Banking Act 2009
Sajid Javid Excerpts(10 years, 10 months ago)
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The Financial Secretary to the Treasury (Sajid Javid)
The Treasury has laid before the House of Commons a report required under section 231 of the Banking Act 2009 covering the period from 1 April 2013 to 30 September 2013. Copies of the document are available in the Vote Office and the Printed Paper Office.
Oral Answers to Questions
Sajid Javid Excerpts(10 years, 10 months ago)
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Jeremy Lefroy (Stafford) (Con)
12. What recent steps he has taken to regulate financial services.
The Financial Secretary to the Treasury (Sajid Javid)
Following the failure of the previous Government’s tripartite system, this Government have created a new architecture for financial regulation. The Bank of England has responsibility for financial stability, and two new regulators—the Prudential Regulation Authority and the Financial Conduct Authority—have been set up with clear responsibilities for prudential and conduct regulation.
Jeremy Lefroy
Good regulation can only enhance the vital contribution that financial services make to the employment, tax revenues and balance of payments of our country, but constituents of mine find that there is still insufficient protection for so-called non-sophisticated investors when they are sold products without sufficient explanation. What is the Financial Secretary doing to improve protection for customers and to ensure that the Financial Ombudsman Service is their champion?
Sajid Javid
My hon. Friend is right to highlight the contribution of the financial sector. Last year it paid over £60 billion in taxes and employs over 1 million people throughout the country. Where consumer detriment occurs, the Financial Ombudsman Service provides a valuable service, providing swift resolution to complaints, but of course we must stop consumer resolution occurring in the first place. That is why we have created a new regulator—the FCA, a regulator with real teeth.
Mr Iain McKenzie (Inverclyde) (Lab)
23. Will the Financial Secretary commit to looking more at financial services on the high street—I speak of high-cost credit—and to looking at more than just imposing a cap, including such business practices as no affordability checks, encouraging roll-overs and advertising aimed at the most vulnerable in our communities?
Sajid Javid
I agree with the hon. Gentleman: he is right to raise this important issue. I am sure that, like me, he will welcome the action we have already taken to transfer regulation from the Office of Fair Trading to the FCA and the consultation the FCA is holding on new rules, including on continuous payment authorities, roll-overs, advertising and strict affordability checks.
Sir Peter Tapsell (Louth and Horncastle) (Con)
What view should be taken of banks with a record of misbehaviour that are now promising their shareholders that they are considering moving their domicile away from Britain because they fear that the regulatory proposals by Vickers will limit their freedom to misbehave in the future?
Sajid Javid
The action we have taken on the back of the report issued by the Independent Commission on Banking is the right one, and I think it will be very hard indeed for the banks to try to avoid the new regulations and the new structure of banking that we are bringing in.
Sammy Wilson (East Antrim) (DUP)
The Minister will be aware of the scandalous behaviour highlighted in the Tomlinson report, in which RBS was alleged to have bankrupted customers in order to seize their assets. What action does he intend to take, first, to obtain redress for those affected and, secondly, to regulate the banks so that this does not happen again? Will he assure us that any discussions on this matter will include Ulster bank, which it has been alleged was at the head of queue when it comes to such behaviour?
Sajid Javid
The hon. Gentleman raises an important issue. He will know that the Tomlinson report is independent—it is not a Government report—but the Government and the FCA are taking it very seriously. The report raises some very serious allegations. The FCA has already committed to look carefully into them and if they are proven, it will take appropriate action.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
With the Government now in chaos over the banking Bill, with one U-turn following another, does the Minister agree that Labour was right all along to insist on a tougher licensing regime for senior bankers? Why were the Government so keen to resist Labour’s amendments, only to be defeated?
Sajid Javid
I have to say that I do not recognise the description that the hon. Lady has attached to the banking Bill. When she refers to Labour being right all along on banking regulation, perhaps she is referring to the changes that Labour made 13 years ago, which my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), then shadow Chancellor, described at the time as “a field day” for “spivs and crooks”.
Ann McKechin (Glasgow North) (Lab)
13. What representations he has made to the EU on the proposed cap on bank bonuses.
The Financial Secretary to the Treasury (Sajid Javid)
In September, the Government launched a legal challenge to specific remuneration rules under the EU capital requirements directive IV. These rules, rushed through without any assessment of their impact, will undermine the significant progress we have made to align remuneration with risk by pushing up fixed remuneration rather than pushing it down. In our view, regulating remuneration in this way goes beyond what is permitted under the EU treaty.
Ann McKechin
I am grateful to the Minister for his answer, but does he not agree that rather than using taxpayers’ money to protect the incomes of investment bankers earning more than £1 million per annum, that money would be better spent on enforcing our minimum wage legislation?
Sajid Javid
I am not going to take any lectures from the Labour party on bankers’ bonuses. Under Labour, bankers’ bonuses went up fivefold and peaked at £11.5 billion in 2007-08. At the very same time, the Labour Government were using taxpayers’ money to carry out the world’s biggest banking bail-out. Last year, the bonuses were down 85%.
Christopher Pincher (Tamworth) (Con)
Given what Robert Peston has described as the “stupendous mismanagement” of the Co-operative bank, which has exposed creditors to huge losses, does the Financial Secretary agree that no bonuses should be paid at that bank, and that anybody who has received bonuses or benefits from it should consider paying them back?
Sajid Javid
I agree with my hon. Friend. I understand that the Co-op bank has made donations to at least three members of the shadow Treasury team. It has been reported that the shadow Chancellor used his £50,000 donation from the Co-op group last year to hire a speaker—
Mr Speaker
Order. That has absolutely nothing to do with the Minister’s responsibility for a proposed cap on bank bonuses. I think he probably knew that; if he did not, he certainly does now.
Andrew Selous (South West Bedfordshire) (Con)
T3. Will the Financial Secretary provide any more detail on last week’s announcement that the Government will later this month provide payment for people who bought pre-September 1992 with-profits annuities from Equitable Life?
The Financial Secretary to the Treasury (Sajid Javid)
At Budget 2013 the Chancellor announced that the Government would make ex gratia payment to Equitable Life with-profits annuitants who were excluded from the Equitable Life payment scheme because their annuity began before September ’92. Thanks to the legislation this Government have brought forward, we are now ready to make those payments. Today, I can confirm that over 9,000 people will receive lump-sum payments of £5,000 each next week, before Christmas, and a further 450 in receipt of pension credit will receive an additional £5,000 each.
Ed Balls (Morley and Outwood) (Lab/Co-op)
On Thursday the Chancellor claimed in this House that living standards are rising, on Friday the Institute for Fiscal Studies said that living standards are falling, so who is right?
Mr Simon Burns (Chelmsford) (Con)
T6. Will the Minister update the House on the support that the Government are giving to small businesses?
Sajid Javid
We are committed to ensuring that small and medium-sized enterprises have the access to finance that they need, and we were pleased with the recent announcement by the Bank of England and the Treasury on refocusing the funding for lending scheme on to SMEs from next year. My right hon. Friend will also know that, in the autumn statement, we announced further improvements in the lending appeals process and a consultation on requiring banks to share more information on SME lending.
John Cryer (Leyton and Wanstead) (Lab)
T5. What assessment has the Chief Secretary to the Treasury made of the relationship between consistently falling real wages and the rapid growth of zero-hours contracts?
Mr Douglas Carswell (Clacton) (Con)
Narrow measures of money show that there has been no significant growth in the money supply. However, broader measures, such as the Divisia money measure, show that there has been a significant and sharp increase since late 2011. Does that concern the Treasury, and can my hon. Friend assure the House that the monetary authorities are not cooking up yet another credit-induced boom?
Sajid Javid
My hon. Friend is well versed in these matters and makes a significant contribution to the debate on monetary policy. He will know, therefore, that monetary policy is determined by the independent Bank of England, but I will ensure that Governor Carney is made aware of his concerns.
Barry Gardiner (Brent North) (Lab)
The World Bank and the independent TEEB—the Economics of Ecosystems and Biodiversity—report both state that 7% of global GDP could be lost by the devaluation of natural capital by 2050. Will the Government investigate what percentage of UK GDP is being lost through the depletion of natural capital?
Mortgages: Government Assistance
Sajid Javid Excerpts(10 years, 11 months ago)
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Sajid Javid
The Government is committed to making the aspiration of home ownership a reality for as many households as possible. The Government wants current and future generations to experience the benefits of owning their own home, in the same way their parents were able to. Since the financial crisis, larger deposit requirements and falling equity values mean many credit-worthy households cannot get a mortgage, or are trapped in their existing homes unable to take the next steps.
In the one month since the publication of the scheme rules on 8 October, more than 2,000 people have put in applications to lenders under the Help to Buy: mortgage guarantee scheme totalling £365 million of new mortgage lending. Lenders will submit details of their loans to the scheme when it opens in January.
More than three quarters of the applicants are first time buyers and many in their early thirties, demonstrating that the Help to Buy: mortgage guarantee scheme is helping hardworking people realise their home-owning aspirations.
Once the Help to Buy: mortgage guarantee scheme opens in January, the Government will collect data on mortgages covered by the guarantee, and will report in due course.
The correct answer should have been:
Sajid Javid
The Government is committed to making the aspiration of home ownership a reality for as many households as possible. The Government wants current and future generations to experience the benefits of owning their own home, in the same way their parents were able to. Since the financial crisis, larger deposit requirements and falling equity values mean many credit-worthy households cannot get a mortgage, or are trapped in their existing homes unable to take the next steps.
In the one month since the publication of the scheme rules on 8 October, more than 2,000 people had put in applications to lenders under the Help to Buy: mortgage guarantee scheme totalling £365 million of new mortgage lending. The Royal Bank of Scotland received 81 of these applications from the west midlands.
More than three quarters of the applicants are first time buyers and many in their early thirties, demonstrating that the Help to Buy: mortgage guarantee scheme is helping hardworking people realise their home-owning aspirations.
Once the Help to Buy: mortgage guarantee scheme opens in January, the Government will collect data on mortgages covered by the guarantee, and will report in due course.
Cost of Living
Sajid Javid Excerpts(10 years, 11 months ago)
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The Financial Secretary to the Treasury (Sajid Javid)
When the Opposition first tabled this motion, the title referred to the Government’s “economic failure”. The word “failure” has been mysteriously removed and replaced with “policy”. Perhaps the Opposition originally asked the Rev. Paul Flowers, who was their economic adviser, to help draft the motion. Now that they have been forced to sack him, they have had to amend the deluded original title of the motion. Even before the debate started, the Opposition have had to back down.
The Government recognise that many people up and down the country are facing living standards challenges. Each and every week I speak to many hard-working people in my constituency who are still suffering from Labour’s recession, and whose businesses or employers were hit hard in 2008 and 2009 and are still feeling the impact. Of course we all want the situation to improve.
Geraint Davies
On failure, does the hon. Gentleman accept that the movement of debt to GDP from 55% when he came into office, to 75% now and 85% by 2015, is a sign of failure both in increasing debt to a higher level than we borrowed throughout our term, and through not getting any growth?
Sajid Javid
I accept that the sharpest move in debt to GDP that this country has seen in recent times was under 13 years of Labour rule when national debt more than doubled. We will take no lectures from the Labour party about growing public debt. Allow me to remind the House, especially Labour Members, why people are facing such challenges.
Helen Jones
On a point of order, Mr Deputy Speaker. I note that the Chief Secretary to the Treasury is not present. Can you investigate whether that is because the Lib Dem part of the coalition no longer takes responsibility for economic policy?
Mr Deputy Speaker (Mr Lindsay Hoyle)
As the hon. Lady well knows, that is not a point of order. It is certainly not a matter for the Chair and does not want to be. I call the Financial Secretary.
Richard Fuller (Bedford) (Con)
I was concerned that the shadow Chief Secretary to the Treasury did not seem to understand the difference between deficit and debt, which I thought would be a prerequisite for talking about economics. Will my hon. Friend explain to the House what the circumstances were when this Government came to office?
Sajid Javid
My hon. Friend tempts me and I will do just that in a moment, after I have given way to my hon. Friend the Member for Burnley (Gordon Birtwistle).
Gordon Birtwistle
The shadow Chief Secretary to the Treasury did not want to take an intervention from a Liberal Democrat, perhaps because it used to be a Labour Member who sat here and now it is a Liberal Democrat. Will my hon. Friend comment on the fact that in 2009 Burnley was classed as a basket case under the Labour Government with a Labour MP, but it has now won an award for the most enterprising town in the UK? Unemployment has collapsed under this Government.
Sajid Javid
I will comment on that because it reflects the hard work of the people of Burnley and their local MP. Why are people facing challenges up and down the country? The reason is simple and can be summed up in just three words: the Labour party.
Toby Perkins
The Minister asks why people are suffering a cost of living crisis, and he referred previously to Labour’s recession. Labour’s recession was over by the time he became a Member of Parliament, and it was a recession caused by the bankers. Will he remind the House what he was doing when Labour’s recession finished?
Sajid Javid
What I can do is remind the hon. Gentleman what was going on in his constituency during Labour’s recession. During Labour’s last term, unemployment in his constituency increased by 56%. So far, under this Government it has declined by 26%, which I think he would welcome.
Sajid Javid
I will give way to my hon. Friends in a moment. The Opposition spokesman talked about breaking records, so let us take a quick look at Labour’s record breakers—they are enough to make Roy Castle jump up and down with excitement. Labour gave this country the deepest recession in living memory, and the biggest budget deficit in our post-war history, and the largest in the G20. To answer the question from my hon. Friend the Member for Bedford (Richard Fuller), Labour was borrowing almost £160 billion—£300,000 a minute, or £5,000 every second. Labour gave this country the largest bail-out the world has ever seen. [Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I find it strange that I cannot hear the Financial Secretary because Government Members are making so much noise. I would have thought they ought to listen to him, just as I wish to hear him.
Sajid Javid
I think the House missed hearing about another record breaker that Labour gave this country, which was the largest bank bail-out the world has ever seen. That is Labour’s legacy, and if the Opposition spokesman wants to apologise, he is welcome to do so.
Chris Leslie
The Minister, who worked for Deutsche Bank before the general election, might wish to explain and answer a specific question on borrowing, the deficit and national debt. Can he tell the House how much the Chancellor has borrowed and added to the national debt since the last general election? What is that amount of money in cash terms?
Sajid Javid
We know that if we had continued the plans recommended by the Labour party, the country would be borrowing a lot more. According to the independent Institute for Fiscal Studies, Labour plans to borrow at least £200 billion more, which would push up borrowing costs for many hard-working families up and down the country.
Guy Opperman (Hexham) (Con)
Does the Minister agree with the North East chamber of commerce, which said that the most important factor in raising living standards is to increase skills levels with an increase in skills funding and a doubling of apprenticeships? Is that not the true foundation of a long-term recovery?
Sajid Javid
I agree wholeheartedly with my hon. Friend, and I am sure he agrees that the Government were right to increase funding for apprenticeships, which are up by more than 1.5 million since the start of 2010.
Mr Donohoe
Will the Minister accept that a number of the jobs brought into the economy are part time? Would it be better for the Government to calculate the number of jobs in terms of hours worked by individuals, and would they find that the number of jobs has actually dropped in real terms if those hours are taken into account?
Sajid Javid
The hon. Gentleman tempts me and I will come to jobs shortly as there is plenty to tell. He should recognise that employment is at its highest level since records began, and that most jobs created are full time. Also, there is nothing wrong with part-time work.
Andrew Selous (South West Bedfordshire) (Con)
Because the Government have taken the difficult decisions necessary and stuck to a long-term plan, the claimant count has fallen by more than a third in my constituency, where 730 more people are in work than when the other lot were in power.
Sajid Javid
The information my hon. Friend provides is true of almost every constituency in the country.
Debbie Abrahams
The Government consistently make that point, but it is totally misleading. The employment rate is lower now than it was in 2008. Absolute figures mean nothing; the Minister must quote a rate to make them mean something.
Sajid Javid
The hon. Lady is still fairly new to the House, but she will know that the Government changed hands in 2010. There is no point making comparisons with 2008. She will be interested to hear that unemployment in her constituency increased by a shocking 119% during Labour’s last term. I will say that again, because Labour Members have a hard time believing it: unemployment increased in her constituency by 119%. Under this Government, unemployment in her constituency is down by 24%.
Neil Carmichael (Stroud) (Con)
The Government have increased the number of private sector jobs by 1.4 million, and 88% of those jobs in the past six months were full time. Does that not illustrate that we are rebalancing the economy towards manufacturing and engineering, which we definitely need to do? That is part of an economic plan to recover this country from the disastrous situation in which we found ourselves in 2010.
Sajid Javid
I agree completely with my hon. Friend—I shall make further remarks on that in a moment.
In short, Labour left our country a lot poorer, and it still has not apologised for the damage it did, despite many opportunities, including this afternoon. The Labour Government destroyed the aspirations of millions of hard-working people up and down the country. Instead, Labour Members sneer over the Dispatch Box and oppose every single measure the Government take to clean up the mess they left behind.
Robert Flello
I say in all sincerity that it would have been nice to see the Minister’s boss in the Chamber—where is he?—but will he answer this question? A moment ago—[Interruption.] Conservative Members should listen for a moment. A moment ago at the Dispatch Box—Hansard will show this—the Minister criticised the Labour Government for bailing out the banks. Is he saying we should not have done that?
Sajid Javid
The hon. Gentleman needs to listen more closely to my remarks. He will be interested to know that unemployment increased by 104% in his constituency during Labour’s last term. The bail-outs and the other action the previous Government took did not help unemployment in his constituency but, thankfully, under this Government, unemployment there is down by 24%.
It is good to remind ourselves that office and government are a privilege given to us by the people of the United Kingdom. We are the tenants; the British public are our landlord. The Labour party was the tenant who trashed the house. It is left to this Government to clean up its mess.
We need to treat the public with the respect they deserve. We know that times are tough. Labour left our country a lot poorer, and families are feeling it. That is why we had to put in place a long-term, sustainable economic plan to fix things.
Yasmin Qureshi (Bolton South East) (Lab)
The Minister says that Labour left the economy in difficulties or a mess, but does he accept that, in 2006, the GDP to national debt ratio was about 42%, whereas it is now 91%? How is that responsible?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Lady has made her intervention. She cannot keep going.
Sajid Javid
The hon. Lady needs to check her figures. She will see that, as I have said, the sharpest rise in the debt-to-GDP ratio took place during the last 10 years of the Labour Government.
Kwasi Kwarteng
With regard to the deficit, why, for nine years, and for seven years of economic growth, did the Labour Government run persistent deficits?
Sajid Javid
My hon. Friend makes a good point. He reminds the House that the previous Government began running a deficit from 2001, way before any financial crisis. They ran a structural deficit from 2006 onwards. Hon. Members will remember that the shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), tried to deny that until he was corrected by the International Monetary Fund.
Without a credible economic plan, we cannot have a plan for helping families with living standards challenges. Anyone, including the Labour party, can come up with a list of interventions, but they are completely meaningless and unsustainable if there is no long-term economic plan to back them up. Labour’s only plan is for more spending, more borrowing and more debt, which is exactly what got us into this mess in the first place.
Charlie Elphicke
I have a deep concern that many hard-working people lost earnings when interest was suspended on Co-op bonds in March. I am concerned that, 11 days later, it lent substantial amounts of money to the Labour party. Will the inquiry cover the bank’s relationship with the Co-operative party and whether the bank was unduly influenced by the national executive committee?
Sajid Javid
My hon. Friend raises a good point, but he will know that I am not in the best position to answer his question in detail. Perhaps the shadow Chief Secretary will rise to his feet to do so. I understand that he is a Labour and Co-operative Member and receives money from the Co-op. I am happy to give way if he would like to answer the question.
Chris Leslie
I am proud to be a Co-operative Member and a supporter of mutuality—I thought Conservative Members supported that, too. Will the Minister tell us the number of occasions on which his Treasury had meetings to discuss the Co-op Verde deal and the takeover of those Lloyds branches? How many times did Treasury Ministers have those meetings after the general election? Can he give us that fact now?
Sajid Javid
I am sure that question will be looked at further during the Co-op inquiry. The number and nature of meetings between the Leader of the Opposition, the shadow Chancellor and Co-op representatives will also be looked at—[Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. The House cannot hear the Minister. If hon. Members want to argue with him, they must hear what he has to say first.
Richard Graham
I am very grateful to the Minister for giving way—he has been gracious throughout the debate. It is appropriate that we follow Madam Deputy Speaker’s advice and listen to him carefully. I would reinforce his point from my experience in Gloucester. Under the previous Government, 6,000 people in business lost their jobs, but since the last election, 3,000 new business jobs have been created and four times the number of apprentices have been employed, and unemployment and youth unemployment are lower. Does the Minister agree that this debate should not be about the cost of living, but be about the cost of having a Labour Government to people with jobs in my constituency?
Sajid Javid
My hon. Friend is right. Hon. Members know—I am highlighting this as much as I can in the debate—just how many lives and aspirations the Labour Government destroyed in their time in office.
The House has just heard the shadow Treasury Minister. His speech was more interesting for what was not in it than for what was. There is no talk today of plan B—[Interruption.] What the shadow Treasury did not mention was predictable. Let me say what it was, because four or five months ago, we heard what he did not say today in virtually every single speech from Labour Front Benchers. We heard no talk today of plan B. I did not hear anyone say, “Too far, too fast.” There was no mention of a double-dip, let alone of a triple-dip, because Labour Members know that there has been only one dip in recent times: Labour’s dip. They have comprehensively lost the economic argument. They have no plan and no answers for the problems they helped to create.
Sajid Javid
Does the hon. Gentleman have any answers to the problems Labour helped to create?
Tom Blenkinsop
I have no answer to the fact that we saw more growth in the last quarter of 2010 under the Labour Government than we did in the whole of 2011.
Sajid Javid
Let us talk about the growth in Middlesbrough South and East Cleveland. Is the hon. Gentleman referring to the record 92% increase in unemployment in his constituency in Labour’s last term? I notice that he did not refer to the 18% decline under this Government.
James Morris
My hon. Friend refers to what the Labour Front-Bench team will not mention. In the past two years, export growth in the west midlands has gone up by 30%—the best performance of any region. Is that not further evidence that the Government are on track with a sustainable, long-term plan to rebalance the British economy?
Sajid Javid
My hon. Friend is right. As a fellow west midlands MP, I have seen at first hand record growth, particularly in manufacturing and in the car industry.
Enough on the mistakes of the past. This Government are working hard to secure the country’s future. The only way we can deliver a sustained improvement in living standards is to continue to tackle the economy’s problems head-on and to deliver a recovery that works for all.
Guto Bebb (Aberconwy) (Con)
My hon. Friend talks about the future. How does he respond to the approval, given by the Labour party yesterday, of a 5% increase in council tax in my constituency—a decision made with no consideration of the cost of living for my constituents?
Sajid Javid
My hon. Friend makes an excellent point. What goes on in Wales is an excellent example of what a Labour Government would do, if they had the chance, in the United Kingdom. As well as increases in council tax, there has been a 10% cut in the NHS budget in Wales. That tells us exactly what Labour’s priorities are.
Stewart Hosie (Dundee East) (SNP)
On exports, in 2011 the deficit for trading goods was £100 billion. In 2012, that rose to £110 billion in the red, and has been running at about £20 billion in the red every quarter this year. I am not sure if I am seeing the green shoots of export recovery that the Minister is seeing.
Sajid Javid
I will speak on exports in more detail shortly. I am not sure that Scottish independence would help the record on exports.
Under this Government, Labour’s record budget deficit is down by a third, confidence and investment is on the rise, and the economy has turned a corner. The UK is growing faster than any other developed economy, including the US, Germany and Japan. Just last week, while downgrading global growth the OECD revised up UK growth by more than any other developed country. That growth is spread broadly across all sectors of the economy. Recent survey data show that construction is at its strongest level in six years and that activity in the services sector has not been this strong since 1997. New orders in manufacturing have risen to their highest level since 1995, according to the CBI.
Mr Gordon Marsden (Blackpool South) (Lab)
The Financial Secretary is taking pains to show that there is a long-term economic plan. What sort of plan is it when the number of young people on jobseeker’s allowance has gone up by 174% in a year? He and his colleagues have failed to provide 19 to 24-year-olds in traineeships with any funding to continue, JSA or otherwise.
Sajid Javid
I can tell the hon. Gentleman how our plan is panning out. Under the previous Government, he saw a 91% increase in unemployment in his constituency. Unemployment in his constituency is down by 7% under this Government. Youth unemployment is down by 24%. Rather than making cheap political points, he would do well to welcome the economic improvement in his constituency.
Debbie Abrahams
The Minister was making an international comparison with the UK economy. I remind him that the UK economy remains 2.5% below its pre-crisis peak, and the US economy is now 4.6% above its pre-crisis peak.
Sajid Javid
The US did not have a Government as incompetent as the one we had in Britain, who boasted the sharpest decline in GDP in this country in living memory and in our post-war history. When I said earlier that Labour left this country poorer, I am sure the hon. Lady realised—if she did not, I am happy to repeat it—that we saw the sharpest decline in GDP of any major developed country during Labour’s term in office.
Our economic plan is pulling in growing inward investment, with inflows into the UK in the first half of this year greater than any other country in the world except China. As I mentioned earlier, we are increasing exports to growing economies. From 2009 to 2012, exports to Brazil were up by 49%, to India by 59%, to China by 96%, and to Russia by 133%. We have become a net exporter of cars for the first time since 1976.
Tom Blenkinsop
Will the Minister please explain why, since 2011, lending to small and medium-sized enterprises has gone down by £30 billion? Long-term female unemployment in my constituency has increased by 144% since his Government came to power.
Sajid Javid
The hon. Gentleman will know that SME lending was hit from 2010 to 2011 because of Labour’s banking crisis. We had the deepest banking crisis and the largest bank bail-out the world has ever seen. What did he think the impact was going to be? He should welcome the Government’s action to help SME lending, including the funding for lending scheme, which has helped thousands of companies.
The Opposition claim that economic growth is not felt by people across the UK and that living standards are falling. The truth is that the previous Labour Government left the country a lot poorer and, as a result, many hard-working families are finding it difficult. Our long-term plan for the economy, the plan that has put our country on a path to prosperity, will help those families. What better way to increase standards of living than by making sure that as many Britons as possible can take home a steady wage at the end of each month? With more than 1.4 million private sector jobs created in the past three years—more private sector jobs created in three years of this Government than in 13 years of the previous Labour Government—we now have more people employed than at any time in our history.
We are also taking measures that help to keep more cash in the pockets of hard-working people up and down the country, while economic confidence has helped to keep mortgage bills low. If mortgage rates rose by just 1%, the average mortgage bill would increase by about £1,000 a year. We are also letting people keep more of their hard-earned income. Our increases in the personal allowance are worth £700 each year to every average taxpayer—a tax cut for more than 25 million people—while 2.7 million people on low incomes have been taken out of income tax altogether.
Simon Kirby (Brighton, Kemptown) (Con)
Does the Minister realise that from next April 36,000 people in my constituency will be better off because of this policy?
Sajid Javid
My hon. Friend is right to make that point. I think every MP in this illustrious House could share similar numbers. Indeed, in the shadow Chief Secretary to the Treasury’s constituency, 4,000 people have been taken out of income tax altogether and more than 38,000 have had an income tax cut.
Our changes to the personal allowance mean that someone working full time on the minimum wage has seen their income tax bill more than halved under this Government. It also means that for any income on which people would pay Labour’s 10p tax rate, which it previously abolished, they pay a 0% tax rate under this Government.
Stephen Doughty
Is the Minister still a member of the Free Enterprise Group of Conservative MPs and does he agree with that group and the hon. Member for Spelthorne (Kwasi Kwarteng) that VAT could be increased to 15% on food and children’s clothes, which are currently zero-rated? How would that help with the cost of living crisis for my constituents?
Sajid Javid
I am pleased that the hon. Gentleman is so interested in tax, because he will be sure to welcome the news that 38,000 people in his constituency have had an income tax cut and 4,500 have been taken out of income tax altogether.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I am grateful to the Opposition for pointing out earlier that before the election the Minister worked for a bank that the British Government did not need to bail out, whereas the shadow Chief Secretary to the Treasury ran the campaign of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). Nevertheless, does my hon. Friend agree that the Prime Minister made it absolutely clear at the Dispatch Box only last Wednesday that he did not agree with putting VAT on children’s clothes and food?
Sajid Javid
My hon. Friend makes a good point. [Hon. Members: “Answer the question!”] The Prime Minister answered it. The Government have absolutely no plans to increase VAT.
Kwasi Kwarteng
This proposal has been ripped out of context and completely distorted by the Daily Mirror and some of Labour’s other friends in the media. Let me be clear: this proposal was designed as a tax simplification measure that would cut the VAT rate and allow the savings to be targeted at people who really needed the money. It was a complex proposal whose details, I am afraid, got lost in the Labour spin machine.
Sajid Javid
My hon. Friend has made his point well, and I will not dwell on it further, in the interests of time.
We have also frozen fuel duty. Petrol is now 13p per litre lower than under Labour’s plans. Each time the average motorist fills up their car, they are saving £7 because we have refused to implement Labour’s fuel duty escalator. We are also helping local authorities to freeze council tax, and our tax-free child care plan will mean savings for parents of up to £1,200 per child.
Alun Cairns
My hon. Friend makes an extremely important point about council tax, highlighting the freezing of council tax here in England. Sadly, in Labour-run Wales, council tax has risen by nearly 9% over recent years, in the same time as it has been nearly frozen here. Will he join me in calling on the Labour Front-Bench team to pressure their colleagues in Cardiff Bay to freeze council tax for my constituents in the same way that he is doing for constituents in England?
Sajid Javid
My hon. Friend has made his point very well, and the shadow Front-Bench team will have heard it. If they really cared about citizens in Wales, they would pressure their Government in Wales to take action on council tax.
We are also making it easier for hard-working people to put some of their savings towards buying their own home. Our Help to Buy mortgage guarantee and equity loans are making home ownership a real possibility for aspiring people. Just one month since its launch, more than 2,000 people have put in offers for homes under the mortgage guarantee scheme. More than three quarters of the applicants were first-time buyers, many of them in their early 30s. Since the launch of the equity loan scheme in April, 92% of the 5,000 new homes built have been bought by first-time buyers. This is how we are helping to raise living standards: we create a business environment in which more people can go to work every day; we create a tax environment in which people can keep more of the money they earn every month; and we work with the banks so that every year more people can secure the dream of their own home.
Our plans are improving living standards, but what is the Labour party’s solution? I am sure it will tell the public that the only way is up—and they would be right: under Labour, taxes would go up; mortgage rates would go up; inflation would go up; and unemployment would go up. That is what economic failure looks like.
As I said at the outset, the shadow Minister needs to give the British public more credit. They are a lot smarter than he realises. They recognise that it was the Labour party that got the country into this mess, and that it will take time and difficult decisions to clear up that mess. We, the coalition Govt, have put our faith in the British public, and because of their hard work over the past three and a half years, jobs are being created at a record rate, the economy is growing faster than in any other developed country, and as Governor Carney said just last week, the recovery has finally taken hold. There was never going to be a magical short-term fix, but our sensible, sustainable economic strategy will raise living standards, so let us not lose ground on the progress we have made; let us not allow Labour to take Britain back towards economic ruin. I beg the House to oppose this motion.
Bradford & Bingley plc
Sajid Javid Excerpts(10 years, 11 months ago)
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The Financial Secretary to the Treasury (Sajid Javid)
I welcome you to the Chair, Mr Betts. It is a pleasure to serve under your chairmanship.
I thank my hon. Friend the Member for Shipley (Philip Davies) for securing the debate and for his continued commitment and effort in tirelessly pursuing the issue on behalf of his constituents. I have not been long in Parliament, but one thing I noted right from the start, which has been reaffirmed today, is that few colleagues so assiduously pursue their constituents’ causes as my hon. Friend. He is an example to us all. I also thank my hon. Friend the Member for Calder Valley (Craig Whittaker) for his tireless work on behalf of his constituents, as we have seen today.
Before I get into the specifics of Bradford & Bingley, I will give some context on the time, the policies that we have heard reference to today, which contributed to the banking crisis, and this Government’s response, which hon. Members have spoken about during the debate.
The nationalisation of Bradford & Bingley was one of the key outcomes of the financial crisis. The crisis was the biggest failure of economic management and banking regulation in this country’s history. Let me remind hon. Members of the events preceding the crisis. Over the decade before the crash, Britain experienced the biggest increase in debt of any major economy in the world. The total of household, corporate, financial and public sector debt reached a staggering 500% of GDP. UK banks became the most leveraged in the world.
None of that, however, caused concern or invited intervention under the failed tripartite system of regulation created 16 years ago. The Bank of England was stripped of its historical responsibility for regulating the banking system, which was given to a new Financial Services Authority. Let me quote a warning from 16 years ago by the then shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). During the passage of the Bank of England Act 1998, which created the failed tripartite system, he said:
“The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day.”—[Official Report, 11 November 1997; Vol. 300, c. 732.]
Sixteen years later, the consensus is clear. There were fundamental flaws in the tripartite system right from the start, which are today painfully apparent to the whole world.
I respect the comments of the shadow Treasury Minister, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), and I accept that she was not responsible for the actions of the previous Government. However, she was close to some of the key decision makers at the time, and I hoped that we would hear an apology from her on behalf of the previous Government—that was wishful thinking.
The situation that I have described is why this Government have embarked upon a fundamental reform of our system of financial regulation. We have introduced domestic legislation to increase the resilience of financial institutions to shocks. The Financial Services Act 2012 fundamentally reformed the previous, failed tripartite system by giving the Bank of England clear responsibility for maintaining financial stability; establishing the Financial Policy Committee within the Bank as a strong and expert macro-prudential authority; creating the Prudential Regulation Authority, a new micro-prudential regulator, as a subsidiary of the Bank of England; and creating a new independent conduct of business regulator, the Financial Conduct Authority.
Martin Vickers (Cleethorpes) (Con)
The Minister is outlining a tightening up of the regulatory regime, which I am sure all our constituents would welcome. However, does he recognise that those who have been let down by the Bradford & Bingley scandal and other financial scandals feel that regulators go native, stand back and, instead of being on the side of consumers, are too close to the people they are supposed to be regulating?
Sajid Javid
My hon. Friend makes a good point that has been brought up by many hon. Members. With the reforms we have implemented, and some that we are still in the process of implementing, the Government have created a stronger, more rigorous system, with regulators with a lot more teeth and a greater degree of independence.
The Government have also set up the Independent Commission on Banking, or ICB, to recommend further reforms to enhance financial stability. The Government accepted the recommendations of the ICB and are putting them into law this year through the Financial Services (Banking Reform) Bill. The Government also supported Parliament in setting up the Parliamentary Commission on Banking Standards and have accepted that commission’s main recommendations.
I turn now specifically to Bradford & Bingley. Following the difficulties Bradford & Bingley experienced in 2008, the previous Government transferred its retail deposit taking business and branch network to Abbey National after a competitive process; its mortgage business was brought into public ownership. At the time of the nationalisation of Bradford & Bingley, the UK was in the grip of a rapidly evolving crisis, as we have heard today. I cannot speak for the actions that the previous Government took to deal with the crisis, as I was not privy to the relevant discussions; nor, rightly, have I seen the papers that relate to the previous Administration, although I understand that the Treasury is handling all freedom of information requests in the proper manner.
Extensive information is already in the public domain: events leading up to the nationalisation have been looked at by both the National Audit Office and the Treasury Committee. But on the matter of information, I have to agree with the comments made by my hon. Friend the Member for Shipley, and, in particular, with the request made by my hon. Friend the Member for Chippenham (Duncan Hames), who asked the shadow Minister to use her good offices to speak to the former Prime Minister, the former Chancellor and others who were Ministers under the previous Government and closely involved in events at that time. That is a reasonable request; I hope she will act on it and get back to my hon. Friend about it. It could lead to further information that many stakeholders would find useful.
Following the transfer of Bradford & Bingley into public ownership, the previous Government made the Bradford & Bingley plc Compensation Scheme Order 2008, which was debated and approved by each House. The order provided for a mechanism through which compensation for former shareholders would be assessed by an independent valuer. As we have heard, after conducting a robust and rigorous process the independent valuer determined that no compensation was payable.
My hon. Friend the Member for Shipley asked whether it was right that the valuer should have been asked to work on the basis that there was no Government support. I believe that it cannot be right, or in the best interests of the taxpayer, that the valuer should have been asked to compensate for value that existed only by virtue of support that taxpayers themselves were providing.
Following the determination, all affected parties had the opportunity to submit requests for the valuer to reconsider his decision. The valuer considered all requests before concluding that no compensation was payable. That decision was further upheld in the upper tribunal review.
I believe that due process has been followed at every stage. Transparent and independent arrangements for compensation have been put in place and there has been a proper process in the courts. As I mentioned, there have also been investigations by the NAO and the Treasury Committee. I have to say to my hon. Friend that I have looked at the matter closely using the limited information available to me, and from what I have seen I am not persuaded that there is a case for a further investigation or inquiry.
Before I conclude, I want to respond specifically to a number of my hon. Friend’s questions. He talked about the rights issue that took place just before nationalisation. From the information I have seen, I can tell him that the Treasury had no involvement in that rights issue at all; as we have heard, the rights issue was conducted in the summer of 2008, prior to nationalisation, and was a matter solely for Bradford & Bingley’s board and senior management. Like many banks and building societies at that time or thereabouts, Bradford & Bingley was required to meet FSA regulatory capital requirements in order to continue with those regulated activities.
My hon. Friend also raised the issue of accounting standards, and in particular IAS 39, which he said was problematic and could perhaps take some blame for the financial crisis. He is right to raise accounting standards and the contribution they could have made to the crisis. The issue has been looked at extensively by authorities around the world, including the International Accounting Standards Board. The board has proposed a series of changes to IAS 39 and other, similar accounting practices. Those changes essentially mean that, in future, banks will have to hold more capital or take losses earlier on problematic loans.
My hon. Friend also rightly expressed his concerns about the future of a number of his constituents who were transferred to UKAR during nationalisation and are currently UKAR employees. He was absolutely right to say that those people have considerable expertise and experience in an important sector. My understanding is that currently over 2,000 staff are still employed in managing the closed mortgage books of both Bradford & Bingley and Northern Rock, and are doing an excellent job.
My hon. Friend may take some comfort from knowing that those people’s skills are such that it seems they will face growing demand for them: the Council of Mortgage Lenders recently said that mortgage lending in the third quarter of this year was at its highest level since 2007 and is growing strongly thanks to the Government’s policies and the economic growth we are experiencing. I am sure that the value of the skills they hold will give some comfort to the constituents he mentioned.
Philip Davies
I am grateful to my hon. Friend for his comments, although clearly I am disappointed that he does not believe that there is a need for an inquiry: we are still no further forward when it comes to knowing why Bradford & Bingley was treated so differently from other banks and building societies.
In the light of the comments my hon. Friend has just made about the future of Bradford & Bingley, will he go away and think about whether a new Bradford & Bingley could be born out of what is there at the moment to be a new challenger to the banking sector on the high street and to introduce the competition that we all want?
Sajid Javid
I will give a commitment to my hon. Friend that I will think about that further. In fact, I will do more: he will know that UKAR is part of United Kingdom Financial Investments Ltd, the agency that acts as the Government’s shareholder in the former assets of Bradford & Bingley, and of the Royal Bank of Scotland, Lloyds and others. I will write to the head of UKFI and to the head of UKAR to ask them to consider the case that my hon. Friend has made today.
I congratulate my hon. Friend once more on securing this debate. This is an issue that he, rightly, feels very strongly about. I assure him that we are taking what we believe are the right steps to ensure the future stability of our banking system.
Mr Clive Betts (in the Chair)
I now suspend the sitting until 11 o’clock, although if the hon. Member responsible for the next debate and the Minister responding both arrive a little early, I am happy to start the debate a few minutes earlier.
ECOFIN
Sajid Javid Excerpts(10 years, 11 months ago)
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The Financial Secretary to the Treasury (Sajid Javid)
A meeting of the Economic and Financial Affairs Council was held in Brussels on 15 November 2013. Ministers discussed the following items:
Savings taxation
Council discussed a proposal on taxation of savings income in the form of interest payments. The UK and the majority of member states supported an agreement of the amending proposal to the EU savings directive and an adoption of the mandate as soon as possible. Austria and Luxembourg could not support the proposal and the presidency concluded that it will need to return to a future ECOFIN.
Standard VAT return
Council heard a presentation by the Commission on the recently published proposal for an EU-wide standard VAT return. The presidency noted the Council’s working group is expected to start examining the proposal in December.
EU Statistics
Council adopted conclusions on EU statistics as part of an annual review of statistical governance. The package sets out the need for and nature of future developments with regard to the European statistics system.
Report from Special Adviser Philippe Maystadt on the EU’s contribution to international accounting standards
Mr Maystadt, Special Adviser to the Commission, presented his report on the EU’s contribution to international accounting standards. Council held an exchange of views on the report and asked the Commission to look into these and report back at a future ECOFIN.
Banking Union
Council agreed a statement on backstop arrangements in anticipation of a comprehensive assessment of banking institutions to be launched by the European Central Bank.
Anti-money laundering
There was a state of play discussion on a proposal for a directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.
Single Resolution Mechanism
Council held an exchange of views on the single resolution mechanism proposal. The presidency mandated the working group to continue examination of this matter, which will return to ECOFIN in December. The Government will seek to ensure the proposal is fit for purpose and that there is equal treatment of member states inside and outside the banking union.
Any Other Business: Current legislative proposals
The presidency provided an update on the following financial services dossiers: deposit guarantee scheme directive (DGSD); omnibus II; markets in financial instruments directive (MiFID); central securities depositories regulation (CSDR); and bank recovery and resolution directive (BRRD).
Oral Answers to Questions
Sajid Javid Excerpts(10 years, 12 months ago)
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The Financial Secretary to the Treasury (Sajid Javid)
The Government want the United Kingdom to become the first sovereign state outside the Muslim world to issue an Islamic bond. The Treasury is therefore working on the practicalities of issuing about £200 million of sovereign sukuk as early as next year. The Government see sukuk issuance as an excellent opportunity to promote London as the leading centre for Islamic finance.
Roger Williams
As chairman of the all-party group on Islamic finance and diversity in financial markets, I welcome the Government’s decision to issue a sukuk. It is something the group has campaigned on. I also congratulate the Government on their part in hosting the World Islamic Economic Forum in this country, the first time it has been held in a non-Muslim country. What else are the Government doing to promote Islamic investment in this country and sustain the Islamic banking sector?
Sajid Javid
I thank my hon. Friend for his continuing work in promoting Islamic finance and diversity in financial markets. London is already a global player in Islamic finance, which brings in significant investment and creates thousands of jobs. Last week I also announced that we are bringing together a global Islamic investment group. This group will have the expertise to help Islamic finance grow globally, as well as developing London as one of the leading centres for Islamic finance.
Keith Vaz (Leicester East) (Lab)
May I also welcome what the Government have done? It will make this country the first anywhere in the western world to provide sharia-compliant bonds. We do not just want people to invest from outside, however. Although the last census showed that Brecon and Radnor had 116 Muslim people, I have 21,075 in my constituency. How does the Minister intend to sell those bonds to the people of Leicester East?
Sajid Javid
I thank the right hon. Gentleman for his warm words. Britain already has 20 banks offering Islamic financial products. We also have 49 sukuk listed on the London stock exchange, valued at over £25 billion, and 25 law firms that have significant Islamic practices. We will bring all this experience together to further develop Britain as an Islamic finance centre, and I am sure that will help his constituents with their investment decisions.
Paul Goggins (Wythenshawe and Sale East) (Lab)
4. If he will introduce a time-limited exemption from air passenger duty on new long-haul routes from uncongested airports.
The Financial Secretary to the Treasury (Sajid Javid)
The Government are committed to making the aspiration of home ownership a reality for as many people as possible. That is why we recently announced that participating lenders will be able to offer high loan-to-value mortgages supported by their Help to Buy mortgage guarantee schemes three months earlier than planned. I was pleased to hear that Lloyds Banking Group recently announced that the first such mortgage was taken out by a first-time buyer in Dartford, Kent.
Alec Shelbrooke
Will my hon. Friend update the House specifically on helping the hard-working people in my constituency, where there is 77% home ownership, which is increasing, compared with 65% across the UK?
Sajid Javid
Under Labour, the number of first-time buyers fell to its lowest level for 25 years, from an average of 470,000 a year in the early 2000s to around 190,000 by 2008. That destroyed the hopes and aspirations of many hard-working families. This Government’s two Help to Buy schemes will help thousands of hard-working people to get on the housing ladder, including those in Elmet and Rothwell and those throughout the UK.
Ann McKechin (Glasgow North) (Lab)
16. Is it fair for taxpayers in my constituency to subsidise a London property bubble that has already increased by 10% since the introduction of this scheme?
Sajid Javid
The hon. Lady should know, as she would if she looked at the facts carefully, that the Help to Buy scheme is priced on commercial terms; it is designed to break even and it will not cost the taxpayer anything.
Andrew Selous (South West Bedfordshire) (Con)
Does the Minister share my concern that, reportedly, some young people have actually given up saving for a deposit, and will he ensure that those of us on the Government Benches will stand with those people who have a dream of home ownership to make sure it can be fulfilled?
Sajid Javid
My hon. Friend is absolutely right. Some Opposition Members believe that only people who have rich parents that can help them meet some of the large deposit requirements should be able to buy their own home. That is not the policy of this Government, who support hard-working families.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
On the issue of fiscal steps to help people buy homes, the Chancellor of the Exchequer said last year that people buying homes through a company to avoid tax was unacceptable, and he would come down on it
“like a ton of bricks”.
Has he investigated reports that the Under-Secretary of State for Transport, the hon. Member for Wimbledon (Stephen Hammond), has avoided tax in that way, and will he come down on him like a ton of bricks?
Sajid Javid
I welcome the hon. Lady to the shadow Front Bench team. I look forward to debating with her. The Government have already taken steps to ensure that property buyers pay more in tax, by increasing stamp duty and by dealing with purchases through companies, and it would not be appropriate for any Minister to make a comment on any individual’s tax circumstances.
Jason McCartney (Colne Valley) (Con)
8. What recent steps he has taken to increase investment in infrastructure.
David Mowat (Warrington South) (Con)
13. What representations he has received on Yorkshire bank and lending to small and medium-sized businesses.
The Financial Secretary to the Treasury (Sajid Javid)
All meetings between external organisations and Treasury Ministers are published on the Government’s website. However, it is not the Treasury’s practice to provide details of all representations Ministers receive. Lending to small and medium-sized businesses is an important issue, and I can assure my hon. Friend that it receives the Government’s highest attention.
David Mowat
I thank the Financial Secretary for that answer. He might be aware that two years ago the owners of Yorkshire bank announced their intention to downsize in the UK and invest more money in Asia. Since then they have aggressively reduced the size of their UK loan book, despite assurances made to small businesses. That has affected many businesses across the country, including Arley Homes in my constituency, which has been forced into administration, with the loss of many jobs. Is there more we can do to make them behave responsibly?
Sajid Javid
I know that my hon. Friend raised this issue with my predecessor on behalf of his constituents, and he was absolutely right to do so. The way in which a bank structures its business is a commercial decision, as I am sure he appreciates, so I am unable to comment on it. However, if a bank decides to restructure its business in a certain way, I would expect it to pay due regard to the interests of all its customers and to treat them fairly.
Bill Esterson (Sefton Central) (Lab)
Small businesses in my constituency used to borrow from Yorkshire bank, and many have told me that they never missed a repayment, but now the bank simply will not lend to them, despite excellent credit histories. Why are the banks refusing to lend to small businesses that have a strong history of repayment?
Sajid Javid
May I give the hon. Gentleman some advice on how he can help small businesses in his constituency and elsewhere? The SME appeals process that the Government set up with the banking sector has been very successful, with 40% of businesses that appeal finding decisions overturned. He can help to advertise that, as the Government will be doing shortly to banks.
Philip Davies (Shipley) (Con)
The point of capitalism is that people who take risks should be rewarded when they are successful and should lose money when they fail. Yorkshire bank has been among the worst for penalising its good customers to try to make up for its own losses. That is an abuse of capitalism. I hope that the Minister will take steps to ensure that Yorkshire bank treats its customers fairly, because in too many cases it has been treating them terribly unfairly.
Sajid Javid
My hon. Friend has made a number of representations on this issue, and he is right to do so. As I have said, we want all banks to treat their customers fairly, and the Government are absolutely committed to that.
Mr Clive Betts (Sheffield South East) (Lab)
I agree with the comments made by the hon. Member for Warrington South (David Mowat). Following an article I wrote for the Yorkshire Post, I have received dozens of complaints about Yorkshire bank from small businesses, particularly about being locked into tailored business loans with very high interest rates and very high redemption clauses and payments to get out of them. Will the Minister look at involving the Financial Conduct Authority to see if there could be an investigation into what has been going on?
Sajid Javid
I believe that my predecessor raised this issue with the FCA, but I would be more than happy to do so again.
Steve McCabe (Birmingham, Selly Oak) (Lab)
14. What recent comparative assessment he has made of trends in real wages in the UK and in similar economies.
Sir Tony Baldry (Banbury) (Con)
15. What recent steps he has taken to increase competitiveness in the banking sector.
The Financial Secretary to the Treasury (Sajid Javid)
The Government are driving a wide-ranging and ambitious programme of reforms to make the banking sector more competitive and to give consumers a better deal. This includes reducing market barriers, encouraging current account switching, and putting competition at the heart of the regulatory system.
Sir Tony Baldry
Will my hon. Friend commend the Church Commissioners for their investment in Williams and Glyn’s as a new competitive bank that intends to have the highest ethical standards? As well as increasing competition in banking, is it not also crucial that we have a system of banking regulation with clear accountability and responsibility, avoiding mistakes in the system designed by the previous Administration?
Sajid Javid
I congratulate the Church Commissioners on their role and the expertise that they bring. Given that my hon. Friend is a commissioner, I take this opportunity to congratulate him too. He is right to highlight the fact that the previous Government’s changes to financial regulation contributed significantly to the banking crisis in 2008. That caused misery and hardship for millions of hard-working families, yet I notice that the Opposition have yet to apologise.
Mr George Mudie (Leeds East) (Lab)
The Minister will agree that a level playing field is important for competition. Why, then, did the Chancellor make the misguided offer to the Chinese Government to give light-touch regulation to Chinese banks operating in this country? If we are going to have competition, will that approach be extended to all other banks?
Sajid Javid
The hon. Gentleman will know that such decisions are made by the independent regulators—in this case, the Prudential Regulation Authority, which has made the reasons for the decision absolutely clear.
Mr Ronnie Campbell (Blyth Valley) (Lab)
T1. If he will make a statement on his departmental responsibilities.
Interest Rate Swap Derivatives
Sajid Javid Excerpts(11 years ago)
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The Financial Secretary to the Treasury (Sajid Javid)
First, let me take this opportunity to welcome you to your new Chair, Madam Deputy Speaker. It is a great pleasure to see you in your place. I also welcome the hon. Member for Birmingham, Ladywood (Shabana Mahmood) to her new role and wish her luck with it.
I start by thanking all the hon. Members who secured this debate and by congratulating everyone on presenting their case well. Special thanks must go to my hon. Friend the Member for Aberconwy (Guto Bebb) for the time, energy and passion that he has put into this issue and for the leadership he has shown. We can see from this debate that this issue is very serious; 17 of my hon. Friends and four other hon. Members have spoken today. I am sure that everyone in this Chamber, like all those others watching in the Public Gallery, at home and elsewhere, including the hundreds watching in the Central Methodist hall from the many businesses that have been affected, is keen to see a quick conclusion to the FCA review and to see that those businesses that were mis-sold financial products are compensated accordingly.
When I was growing up, my father ran a small family business in Bristol, so I was made aware from a young age about the importance of cash flow and the dangers of unexpected costs. As such, I sympathise wholeheartedly with the small businesses that have been affected by this mis-selling scandal and have put such energy into lobbying on this issue. This Government have made it clear from the beginning that the mis-selling of financial products is totally unacceptable. We take extremely seriously the abuse that has taken place, and we are determined that any wrongs that have been inflicted on businesses should be righted.
I share the disappointment of fellow hon. Members about the progress made under the FCA review to date. I stood up in a Westminster Hall debate about four and a half months ago to discuss this very issue, and the fact that the FCA has not made any significant progress since that debate is, frankly, not good enough. As we have heard today, the FCA said in January this year that the full review process would begin, but it has since confirmed that the full process did not start until May this year. That delay has been disappointing, and the FCA should have been much clearer about exactly when this full review actually started. However, the review is now up and running, with the large majority of cases being looked at. I understand from the FCA that it believes that about 85% of cases are now under review, but hon. Members are absolutely right to say that it is time for the banks and the FCA to do more to speed up the process and get redress out the door. As such, the Government will continue to push the banks and the FCA to complete the process as quickly as possible. As the motion says, the redress scheme’s progress has been too slow. That is costly and has caused further undue distress to the businesses involved. The FCA and banks need to get on with the job.
Mr McFadden
Before the Minister leaves the issue of the FCA, will he say what he thinks of the FCA’s reply to some businesses in distress—that it will not consider individual cases?
Sajid Javid
The FCA has set out a clear process and is publishing more and more information on it. It is important that the FCA and the banks should stick to that. Equally, however, Martin Wheatley, the head of the FCA, has not ruled out any further action, including taking enforcement action if he deems that the redress process has not worked as intended.
A number of Members have mentioned redress payments. Of course we need to be confident that the scheme provides the correct level of redress for affected businesses. I understand why concerns have been raised about the FCA’s decision to allow the banks to settle with customers for a single redress offer, covering both basic redress and consequential losses.
It is right that the FCA, as an independent regulator, should decide such details. However, I agree that it is sensible for the initial payment for basic redress to be made to provide much-needed relief to the businesses. That is why I welcome the announcement this week, from HSBC and RBS so far, that they will now make an initial redress payment to businesses and then discuss consequential losses separately. Back Benchers should take credit for that move. Under the leadership of my hon. Friend the Member for Aberconwy (Guto Bebb), they have put pressure on the banks and we have seen the results already.
However, I want things to go further—I would like all the other banks to join the move announced by HSBC and RBS, and I shall be watching closely to see whether they do. That should help prevent any further undue distress for the businesses and give them much-needed cash-flow relief.
Ian Swales
I well understand that consequential loss calculations are probably unique to each business. However, the redress payments surely form a pattern, given that they are all based on similar products. Does the Minister believe that the banks should be able to move very quickly with the redress part of the compensation?
Sajid Javid
I agree. The banks should move much faster. Today’s announcement from the two banks is welcome, but other banks should take a serious attitude to not only the amounts but the timing of redress payments.
Hon. Members have also voiced concerns about the large number of businesses that have been assessed as sophisticated and so fall outside the scheme. My understanding is that the FCA used as a starting point the criteria for non-sophisticated customers set out in the Companies Act 2006. As such, the test reflects the fact that larger businesses would have greater resources to seek advice on the products in question, both at the time of sale and subsequently. Moreover, I understand that the FCA then amended the sophistication test in January to ensure that certain companies, which were classified as sophisticated under the Companies Act test but which might reasonably be considered to be non-sophisticated, were also brought into the scope of the review.
Throughout this debate, the Government have been clear that when a business lacked the necessary skills and knowledge to understand fully the risks of the products, it should receive the appropriate redress. We do not agree that all businesses should have access to the FCA review; there needs to be a defined cut-off point beyond which more sophisticated businesses take responsibility for understanding the products that they entered into. I am confident that the FCA has found the right balance to ensure that all non-sophisticated businesses fall inside the scheme.
I will not be able in the time available to address all the questions raised, but I might be able to help with a couple in particular. Some Members asked whether insolvency could be a reason for banks to try to delay the redress process. I assure the House that that could not be a reason. No one wants businesses to go insolvent, but if, sadly, they do, they will still be part of the review process. If mis-selling is found to have happened, banks will still be liable and on the hook—they will gain no advantage from the insolvency of a company.
Hon. Members, including the shadow Minister, asked whether the FCA could consider setting a deadline. There is a good case for the FCA to consider that, but it would have to be its independent decision. Due regard must be taken of the fact that it might take longer to sort out the most complex products, but it would be good for the FCA to consider whether setting a deadline would help to speed up the process.
Steve Brine
A number of colleagues have mentioned this. Does the Minister have a view on a truly independent appeals process? Given that 93% of the cases looked at thus far have been non-compliant, the number involved would not be massive.
Sajid Javid
As my hon. Friend will know, there is a necessary degree of independence in the process. However, he raises a good point, which, as he said, has been raised by others today. It is important to make sure that there is confidence in the process. If confidence does not come about in the coming months, the FCA may have to review things and the process that my hon. Friend suggests could be taken forward.
I end by reiterating that the Government take extremely seriously the abuse that has taken place in very many cases. I sympathise wholeheartedly with campaigners in the Chamber and beyond. I am determined that any wrongs inflicted on businesses should be put right and want a quick solution to the mis-selling of interest rate hedging products.
Small businesses are the backbone of our economy and they should be allowed to draw a line under this issue and get back to what they do best—working hard, creating jobs and creating growth for the UK economy. Once again, I thank hon. Members, particularly my hon. Friend the Member for Aberconwy, for bringing the issue to the attention of the House. I assure them that I will make sure that the issue continues to receive the highest level of attention from the Government.
Guto Bebb
With the leave of the House, I should like to make a few concluding remarks. This has been a positive and necessary debate, and we have seen significant progress as a result of it. Members from across the House have made it clear that they want a step change in the progress made by the FCA review process. That is necessary; we need a significant increase in the number of businesses offered redress. There are real concerns about an expansion of the scheme. Speeches have highlighted the issue of embedded swaps and the concerns about the sophistication test, which I would like to discuss in further detail with the Minister in due course if I can.
The other pretty obvious thing from this debate is that we need the banks to provide support for the businesses while they wait to be reviewed. We want the banks to show forbearance and to understand that the difficulties faced by many businesses were created by the banks’ own mis-selling. No further businesses should be lost to the UK economy as a result of the mis-selling of these products, which were inappropriate in the vast majority of cases. This has been a positive debate, but we still need to see the proof of the pudding in the way in which the scheme delivers from now on.
Sajid Javid
May I tell my hon. Friend that I would be more than happy to meet him and other stakeholders to discuss this further?
Madam Deputy Speaker (Mrs Laing)
If the Minister has finished his intervention, the hon. Gentleman may conclude his speech.
Counter-Terrorist Asset-Freezing Regime
Sajid Javid Excerpts(11 years ago)
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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 11th report under the Act and it covers the period from 1 July 2013 to 30 September 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 30 September 2013:
TAFA 2010 | EU Reg (EC) 2580/2001 | Al-Qaeda Regime UNSCR 1989 | |
|---|---|---|---|
Assets frozen (as at 30/09/2013) | £91,000 | £11,0001 | £70,0002 |
Number of accounts frozen in UK(at 30/09/13) | 61 | 10 | 29 |
New accounts frozen | 0 | 0 | 1 |
Accounts unfrozen | 0 | 0 | 0 |
Number of designations (at 30/09/2013) | 39 | 373 | 284 |
(i) New designations (during Q3 2013) | 0 | 1 | 1 |
(ii) Delistings | 0 | 0 | 7 |
(iii) Individuals in custody in UK (at 30/09/2013) | 15 | 0 | 0 |
(iv) Individuals in UK, not in custody (at 30/09/2013) | 3 | 0 | 4 |
(v) Individuals overseas (at 30/09/2013) | 13 | 11 | 217 |
(vi) Groups | 8 (0 in UK) | 26 (1 in UK) | 63 (1 in UK) |
Individuals by Nationality | |||
(i) UK Nationals4 | 14 | n/a | n/a |
(ii) Non UK Nationals | 17 | ||
Renewal of designation | 0 | n/a | n/a |
General Licences | |||
(i) Issued in Q3 | (i) 0 | ||
(ii) Amended | (ii) 5 | ||
(iii) Revoked | (iii) 0 | ||
Specific Licences | |||
(i) Issued in Q3 | (i) 9 | (i) 0 | (i) 2 |
(ii) Amended | (ii) 0 | (ii) 0 | (ii) 0 |
(iii) Revoked/Expired | (iii) 1 | (iii) 0 | (iii) 0 |
1This does not duplicate funds frozen under TAFA. 2This figure reflects the most up-to-date account balances available and includes approximately $64,000 of funds frozen in the UK. This has been converted using exchange rates as of 30/09/2013. | |||
3This figure is based on ex-designations where the UK freeze forms the prior competent authority decision for the EU freeze. 4Based on information held by the Treasury, some of these individuals hold dual nationality. |
Legal Proceedings
Appeals against designations made under the Terrorism (United Nations Measures) Order 2009 and TAFA 2010 were ongoing in the quarter covered by this report, brought by Zana Abdul Rahim. Two civil claims relating to designations are also ongoing, one brought by Gulam Mastafa against the Treasury and other Government Departments, and another brought by an individual, known as “M”, against the Treasury. The challenge under s63(2) of the Counter-Terrorism Act 2008 brought by Mohammed Al Ghabra against the Treasury and joined to be heard with his claim for Judicial Review against the Foreign and Commonwealth Office, is also ongoing.
In the quarter to 30 September 2013, no criminal proceedings were initiated in respect of breaches of asset-freezes made under TAFA 2010 or under the Al-Qaeda (Asset-Freezing) Regulations 2011.
Annex A: Designated persons under TAFA 2010 by name5
Individuals
1. Hamed Abdollahi
2. Bilal Talal Abdullah
3. Imad Khalil Al-Alami
4. Abdula Ahmed Ali
5. Abdelkarim Hussein Al-Nasser
6. Ibrahim Salih Al-Yacoub
7. Manssor Arbabsiar
8. Usama Hamdan
9. Nabeel Hussain
10. Tanvir Hussain
11. Zahoor Iqbal
12. Umar Islam
13. Hasan Izz-Al-Din
14. Mohammed Khaled
15. Parviz Khan
16. Waheed Arafat Khan
17. Osman Adam Khatib
18. Musa Abu Marzouk
19. Khalid Mishaal
20. Khalid Shaikh Mohammed
21. Ramzi Mohammed
22. Sultan Muhammad
23. Yassin Omar
24. Hussein Osman
25. Muktar Mohammed Said
26. Assad Sarwar
27. Ibrahim Savant
28. Abdul Reza Shahlai
29. Ali Gholam Shakuri
30. Qasem Soleimani
31. Waheed Zaman
Entities
1. Basque Fatherland and Liberty (ETA)
2. Ejercito de Liberacion Nacional (ELN)
3. Fuerzas Armadas Revolucionarias de Colombia (FARC)
4. Hizballah Military Wing, including External Security Organisation
5. Holy Land Foundation for Relief and Development
6. Popular Front for the Liberation of Palestine—General Command (PFLP-GC)
7. Popular Front for the Liberation of Palestine (PFLP)
8. Sendero Luminoso (SL)
Annex B: Persons designated by the EU under Council Regulation (EC)2580/20016
Persons
1. Hamed Abdollahi*
2. Abdelkarim Hussein Al-Nasser*
3. Ibrahim Salih Al Yacoub*
4. Manssor Arbabsiar*
5. Mohammed Bouyeri
6. Sofiane Yacine Fahas
7. Hasan Izz-Al-Din*
8. Khalid Shaikh Mohammed*
9. Abdul Reza Shahlai*
10. Ali Gholam Shakuri*
11. Qasem Soleimani*
Groups and Entities
1. Abu Nidal Organisation (ANO)
2. Al-Aqsa Martyrs’ Brigade
3. Al-Aqsa e.V.
4. Al-Takfir and Al-Hijra
5. Babbar Khalsa
6. Communist Party of the Philippines, including New People’s Army (NPA), Philippines
7. Gama’a al-lslamiyya (a.k.a. Al-Gama’a al-Islamiyya) (Islamic Group—IG)
8. Islami Büyük Dogu Akincilar Cephesi (IBDA-C) (Great Islamic Eastern Warriors Front)
9. Hamas, including Hamas-Izz al-Din al-Qassem
10. Hizbul Mujahideen (HM)
11. Hizballah Military wing, including external security organisation
12. Hofstadgroep
13. Holy Land Foundation for Relief and Development*
14. International Sikh Youth Federation (ISYF)
15. Khalistan Zindabad Force (KZF)
16. Kurdistan Workers Party (PKK) (a.k.a. KONGRA-GEL)
17. Liberation Tigers of Tamil Eelam (LTTE)
18. Ejército de Liberación Nacional (National Liberation Army)*
19. Palestinian Islamic Jihad (PIJ)
20. Popular Front for the Liberation of Palestine (PFLP)*
21. Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*
22. Fuerzas armadas revolucionarias de Colombia (FARC)*
23. Devrimci Halk Kurtulu Partisi-Cephesi—DHKP/C (Revolutionary People’s Liberation Army/Front/Party)
24. Sendero Luminoso (SL) (Shining Path)*
25. Stichting Al Aqsa
26. Teyrbazen Azadiya Kurdistan (TAK)
5For full listing details please refer to: http://www.hm-treasury .gov.uk/d/terrorism.htm.
6For full listing details please refer to: www.gov.uk
*EU listing rests on UK designation under TAFA 2010.
Money Services Businesses
Sajid Javid Excerpts(11 years ago)
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The Financial Secretary to the Treasury (Sajid Javid)
Annual remittances from the UK stand in excess of £15 billion with up to 65% flowing to developing countries. The UK has one of the largest money transfer markets in Europe and the largest number of money transfer operators (MTOs).
Globally, some major banks are withdrawing bank accounts from MTOs because of the reputational and regulatory concerns. A number of UK banks have recently chosen to close accounts for a number of money transfer companies which has resulted in concerns being raised about the continued viability of remittance flows to a few developing countries, including Somalia.
The Government are acutely aware of the importance of remittances to these countries and to UK residents. The Government are committed to doing the utmost to ensure that remittances continue to flow through secure, legitimate channels.
We recently asked our officials to convene stakeholders to discuss possible actions the Government could take. A round table was held at the Department for International Development (DFID) on Friday 27 September 2013. The round table was co-chaired by senior officials from HM Treasury and DFID. It was attended by Government, the money transfer industry, NGOs and international organisations.
The purpose of the round table was to agree a set of actions to be taken by Government, supervisors and industry to promote a safe, secure and compliant UK money transfer sector that continues to support legitimate remittances while maintaining effective measures against money laundering and terrorist financing.
As a result of this meeting, and the continued cross-Government effort to find solutions, the Government can today announce a range of actions which they are committed to taking forward. These actions include:
The UK Government will form an action group on cross-border remittances, which will include relevant stakeholders.
The action group will draft guidance on applying a risk-based approach to anti-money laundering and countering the financing of terrorism when banking money transfer companies.
The National Crime Agency will provide more detailed and specific risk assessments and alerts about the sector to banks and money transfer companies, to help differentiate the risks involved in dealing with different money transmitters.
DFID will take forward a pilot project to help develop secure remittance channels to Somalia.
HM Revenue and Customs (HMRC) will increase “days of action” with law enforcement and the number of risk-targeted supervisory visits they undertake to provide further confidence that non-compliant money transmitters are being required to improve or are removed from business.
HMRC will also provide further training to money transmitters to help them achieve an effective level of compliance.
The full list of Government and supervisor actions with respective timelines has been placed in the Library of the House.
Securing a sustainable future for the UK remittance market will require all of the stakeholders to work together. The Government remain committed to playing their part in this and we hope these clear actions will be a key step in the right direction.