal empowerment needs to be matched with monetary policy-setting reform. Does the Minister agree that one option would be to appoint representatives of the devolved nations—and, arguably, representatives of territories outside the United Kingdom that use sterling, such as the Channel Islands and the Isle of Man—to the MPC, to ensure that monetary policy is formulated on the basis of the economic requirements of every part of the sterling zone? Would that not truly represent a partnership of equals?

[Sajid Javid]

No, I do not agree with the hon. Gentleman. I think the MPC is constituted in the right way. He knows that monetary policy is not a devolved responsibility, and there are no plans to change that.

[Mr Douglas Carswell (Clacton) (Con)]

As well as ensuring more diversity in terms of gender, will my hon. Friend ensure more diversity of opinion and outlook in the membership of the MPC? Specifically, may we have a few free market economists who recognise that cheap credit is a consequence of economic success, not necessarily a cause of it?

[Sajid Javid]

I like the contribution my hon. Friend makes to Parliament so I hope that he is not applying to join the MPC. I agree, however, that when appointments are made on merit, diversity is important.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I wonder if the Minister can tell us why there have been no women on the MPC since June 2010. Why has the Chancellor not appointed a single woman to the MPC over those last four years, and does the Minister agree with Labour that it is time to put that right?

[Sajid Javid]

Appointments to the MPC should always be made on merit and—[Interruption.] Diversity is, of course, always an important consideration. Factors in decisions on appointing external members to the MPC include looking at career training and background as well as ethnicity and gender. [Interruption.] The Government would like to see more women on the MPC and will encourage them to apply. [Interruption.] It is also worth noting that four women have already been part of the MPC.

[Stephen Mosley (City of Chester) (Con)]

Following on from the previous question, how will the Government be encouraging more women to apply for jobs on the MPC?

[Sajid Javid]

Whenever there is a vacancy on the MPC, the Government look at encouraging women to apply and will often invite women to apply to ensure that we can make our best efforts to increase diversity.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

7. What plans he has to enhance the role of the Office for Budget Responsibility.

--- Later in debate ---

[Mr Stephen Hepburn (Jarrow) (Lab)]

8. What steps he has taken to reduce the cost of living for people on low incomes.

[The Financial Secretary to the Treasury (Sajid Javid)]

The Government are protecting the incomes of low-income households by freezing fuel duty and council tax and taking 2.7 million people out of tax by freezing the personal allowance. The best way to raise living standards is to stick to the Government’s long-term economic plan, which delivers for all. Britain is back on the path of prosperity: the economy is growing, the deficit is falling and jobs are being created.

[Mr Hepburn]

Now that’s nonsense. How on earth can this Government—the lot of them—justify this, let alone lie straight in bed at night, when they have given the top 1% richest people in this country a £100,000 pay rise and at the same time they are impoverishing the real workers of the country—the postmen, the nurses, the teachers—by making them up to £2,000 a year worse off?

[Sajid Javid]

The hon. Gentleman should put an end to the petty party politics and focus on the facts. He talks about the richest 1%, but the richest 1% are paying almost 30% of total income tax, which is the highest share ever. The richest 5% are paying almost 50% of total income tax. The only way this country will recover from Labour’s great recession is if we stick to our long-term economic plan, which is delivering for all.

[Christopher Pincher (Tamworth) (Con)]

Is not creating more jobs the best way to help the lowest paid? Of the 200 businesses I have polled in my constituency, 83% say that they are optimistic about the future and want to expand to create more jobs. Would not the best way to help them be to lower their taxation so that they can create those job opportunities?

[Sajid Javid]

Of course my hon. Friend is right; the best way for anyone to raise their living standards is through having an economy that creates more paid employment. That is why we should welcome the fact that more than 1.3 million jobs have been added to our economy over the past four years.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

The Minister is not having the best of days today, and I wonder whether I could help him by inviting him and the Chancellor to come to Coventry, where I could introduce him to many families in my constituency who are on very low wages and, despite both parents working, finding it very hard to make ends meet. Is he aware that the singular achievement of this Government, and this Treasury, has been to create a new social class—namely, the working poor?

[Sajid Javid]

The hon. Gentleman talks about people not having the best of days, but he should reflect on the policies of the Government he supported and on how many lives were destroyed by the great recession, which was the deepest in 100 years. The best way to raise living standards is to stick to our long-term economic plan. If we abandoned it, many more people would suffer.

[Ian Swales (Redcar) (LD)]

A good way to help those on low incomes is to take less money from them in tax. Next month, the Liberal Democrat manifesto target of a £10,000 income tax threshold will be achieved. Will the Minister help the low paid further by increasing that threshold to £10,500?

[Sajid Javid]

This Government are proud that we have been able to cut taxes for the lowest paid in society. In fact, people working full time on the national minimum wage will have seen their income tax bill more than halved because of this Government, and I welcome my hon. Friend’s support for that policy.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Now we know that the Minister thinks there are no women in Britain good enough to be on the Monetary Policy Committee, let me ask him another question. The Chancellor’s Budgets and spending reviews have hit women, particularly those on low incomes, a staggering four times harder than they have hit men. Millions are struggling with the cost of living crisis, and people are on average £26 a week worse off since 2010, so why are the Chancellor’s top-rate tax cut and marriage tax break giving 80% of the benefit to men? Just take a look at the Government Benches. Are this Government completely out of touch with the women in this country?

[Sajid Javid]

Because of this Government’s economic plan to deal with the record budget deficit that the previous Government left behind, more women are employed in our economy than at any other time in history, and 1.4 million women have been taken out of income tax altogether because of our personal income tax allowance increases.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

9. What assessment he has made of the effect of freezing fuel duty on the price of petrol.

--- Later in debate ---

[John Howell (Henley) (Con)]

15. What recent steps he has taken to reform the banking sector.

[The Financial Secretary to the Treasury (Sajid Javid)]

Through the Financial Services (Banking Reform ) Act 2013, the Government have brought forward the most significant reform to the banking sector in a generation. We have ring-fenced vital everyday banking, including investment banking, and introduced depositor preference and bail-in to ensure that taxpayers are not on the hook when a bank fails.

[John Howell]

Does my hon. Friend agree that under the previous Government’s system of financial regulation, there were no clear channels of accountability, and that by putting the Bank of England back in charge, it will be better placed to take full responsibility for financial stability?

[Sajid Javid]

I agree with my hon. Friend. Under the previous Government’s system of financial regulation, there was a lack of clarity over who was responsible for financial stability, so when the alarm bells were ringing, no one was listening. We have reformed the system of financial regulation to address those failures by placing responsibility for financial stability firmly with the Bank of England and creating two newly focused financial regulators, the Prudential Regulation Authority and the Financial Conduct Authority.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

If the Royal Bank of Scotland asks for permission to pay bonuses of more than 100% of salary—while, incidentally, its subsidiary NatWest closes branches in my constituency—will the Chancellor just say no, or is he as out of touch as the bank appears to be?

[Sajid Javid]

The failed regulation by the previous Government that led to Government ownership of RBS also produced a system of governance that is done on an arm’s length basis. Those are commercial decisions for RBS. If the hon. Gentleman wants to make representations to it, he can do so through me if he wishes.

[Richard Fuller (Bedford) (Con)]

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

--- Later in debate ---

[Bill Esterson (Sefton Central) (Lab)]

The Government’s own figures show that net lending to small and medium-sized enterprises has fallen since the funding for lending scheme was introduced, as confirmed by businesses in my constituency. Does the Minister accept that the scheme has totally failed Britain’s small businesses?

[The Financial Secretary to the Treasury (Sajid Javid)]

The hon. Gentleman is right to raise this issue. Lending to small businesses has been a matter of concern to this Government. There are potentially some issues of competition in the market, and that is why we welcome today’s update by the Office of Fair Trading on its SME market study. The funding for lending scheme has helped. It has increased net lending by the participating banks by more than £10 billion during its first phase, and I think we are right, in its second phase, to focus it on SMEs only.

[Tessa Munt (Wells) (LD)]

I am sure that Members of this House will welcome the overwhelming support in the European Parliament this morning in voting in favour of open public registers of company beneficial ownership and voting against exempting trusts from public disclosure. Will the Minister apply pressure to his colleagues to ensure that the Council adopts the same rigorous position as Members of the European Parliament?

[Mark Tami (Alyn and Deeside) (Lab)]

The banks keep telling us that they are lending more to small business, but the reality on the ground seems to be very different. In particular, what are this Government doing about the excessive level of charges, which means that even when loans are available they are often not taken up?

[Sajid Javid]

I hope that the hon. Gentleman supports the funding for lending scheme, which has not only led to more money in the banking system going to companies and households, but reduced the cost of lending. He may also be aware of today’s update from the OFT. I suggest he takes a good look at it, because it is worth reading.

ECOFIN

Sajid Javid Excerpts

Tuesday 25th February 2014 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

A meeting of the Economic and Financial Affairs Council was held in Brussels on 18 February. The following items were discussed.

Annual Growth Survey 2014: Guidance on the implementation of priorities agreed at the December European Council on macroeconomic and fiscal matters

ECOFIN adopted Council conclusions on the annual growth survey. The Government support the Commission’s focus on fiscal consolidation, promoting economic growth and employment, and broadly agree with the Commission’s overall priorities. However, the Government consider that the European semester should focus on the core priorities of growth and jobs, and that these conclusions should not provide a mandate for a justice scoreboard.

Alert Mechanism Report 2014

ECOFIN adopted Council conclusions on the alert mechanism report (AMR) which marks the start of the macro-economic imbalance procedure cycle.

Preparation of G20 Meeting of Finance Ministers and Governors (Sydney, Australia, 22-23 February 2014)

The Council endorsed the EU terms of reference for the G20 Finance Ministers and Governors meeting in Sydney.

Discharge procedure in respect of the implementation of the budget for 2012

The Council, on the basis of a report from the Court of Auditors, approved the recommendation on the discharge to be given to the Commission in respect of the implementation of the general budget of the European Union for the financial year 2012. The UK, along with the Netherlands and Sweden, voted against the discharge of the EU budget and submitted a joint statement expressing disappointment that the Court of Auditors had been unable to give an unqualified statement of assurance for the 19th consecutive year and that the overall error rate had increased.

Budget guidelines for 2015

The Council adopted conclusions on the budget guidelines for 2015, which will be its overall reference for the budget year.

Implementation of the Single Supervisory Mechanism

The European Central Bank presented its first quarterly report on progress in the implementation of the single supervisory mechanism (SSM). The establishment of the SSM will help to safeguard euro area financial stability and is critical to restoring market confidence over the medium term.

Current legislative proposals

The presidency provided information on the ongoing work on financial services dossiers.

Single Resolution Mechanism

The presidency updated the Council on the trilogue process with the European Parliament. The UK welcomed the progress made on this file since the general approach was reached at ECOFIN in December 2013, and will be ensuring that it fully respects the unity and integrity of the single market.

Currency in Scotland after 2014

Sajid Javid Excerpts

Wednesday 12th February 2014 Westminster Hall

[The Financial Secretary to the Treasury (Sajid Javid)]

I welcome you to the Chair, Mrs Riordan. It is always a pleasure to serve under your chairmanship, and it is good to see my right hon. Friend the Under-Secretary of State for Scotland here today. I congratulate the hon. Member for Edinburgh South (Ian Murray) on securing this debate, on his excellent, thoughtful speech and on giving all hon. Members an opportunity to discuss this important issue. The debate has been lively and passionate. Indeed, it has been the liveliest and most passionate Westminster Hall debate that I have yet seen, which shows how important the issue is not just to the people of Scotland but to the people of the entire United Kingdom.

It is no exaggeration to say that the currency that we use affects everyone every day, whether they are individuals buying food or paying off loans, businesses paying their employees or trading across borders or banks protecting savings or providing mortgages. Currency is one of the most important issues in the Scottish referendum debate. Members may be aware that last April the UK Government issued a comprehensive paper exploring an independent Scotland’s possible currency options. Members will be aware—many hon. Members have referred to this today—that just last week the Governor of the Bank of England, Mark Carney, set out his views on currency unions in measured and, as he describes it, technocratic terms. Members may also have read that the Chancellor plans to give a speech on the matter later this week.

[Pete Wishart]

In the past few days, the Prime Minister and the Chancellor have been playing good toff, bad toff with Scotland. The Prime Minister is love-bombing us from London, and the Chancellor will be threatening us on currency in his speech in Scotland in the next two days. Which one does the Minister support—the good toff or the bad toff?

[Sajid Javid]

That goes to show that the SNP is not interested in a serious debate on one of the most important issues facing the Scottish and British people. That speaks for itself.

The Government have consistently stated throughout the debate that the current economic arrangement—one currency in one United Kingdom—is in the best interest of everyone. We have also consistently stated that it is highly unlikely that a currency union between an independent Scotland and a continuing UK could be made to work. I will use the remaining time to remind hon. Members of our analysis, which explains why that is the case.

First, the lessons of the eurozone crisis are there for us to see. Currency unions do not work without close political and fiscal integration. As a result of the crisis, those countries that use the euro are moving towards ever greater integration to address the challenges that they face. Scottish independence, though, is all about disintegration and would inevitably mean that the continuing UK and Scotland move further apart. The Scottish Government’s proposal for a currency union without fiscal or political integration lacks any credibility and makes one wonder whether the Scottish Government actually understand what the word “independence” means.

Secondly, we know that the economies of an independent Scotland and a continuing UK would be very different and would diverge over time as a result of different laws, different regulations and different industries. One industry that we know would be important for Scotland is North sea oil. A significant portion of an independent Scotland’s economy would depend on oil revenues. Were a change in oil price to affect the two countries differently, a one-size monetary policy with one currency for two separate nations would simply not be suitable.

Thirdly, despite the Scottish Government’s claim, we do not believe that a currency union would be in the interest of an independent Scotland. Such a union would inevitably constrain Scotland’s own economic policies because the remaining UK, to manage the risks of the union, would need to set interest rates and maintain oversight of an independent Scotland’s tax and spending plans. Indeed, a currency union would also be likely to undermine an independent Scotland’s economic resilience and credibility. If, for example, the financial markets sensed that the Bank of England’s monetary policy did not suit Scottish circumstances, they might doubt Scotland’s commitment to the currency union, which would, in turn, lead to financial market speculation. In such circumstances, if markets were not calmed, there would be a very real possibility that Scotland would be forced to adopt its own currency in a time of crisis. One is reminded of the recent situation in Cyprus when there was plenty of talk of the country potentially leaving the euro. Members will know that that was prevented only after a huge bail out from other eurozone members, which came at a significant cost to Cypriots, many of whom lost up to 40% of their deposits in domestic banks.

Fourthly, just as a currency union is not in Scotland’s interest, it is hard to see how it could be in the interest of the remaining United Kingdom. Such a union would involve the remaining United Kingdom giving up an element of its economic sovereignty, as we have heard from many hon. Members today. The public would feel very strongly about that. It would increase the risk of having to bail out Scottish banks, and the idea of putting the remaining United Kingdom’s economy at risk because of another country’s banks just as we are getting our own banks in order would make no sense.

Before I come to an end, I will address some of the questions that have been raised. I listened carefully to the speech of the hon. Member for Dundee East (Stewart Hosie) and what he has to say on this issue is very important. I agree with the shadow Minister that he is an intelligent person who makes valuable contributions in the House, but from what I have heard today, he does not seem to want facts to get in the way of a good argument.

The hon. Gentleman and other hon. Members mentioned the banking bail outs of 2008. I remind him that the cost of recapitalising the Royal Bank of Scotland was £45 billion, which is the largest banking bail out the world has ever seen, plus an additional £275 billion of state support through guarantee and funding commitments. That sum is more than 200% of an independent Scotland’s GDP.

[Stewart Hosie]

Presumably, the Minister does not disagree with the Banking Commission that the total cash cost of the entire financial bail out of all the systems was £133 billion. Of the other figures that he talks about, £220 billion was made up of the asset protection scheme, which was a paid-for insurance guarantee. The scheme made the taxpayer a profit and was never called upon; it has since been shut down. Will the Minister confirm that that is correct?

[Sajid Javid]

Again, that is a good demonstration of how the hon. Gentleman would like to twist the facts. Just because a guarantee is not called upon does not mean that it has not done its job. The guarantee provided confidence and ensured that the banking system did not collapse. Our analysis shows that Scottish banks, even when we focus only on their assets in Scotland, would have assets equal to 10 times the GDP of an independent Scotland. That shows that it would be difficult for an independent Scotland to give depositors confidence in its domestic banking system.

The hon. Gentleman also mentioned trade between the UK and Scotland. The UK accounts for 70% of Scotland’s total trade, whereas Scotland accounts for 10% of the UK’s trade. Scottish trade is important to the UK economy, but it is not clear that it is important enough to risk recreating in the British isles the problems that we have seen in the euro area.

In conclusion, a fiscal and currency union pursued by two diverging nations would put significant limits on an independent Scotland’s economic freedom, and it would put an independent Scotland at severe risk of losing economic resilience and credibility. Such a union would undermine a continuing UK’s sovereignty and would increase the risk of bank bail outs. That is why we have consistently said that it is highly unlikely that a currency union would be agreed and that it is highly unlikely that a currency union could be made to work.

ECOFIN

Sajid Javid Excerpts

Thursday 6th February 2014 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

A meeting of the Economic and Financial Affairs Council was held in Brussels on 28 January 2014. The following agenda items were discussed.

Current legislative proposals

The presidency provided information on the ongoing work on financial services dossiers.

Implementation of the Single Supervisory Mechanism

The European Central Bank (ECB) provided an update on the state of play of the implementation of the single supervisory mechanism (SSM). The establishment of the SSM will help to safeguard euro area financial stability and is critical to restoring market confidence over the medium term.

Presentation of the Presidency work programme

The Greek presidency presented its six-month work programme for ECOFIN. The main themes of the presidency are: growth, jobs and cohesion; further EU/eurozone integration; migration, borders and mobility; and maritime policy.

Follow-up to the European Council meeting on 19-20 December 2013

Council held an exchange of views on the December 2013 European Council conclusions regarding the implementation of the compact for growth and jobs. The UK supports the objectives of the compact to promote growth and competitiveness and tackle unemployment.

Implementation of the Stability and Growth Pact

Council endorsed a Council decision on the existence of an excessive deficit in Croatia and a council recommendation to put an end to the present excessive deficit situation.

Counter-Terrorist Asset-Freezing Regime

Sajid Javid Excerpts

Tuesday 28th January 2014 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

My noble Friend the Commercial Secretary to the Treasury, Lord Deighton, has today made the following written ministerial statement:

Under the Terrorist Asset-Freezing etc. Act 2010 (“TAFA 2010”), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council Resolution 1373.

This is the 12th report under the Act and it covers the period from 1 October 2013 to 31 December 2013. This report also covers the UK implementation of the UN al-Qaeda asset-freezing regime and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU. Under the UN al-Qaeda asset-freezing regime, the UN has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under the Al-Qaeda (Asset-freezing) Regulations 2011. Under EU Regulation 2580/2001, the EU has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

Annexes A and B to this statement provide a breakdown, by name, of all those designated by the UK and the EU in pursuance of UN Security Council Resolution 1373.

The following table sets out the key asset-freezing activity in the UK during the quarter ending 31 December 2013:

ECOFIN

Sajid Javid Excerpts

Tuesday 28th January 2014 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

A meeting of the Economic and Financial Affairs Council will be held in Brussels on 28 January 2014. The following items are on the agenda to be discussed.

Current legislative proposals

The presidency will provide information on the ongoing work on financial services dossiers.

Implementation of the Single Supervisory Mechanism

The European Central Bank (ECB) will provide an update on the state of play of the implementation of the single supervisory mechanism (SSM). The establishment of the SSM will help to safeguard euro area financial stability and is critical to restoring market confidence over the medium-term.

Presentation of the Presidency work programme

The Greek presidency will present its six-month work programme for ECOFIN. The main themes of the presidency are: growth, jobs and cohesion; further EU/eurozone integration; migration, borders and mobility; and maritime policy.

Follow-up to the European Council meeting on 19-20 December 2013

Council will hold an exchange of views on the December 2013 European Council conclusions regarding the implementation of the compact for growth and jobs. The UK supports the objectives of the compact to promote growth and competitiveness and tackle unemployment.

Implementation of the Stability and Growth Pact

Council will be asked to endorse a draft Council decision on the existence of an excessive deficit in Croatia and a draft Council recommendation to put an end to the present excessive deficit situation.

Rothschild Bank and Mortgage Equity Release (Spain)

Sajid Javid Excerpts

Wednesday 22nd January 2014 Westminster Hall

[The Financial Secretary to the Treasury (Sajid Javid)]

I welcome you to the Chair, Mr Turner. It is always a pleasure to serve under your chairmanship. I thank the hon. Member for Ogmore (Huw Irranca-Davies) for making a powerful case on behalf of his constituents. I assure him that I have listened very carefully.

Some of us will have constituents affected by these products who now face an uncertain financial future instead of the comfortable retirement they thought they had earned. As the hon. Gentleman said, the equity release products in question were sold to some UK pensioners resident in Spain. It seems that they were sold by independent financial advisers operating in Spain who suggested that they release equity from their houses and invest the loan in a fund, often claiming that that would have inheritance tax benefits. The products were then provided by a variety of banks, mainly based in Scandinavia, but including Rothschild bank.

With the onset of the financial crisis, those investments did not perform, so many of the investors breached the terms of the loan they were given. That has left many expats in Spain, including those from the UK, with significant financial losses. Some of the banks involved, many of which were facing their own financial difficulties, have sought to repossess the properties on which the loans were secured. That has left some pensioners facing not only large losses, but the threat of repossession, which is a stark contrast with the comfortable retirement they had planned.

Of course, I am sympathetic to the difficulties that these people are facing. Many of them have lost a great deal, but I am afraid that the Government’s ability to act in this case is limited. The products were not sold in the UK or by UK companies and the loans were not secured against properties located in this country, so the UK authorities do not have any jurisdiction over that activity.

What I have said will be frustrating for the individuals involved, but the same rules allow our own regulators to protect our domestic consumers from foreign banks operating here in the UK. I realise that some banks in Europe were involved in providing the products sold by independent financial advisers in Spain. The hon. Gentleman highlighted Rothschild bank specifically. It has strong historic connections with the UK.

I have looked into the matter further, and I understand that Rothschild sold around 130 of the products between 2005 and 2008. However, that activity was carried out by its Guernsey-based entity and, as the hon. Gentleman knows, the Channel Islands do not come under the jurisdiction of the UK Government or UK regulators. The Guernsey regulator may have some jurisdiction over the design and distribution of the product, but that is not for the UK authorities to establish. I understand that some of those who have lost out have taken the case up with the Spanish authorities, and that may be an appropriate option for them.

I am sorry to report that the UK Government have limited influence over this case. I understand that Rothschild has provided affected customers with some flexibility. For example, it is my understanding that it is not repossessing the properties of those that have been affected. That, of course, is welcome. As I said, the UK authorities do not have any jurisdiction over this activity. However, I appreciate that Rothschild has major operations in the UK, so I am happy to write to it to pass on some of the concerns that the hon. Gentleman has raised. I will also raise the matter with my counterparts in Spain and Guernsey to bring it to their attention. I will be more than happy to meet the hon. Gentleman and his constituents if he would find that useful.

The hon. Gentleman may be interested to know that the UK ambassador to Spain wrote to the Spanish regulator about this issue in 2012. Following that exchange, the Foreign Office published advice for people considering taking out equity release products in Spain. It highlighted the importance of checking that the company offering the mortgage is registered with the Spanish financial regulator, known as the CNMV. The publication explains that consumers unhappy with the product should first complain to the company responsible and that, if they are still dissatisfied, they can complain to the Spanish financial regulator.

In a broader context, my hon. Friend the Member for South Derbyshire (Heather Wheeler) gave sensible advice for people who are thinking of taking out similar equity release products in the UK.

In summary, I fully understand and support the hon. Gentleman’s concerns for his constituents affected by these products.

[Huw Irranca-Davies]

I thank the Minister for a very positive, full and helpful response. He may not be able to answer this question now, but does he think that there is any scope within European legislation or elsewhere to avoid this situation happening in the future? In this situation, a UK-based company that has a subsidiary in Guernsey operates in Spain, and people assume that it is applying the same ethical and moral standards elsewhere. Let us lift the debate above Rothschild for a moment. Any company doing what has been described could, within the European Union, be brought to book in one way or the other. Does the Minister think that there is something there that we should be exploring?

[Sajid Javid]

When I first looked into the issue, I thought about that. Unfortunately, I do not think that there is such an avenue through European Union institutions. I am happy to explore the matter further; perhaps when we meet, I can give the hon. Gentleman more information. He may be interested to know that there is currently a mortgage market directive. It is in its final stages in the European Union, but I think that I am right in saying that it does not include equity release products. Obviously, it would not have helped the hon. Gentleman’s constituents anyway; it is for the future.

I am happy to raise the issue with people in the way I have explained to the hon. Gentleman and I thank him again for bringing up this case. I will be happy to report back to him.

[Huw Irranca-Davies]

The few minutes remaining provide an opportunity to get more issues on the record. The Minister may be interested in responding to some other people who have written to me subsequently, when they learned of the debate. One of them wrote:

“When my wife and I met Mr Dewsnip”—

who came up earlier in the debate—

“at one of his public presentations and had a private chat with him after the main event, he most certainly did advise us as to the suitability of the investment fund and assured us that Rothschild would be working on a daily basis with the fund managers to ensure that it was meeting expectations and performing as expected.”

I could cite other examples that imply an intimate, daily, minute-by-minute relationship, but I have yet to discover whether that also means that Rothschild or anyone who worked for Rothschild was financially benefiting from it. That would be interesting and it may figure in a subsequent meeting that I have with Rothschild.

[Sajid Javid]

The hon. Gentleman is right to ask such questions and to raise them in any meeting that he may have with Rothschild and with the relevant regulators for the entities that we have discussed today. I will report back to the hon. Gentleman in due course. I thank him again for raising this important issue.

Question put and agreed to.

Equitable Life Payment Scheme

Sajid Javid Excerpts

Wednesday 22nd January 2014 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

As of 31 December 2013 the Equitable Life payment scheme has made payments totalling £816 million to 717,600 policyholders. The scheme has also published a further progress report, which can be found at: http://equitablelifepaymentscheme.independent.gov.uk/

Over the coming months the scheme will continue to make payments and any policyholders who have not been contacted should call the scheme directly on 0300 0200 150 to check their eligibility for a payment. To support this, the scheme has implemented a new system in their call centre which allows most policyholders to verify their identity on the telephone and thus receive any payment due more quickly, usually within two weeks.

The scheme remains committed to locating as many of the remaining policyholders as possible before it closes in 2015. In addition to the recent advertising campaign which resulted in around 20,000 people calling the scheme, the scheme has also identified enhanced methods of policyholder tracing. It is anticipated that these new approaches will result in thousands more policyholders who have not already identified themselves to the scheme being paid.

Money Transfer Accounts and Remittance Sector

Sajid Javid Excerpts

Wednesday 22nd January 2014 Westminster Hall

[The Financial Secretary to the Treasury (Sajid Javid)]

It is always a pleasure to serve under your chairmanship, Mr Owen.

I congratulate the hon. Member for Cardiff West (Kevin Brennan) on securing this important debate. I listened carefully to him and to all other hon. Members who spoke. They set out a well-argued case and made their points well.

Remittances play a vital role in supporting the people and economies of countries throughout the world. As we have heard, they are a financial lifeline for the families of Somalis, Pakistanis, Poles and other diaspora groups that are living here in the UK. A healthy and functioning remittance sector is crucial for thousands of our constituents up and down the country. We heard from the hon. Member for Bethnal Green and Bow (Rushanara Ali) about her personal experience, and she referred to comments that I have made about my own personal experience. My parents came to this country from Pakistan. They have many loved ones still living there who rely on remittances. I have seen what it is like if sometimes those remittances are missed or not received—it can make a real difference to day-to-day living standards—so I am grateful to Members who have shared personal stories, or told stories on behalf of their constituents, and their contributions show just how important a topic this is.

The UK is a global leader in the fight against money laundering and terrorist financing. Our banks and regulators have a vital responsibility to ensure that there is not inadvertent financing of criminal activities that could pose real risks to British citizens, as well as to national and international security. The Government are proud of our international role on this issue—we are setting the agenda. The Prime Minister received wide international recognition for his role in driving forward that agenda during our presidency of the G8 last year.

The right approach to tackling money laundering and terrorist financing should support a healthy and growing money transfer sector, rather than stifling legitimate money flows or financially excluding honest customers. I assure hon. Members again that the Government are committed to achieving that approach, and I shall set out the steps that we are continuing to take as we work closely with the private sector to facilitate a sustainable, market-based solution to what I accept is a real challenge.

The context for the debate is the trend in recent years for banks in many countries to withdraw accounts from money service businesses in response to perceived risks, and to reputational and regulatory concerns. That is important, because access to banking facilities makes remittances quick and transparent, and keeps costs low. We need to be clear that neither the Government nor regulators can compel banks to offer an account to any customer. Such a decision taken by a bank is private and commercial, and in accordance with their risk appetite and compliance with legal and regulatory requirements. The Government cannot intervene in banks’ day-to-day decisions. I was asked about the publicly owned banks in the UK, and the same applies to them: the Government cannot intervene in their commercial decisions or prevent—

[Rushanara Ali]

The question is about not the Government forcing banks to act in a certain way, but whether discussions have taken place to encourage banks to look at a solution so that they can play an active role. In the session that the Minister hosted last year, the chief executive of one bank was receptive to such dialogue. It is about working with them to find out whether there is a way forward, rather than telling them what to do. Some more enlightened individuals—board members—in the banking sector are worried about the impact of this situation and the damage it does to their banks’ reputations, and they are keen to explore this issue.

[Sajid Javid]

The hon. Lady makes a good point. Banks should be concerned about the reputational impact that could arise as a result of their decisions. I confirm that the Treasury, the British Bankers Association and other representatives of the banking industry have discussed the issue. We are engaged with all banks, including state-owned banks. I stress that what a bank does, or does not do, is ultimately a commercial decision for it to take.

[Stephen Doughty]

I say gently that the idea that the Government do not get involved in directly suggesting what banks do and do not offer is a little bit away from the point. For example, the Government work closely with banks, through Help to Buy and other schemes, on what commercial products they offer and how they provide them to serve the public. I wonder, perhaps philosophically, why this matter is being treated slightly differently.

[Sajid Javid]

The hon. Gentleman will know that the state-owned banks came about by accident rather than design, and the Government’s overriding purpose now is to return those banks to the private sector, with the best interests of shareholders paramount. With regard to Government involvement in the banking sector, he mentioned the Help to Buy scheme. That is a good example of a scheme that is designed to work through incentives. No bank is compelled to take part in that scheme or similar ones, such as the funding for lending scheme, which work through incentives. It is important to consider what the Government can do to make it easier for banks to stay in the MSB sector or to get more active in it. That is the right area to explore to help our constituents.

The Government cannot prevent UK banks from facing supervisory and enforcement action from other jurisdictions. Hon. Members know that this is not just about rules in the UK, because European Union rules, and especially rules in the US, affect many money transfer businesses, because most transfers typically have to be converted into US dollars and therefore touch US soil. What the US authorities think is therefore important.

We are committed to doing our utmost to ensure that remittances continue to flow through secure, legitimate channels. The market is adapting, and remittances are continuing to flow into and out of the UK. Particular concerns have been raised regarding Somalia, as we have heard today. That market, too, is adapting and remittance channels remain open. The supervisors and the Government have been monitoring the situation carefully. We know that all MSBs operating in the Somali corridor prior to the decision by Barclays continue to do so, with a number still having bank accounts. Although individual MSBs may be finding trading conditions more difficult, remitters can still service a wide range of customers in the UK and different areas in Somalia. Additionally, many MSBs across a range of corridors are becoming agents of other MSBs, and discussions have been held with various MSB communities on using cash couriers in a manner that is secure and compliant with legal requirements for the cross-border movement of cash.

We must ensure that our constituents are aware of the options available to help them to continue to make remittances. Since the previous debate on the matter in this Chamber, the Government have engaged directly with the Somali community on these options.

Since the previous time I addressed hon. Members on this issue, I have made a written ministerial statement setting out the cross-government effort to find solutions, which included an action plan to secure the continued flow of remittances. The plan includes steps to improve trust in the UK remittance market by the formal banking sector, for example, through building the capacity of money service businesses and providing guidance on the banking of such businesses. It also outlined the creation of an independent action group on cross-border remittances. Through this group, officials from across the Government are working closely with regulators and the private sector to facilitate a sustainable market-based solution. The first full meeting of the group is scheduled to take place next Friday—31 January. I am pleased to announce today that Sir Brian Pomeroy will chair the group. Sir Brian has extensive experience in this field, as the founding chairman of the Payments Council and the previous chair of the Treasury’s financial inclusion taskforce, and through his work with the Alliance for Financial Inclusion.

[John McDonnell]

Fauzia Adan, a former constituent of mine, is now Deputy Prime Minister and Foreign Affairs Minister of Somalia. I am not sure whether there has been full dialogue with the Somalia Government regarding their representation on this group. Has a representative been nominated?

[Sajid Javid]

I cannot tell the hon. Gentleman specifically whether a representative was nominated or if there will be one in the group, but I can certainly look into that and get back to him. I can confirm that we are working with the Somalia Government, through the Foreign and Commonwealth Office, on this issue overall.

The Somalia-focused working group may be of particular interest to many hon. Members in the Chamber. The group has been tasked with developing a safer corridor pilot to ensure secure remittance channels to Somalia. The group will work with the World Bank, which will provide technical expertise, and the pilot will aim to improve the security, transparency and oversight of this existing remittance channel. The Department for International Development has held consultations to identify appropriate representatives for the working group on the safe corridor. International partners, including the World Bank, the G20 and the international strategic alliance on law enforcement, are also supporting this work.

The group working on the pilot has agreed its final terms of reference, through consultation with stakeholders, and these will be presented to the action group next week. The Somalia-focused group, working with its partners, including the World Bank and others, believes that there is a one-year implementation for the pilot project.

Before I conclude, I want to make sure that I have answered questions raised by hon. Members, if I have not answered them already. The hon. Member for Cardiff West asked about international engagement. I hope that I have given him some insight into that, regarding our working with the G20, the World Bank and other international partners. We are also working through the EU. The hon. Gentleman knows that a payment services directive exists, but a second payment services directive is being negotiated with EU partners. We have taken a strong interest in that to ensure that whatever comes out of it does not make this situation any more difficult, but helps to improve it by encouraging the development of rules to deal with money laundering and our other natural concerns that are proportionate and do not make the situation difficult for banks throughout the EU. We have to keep in mind that Britain has, I think, more money service businesses than any other European country, so that is another important aspect of our international engagement.

Several hon. Members asked how well Government co-ordination is working. We have a steering group at Government level, of which the Treasury is part, which meets every single week. As well as the Treasury, the group involves the Cabinet Office, the Foreign and Commonwealth Office, the National Crime Agency, which provides information from our intelligence agencies that we think might help, Her Majesty’s Revenue and Customs, the Financial Conduct Authority and the Department for International Development. The Treasury is a core part of that group, which has proved important in ensuring that we stay on top of the issue and treat it with the urgency that it deserves.

[Rushanara Ali]

I thank the Minister for his answers, but I have a couple of further questions. First, are there likely to be any impact assessments on cash couriers? Will the group’s terms of reference include what it would mean if cash couriers were going into those countries? What should Somali and other remitters expect? Secondly, will the terms of reference be published? Will there be opportunities for people in the community and the various sectors, and for the NGO community and Opposition Members, to feed in their suggestions?

--- Later in debate ---

[Sajid Javid]

First, we believe that cash couriers, if structured properly, can play a sensible and legitimate role in expanding provision for MSBs. That can work if it is done in a certain way. The action group is working to produce more guidance on how we think that can work, with the aim of making the banks more comfortable. That is why it is important to discuss the matter around the table with regulators and NGOs, which are also part of the action group. That is important not just in the context of cash couriers, but more generally.

My understanding is that the terms of reference will be published, but I will look into that further and get back to the hon. Lady with a more specific answer. My only slight hesitation is that some aspects of the discussion will be confidential and sensitive, especially those relating to money laundering and the financing of terrorists. I hope that she understands that some information will not be put in the public domain because it would not be practical or sensible to do so. Although I am keen to ensure an ongoing flow of information from the action group so that our constituents may stay updated, I do not suggest that the action group will share all the information that is put before it, or all the work that is going on at a Government level.

[Kevin Brennan]

Although the Minister is not able to order anyone to do anything, I asked him whether he agreed that Barclays ought to consider reopening the bank accounts of businesses such as the one in my constituency that were closed following our debate in July 2013, so that while the court case is being considered, those businesses may get on with the business that they have carried out legally, lawfully and without problem for many years? It would be helpful if the Minister were able to say that he feels that Barclays ought at least to consider doing that, even though I completely accept that he is not in a position to order it to do so.

[Sajid Javid]

I thank the hon. Gentleman for reminding me of his question. I understand why he raises that matter, and there are two parts to my answer. First, there is a legal dispute, and I do not think it is sensible for any Minister to give an opinion on any matter that is before our courts, which would not be helpful to either party in the dispute. Secondly—this links to my earlier point—Barclays has to make its own decisions. Barclays is a commercial organisation. It has to assess the risks of doing business as well as, as the hon. Member for Bethnal Green and Bow pointed out, the potential impact of its commercial decisions on its own reputation. I will ensure that Barclays receives the report of our proceedings so that it may have an opportunity to reflect on the words of not just the hon. Gentleman, but all hon. Members who have participated in the debate.

[Stephen Doughty]

With your indulgence, Mr Owen, I have three brief points for the Minister to respond to. First, on the time scales and the window of opportunity that we have, will he assure us that there will be key milestones by which certain aspects of the process will have been concluded? Secondly, will the action group report back to the wider community that has an interest after the meeting on 31 January, because one concern is that there has not necessarily been as much feedback and information sharing as possible with the community? Finally, at what level is the weekly group meeting? Is it at the level of directors, heads of team or Ministers? Who is involved in that group?

[Sajid Javid]

First, we all share the sense of urgency on the time scales, which is apparent from all hon. Members who have spoken today and from the Prime Minister’s communication that the hon. Gentleman read out. Naturally, it is always helpful to set targets—I referred to the target that the Somali focus group pilot would be up and running within a year—but we also have to respect that there is no advantage in setting an artificial target and saying that something should be done in six months or a year. This complex issue requires a degree of international involvement and co-ordination, so the most important thing is to ensure that we do the work urgently, but in a way that brings a long-lasting solution. While I share his sense of urgency, I hope that he respects that answer.

In answer to the second question, we will share as much information as possible with all members of the public, although of course the matter is of particular interest to certain communities in the UK. I have had meetings, for example, with representatives of the Somali community, as have a number of officials in the Treasury, DFID, the FCO and other Departments, and we will continue to have those meetings and to share as much information as possible.

Broadly speaking, the weekly meetings involve officials from all Departments, but the hon. Gentleman’s question was more specifically about the level of those officials, and I will have to find that out because I am not sure whether it is always the same officials involved and always people at the same level. Clearly there will be some commonality when the meetings take place, but I can find out more detail and share it with him.

[Kevin Brennan]

I shall intervene to allow the Minister to receive his in-flight refuelling, because we would like to know what it says.

[Sajid Javid]

I have just had a moment of inspiration, so I can share with hon. Members that the weekly meetings are between the heads of the teams in each Department, which will hopefully reassure the hon. Member for Cardiff South and Penarth (Stephen Doughty).

I hope it is clear that the Government share the concern of all hon. Members who have spoken today, and I speak from my personal perspective of understanding the importance of the remittance sector, as well as in my role as Financial Secretary. We will stay on top of the issue, engage and share as much information as we can. I congratulate the hon. Member for Cardiff West on instigating the debate, which has been a welcome opportunity for us all to share more information.

Debt Advice (FCA Levy)

Sajid Javid Excerpts

Tuesday 21st January 2014 Westminster Hall

[The Financial Secretary to the Treasury (Sajid Javid)]

I welcome you to the Chair, Mr Hollobone; it is always a pleasure to serve under your chairmanship. I congratulate my hon. Friends the Members for Worcester (Mr Walker) and for East Hampshire (Damian Hinds) on securing the debate. I listened carefully to them and the other hon. Members who contributed, and I thank all hon. Members for their contributions. I think that I am right in saying that each of them contributed to yesterday’s important debate on the payday lending sector in general. Once again, they shared thoughtful and well-balanced comments.

The Government believe that consumers should have access to free, independent money and debt advice. The Money Advice Service has the important job of ensuring that consumers get that advice. The Government want to empower consumers to manage their money well and to make responsible financial decisions, which is where MAS’s money advice role comes in. However, as we have heard, for consumers facing difficulties with debts, the first step in getting those debts under control is debt advice, and MAS also has a role to play in that regard. Money advice can help consumers to keep on top of their finances and stop them getting into problems in the first place.

Let me say something about payday lending generally, because it is connected to consumer detriment issues, which we heard about both yesterday and today. As well as giving MAS responsibility for ensuring that consumers have access to debt advice, the Government are tackling the root causes of spiralling debt. We are fundamentally reforming the regulatory system that governs lenders and we are, in particular, clamping down on payday lenders.

The Financial Conduct Authority takes on its consumer credit responsibilities from the Office of Fair Trading in April. The FCA will have far stronger powers over lenders than the OFT has, and it will be more nimble, meaning it is able to keep pace with a fast-moving market. The FCA is already flexing its regulatory muscle in advance of taking on regulatory responsibility for high street lenders. It plans to cap roll-overs, hold payday lenders to account on affordability assessments, curb the misuse of continuous payment authorities, and mandate risk warnings on payday lending adverts that signpost borrowers to the advice and help that MAS can provide.

The Government have taken decisive action to tackle the harm caused by the cost of payday loans. In the Financial Services (Banking Reform) Act 2013, we gave the FCA a clear mandate and duty to put a cap on the cost of payday loans by the beginning of 2015. This is not just an interest rate cap, but a cap on all fees and charges associated with a payday loan including, of course, default charges and roll-overs.

As we have heard—I agree with hon. Members about this—the provision of debt advice is vital. Free debt advice is currently funded by a levy on financial services lenders, which stand to benefit from advice that helps borrowers to get back on their feet and in control of their borrowing again. Once the responsibility for consumer credit transfers to the FCA, it is absolutely right that the levy begins to apply to consumer credit firms including, of course, payday lenders.

I welcome the focus of my hon. Friend the Member for Worcester and the Business, Innovation and Skills Committee on this issue. We all agree that payday lenders must pay their fair share towards the provision of advice. However, although I listened carefully to points made by my hon. Friend and other hon. Members, I am not yet persuaded that the levy collected from payday lenders should be ring-fenced for debt advice only and used to top up funding for front-line debt advice, and I shall now explain why.

We should not consider debt advice separately from money advice. The two go hand in hand to help consumers to get back in control and to give them budgeting skills and financial awareness to help them to stay out of problem debt, which is crucial, as my hon. Friend the Member for Gosport (Caroline Dinenage)said. We also should not forget that money advice can be vital in helping those on the brink of taking out a payday loan. It can help them to understand what they are getting into, how to borrow responsibly, how to find out whether there are better and cheaper options available, and whether they should be turning to payday loans at all. As money advice could help to stop people from getting into trouble with payday loans in the first place, it is right that payday lenders contribute to funding free money advice and debt advice services. The Money Advice Service has a statutory objective to provide money advice and debt advice.

[Ann McKechin]

I have listened carefully to what the Minister has said about money advice. The Money Advice Service primarily uses a website to provide access to money advice. In Glasgow, less than 30% of those on the lowest incomes have broadband access in their house, so the people who need advice the most are the least able to access it. It is not just about giving money advice; it is about how that is delivered. I have to say that, in my experience, it is poorly delivered.

[Sajid Javid]

I listened carefully to what the hon. Lady said, and others have also made that point. When I visited MAS’s office in London last week, I looked much more closely at how it provides money advice. The hon. Lady is right to say that it relies considerably on a website, but it is more than just a website—there are individuals involved. I listened to a lengthy recorded call that was an example of how people who wanted money advice before entering into a financial transaction could be guided through the process. I saw for myself how that was adding value. Although that was obviously a phone call and not face-to-face advice, it was more than just web advice. The hon. Lady highlights the importance of MAS continuing to consider how it can continue to improve its service and ensure that it is providing appropriate advice.

[Justin Tomlinson]

There are a couple of problems. The MAS website is a poor man’s version of Money Saving Expert and it spends a fortune on self-promotion and advertising for its inferior product. The reality is that the financial world is changing, with direct debits and standing orders, and there has never been a greater need for face-to-face help for those who have become overwhelmed by difficulty.

[Sajid Javid]

I agree with my hon. Friend about face-to-face advice, including debt advice. All the debt advice that MAS provides through its partners is face-to-face debt advice. More than 158,000 face-to-face sessions took place in the last financial year, whereas 150,000 had been planned for, which shows that face-to-face debt advice is crucial. I agree with many comments made by colleagues, including the hon. Member for Makerfield (Yvonne Fovargue), about the importance of face-to-face advice.

[Paul Blomfield]

I am a little bit concerned by how the Minister is counterpoising money advice and debt advice. I think that all hon. Members in the Chamber would agree that money advice is important, although there are questions about how MAS delivers it, but that does not overshadow the need for effective debt advice. Given all the contributions that have been made and all the evidence there is, does he agree that the demand for debt advice is growing?

[Sajid Javid]

I agree that demand seems to be growing, and evidence on that is emerging. It might help the hon. Gentleman if I move on to how MAS determines its budgets for money advice and debt advice, and how it has to take demand into account.

[Mr Robin Walker]

As the Minister will be aware, the Treasury Committee, among others, pressed MAS to justify the efficiency with which it delivers those services, and it was right to do so—I am the last person to object to that. Does he agree that it is important that MAS does not take from that the message that the only way to justify itself is by keeping its budget flat or spending less money? Delivering a greater service and providing more money to debt advice services would also be a sign of efficiency, so a message that MAS could take from this debate is that there is support for it providing a better service, and potentially more money, to the free debt advice industry.

[Sajid Javid]

I completely agree with my hon. Friend. He will know that I gave evidence to the Treasury Committee’s inquiry on MAS last year in my previous role as Economic Secretary. I said that the Government would have a full review of MAS during this Parliament, and over the coming weeks and months, I will set out how that review will take place. The review will consider some of the issues he raises.

[Damian Hinds]

As the Minister is on a roll, I have a question. Will he confirm that he said only that money would not be ring-fenced for debt advice, rather than that money would not go to debt advice? Perhaps we should all welcome that extra flexibility, but if he is suggesting that the money would still come in and would not necessarily involve levelling down other contributors, who would decide—and how would they decide—how that extra funding would be allocated between money advice and debt advice?

[Sajid Javid]

As my hon. Friend will find out, I am coming on to how MAS determines its budget. As we all would hope and expect, the budget is based on demand. More generally, MAS has a statutory responsibility to consult on its budget for the forthcoming year. Right now, MAS is consulting on its budget for 2014-15. This debate, the Business, Innovation and Skills Committee report and the information from stakeholders, which we have heard about today, are important in providing MAS with the information it needs to develop its budget for the future. That makes a big contribution to how MAS decides the correct allocation of resources for forthcoming years.

MAS’s budget is based on what it needs to achieve its statutory objectives. Although it is right that payday lenders contribute to that funding, it is also right that the funding is based on demand and that it delivers value for money. In the year ahead, MAS’s budget for debt advice will be based on its assessment of demand for such advice. MAS must consult on its plans for providing debt advice each year, which must then be approved by the FCA.

The National Audit Office recently commended MAS for delivering value for money in its debt advice provision. As we have heard, MAS is also carrying out ongoing research to ensure that the debt advice it funds has the best impact on consumers and that it reaches those who need it most. MAS recently conducted an in-depth study of where in the UK debt advice is needed most. The study shows that 21% of over-indebted people do not even recognise that they are in debt and that 44% of people who are in debt are not aware of the solutions available to them. It is important that MAS reaches such people and engages with them successfully to give them the help that they need. MAS will use the report to inform how it funds debt advice, thereby ensuring that it targets those who need it most. It is important to note that more money does not necessarily mean better provision.

[Paul Blomfield]

I accept that more money does not necessarily mean better provision, but the Minister has acknowledged that there is increased demand and that that increased demand is only the tip of the iceberg. He will also know that many of those delivering services on the ground have been hard pressed because of the reduction in other resources, especially those available through local authority funding. In many parts of the country, citizens advice bureaux are trying very hard to reorganise provision. In my own city of Sheffield, there is a comprehensive reorganisation to deliver value for money and ensure that the challenge can be met. Nevertheless, given the escalating demand for debt advice, which he has acknowledged, would he not also acknowledge that there is now an opportunity, which should be addressed, for that increased demand to be matched with additional resources?

[Sajid Javid]

Where there is emerging evidence of increased demand, I would expect MAS to respond. I am looking for the actual numbers, but off the top of my head, in 2012-13, the most recent financial year, MAS planned for 150,000 face-to-face debt advice sessions, but provided 158,000 sessions. The trend increased in the first six months of this financial year.

[Yvonne Fovargue]

The Minister’s concentration on the number of sessions is somewhat concerning because it is easy to provide a one-off session to someone with one debt. Providing for ongoing work with individuals with a high number of small debts, who continually have to write to creditors, is what costs time and requires expertise, which is why such organisations need paid staff with a high level of expertise. Such staff also help those people with money advice, because they identify the difference between priority debts and non-priority debts, and hopefully, following that advice, the individual will be more empowered to address their own problems.

[Sajid Javid]

I value what the hon. Lady says. She has considerable experience of this subject from before she came to the House and she makes a good point. If she would find it useful, as I certainly would, I would love to sit with her and learn more about what she says, which could help to inform decision making. If she is agreeable, that would be a good step forward.

In the interest of time, I will answer some of the questions that have been raised. Spending time on debt advice, when there is a demand for it, is clearly the right thing to do, and it is crucial to establish how debt advice can best be delivered to reach consumers. My hon. Friend the Member for Worcester is right that debt advice should be funded appropriately to meet demand and to provide services that directly benefit consumers. Last year, 94% of MAS’s £34.5 million budget for debt advice was spent on front-line delivery services. MAS aims to provide 150,000 debt advice sessions this year; last year, it exceeded the same target by 8,000.

The shadow Minister asked whether I have had direct discussions with MAS about this issue. I have not had specific discussions about the levy, as it would not be appropriate for me to get involved at this stage, given the independence we rightly give to the FCA in its oversight of MAS regarding the levy structure. She may be aware that the FCA is still deciding the best way to structure the levy on the consumer lending industry, and it will publish details on that shortly.

The hon. Lady asked me about MAS more generally, and I again point her to the review that will take place, as the Government have promised, during this Parliament. She also rightly asked about alternative sources of lending, which we discussed in yesterday’s debate. She mentioned credit unions, and of course the Government are committed to helping to promote them. We have a credit union expansion project under which there is £38 million of Government funding to help credit unions to modernise and to increase their customer base across the country by more than 1 million. We also recently made regulatory changes to the interest rates that credit unions can charge to ensure that they are not losing money each time they make a loan commitment. As I said in closing yesterday’s debate, I would like to see what further action the Government may take to promote that important sector.

I once again thank my hon. Friend for securing the debate. He and many others made important points, and I know that he in particular cares deeply about consumer detriment in regard to the payday loan sector. He has already played a significant role in the Government’s response to consumer detriment in that area. He mentioned that he recognises that the FCA is independent, and I am sure that the authority has heard the arguments today and will reflect on them. I assure him that I will also further reflect on the points he and other hon. Members have articulated so well.

[Mr Philip Hollobone (in the Chair)]

I thank all who participated in that debate for their contributions. If they are not staying for the next debate, I ask them to leave quickly and quietly.