Financial Services Bill

Seema Malhotra Excerpts

Monday 26th April 2021 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

I start by paying tribute to Rachel Neale and the UK Mortgage Prisoners group for their incredible resilience and the way that they have worked for the last two years with the all-party parliamentary group on mortgage prisoners, which I co-chair, to help to get a pragmatic solution to the problems that we know they face. I also pay tribute to my constituent Mohammed Masood, who first brought this issue to my attention after his family’s own experience—a situation that, after so many years, is still ongoing.

I am grateful for the opportunity to speak in support of Lords amendment 8, which would provide immediate relief to up to 250,000 mortgage prisoners—the FCA’s estimate—by capping standard variable rates and ensuring that they could access fixed-rate deals. The arguments for that were made powerfully and movingly in the other place, and indeed by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) from the Front Bench tonight.

The Minister said that he wants to be guided by the facts. I thank him for his commitment to addressing this issue, but perhaps I can share some other data and another interpretation of the same facts to show why I and others believe that the solution proposed in Lords amendment 8 would indeed be both proportionate and practical.

The 250,000 mortgage prisoners took out their mortgages prior to the financial crisis with fully regulated high street banks such as Northern Rock. They were then kept trapped on high standard variable rates before being sold to mortgage loan sharks such as Cerberus, Tulip and Heliodor. The amendment would apply a cap on the standard variable rate for mortgage prisoners with inactive lenders and unregulated entities and ensure that they can access fixed-rate deals. It would be a targeted intervention that would have no impact on the wider market of active lenders, such as the main high street banks, which compete to offer their existing customers new deals.

The margins on these Northern Rock mortgages increased significantly after the financial crisis. As interest rates available to those at active lenders fell, the Government kept mortgage prisoners on high SVRs and then sold them off to inactive lenders and vulture funds, who also kept them on high SVRs. Prior to the financial crisis, the gap between the Northern Rock SVR and the base rate was 2.09%. Since 2009, it has been 4.29% above the base rate.

When the Government sold on the loans, they gave some of the purchasers, such as Tulip Mortgages, complete discretion on interest rate policy after 12 months. Protections for later packages of mortgages sold required only that the SVR be kept at the level of the third highest of a basket of 15 SVRs, which was higher than the current rate charged to mortgage prisoners. If mortgage prisoners were entitled to new deals on the same basis as other customers, the average rate they would be paying would be 1.8% below the level of the proposed SVR cap of 2.1%.

The Minister suggested that the SVRs paid by mortgage prisoners are just 0.4% higher than SVRs at other lenders. As I said on Report, our case studies, which include nurses, teachers, members of the armed forces and small business people, tell another story. It is inappropriate to compare the rates that borrowers with inactive lenders are currently paying with those paid by SVR customers at other active lenders. If mortgage prisoners were with an active lender and up to date with payments, they would have access to a product transfer, giving them a lower fixed rate.

The Treasury has said that the amendment cannot be supported because it would not be fair to borrowers in the active market, but more than 75% of borrowers in the active market move off the SVR within six months as they are able to access a new deal. Mortgage prisoners have been stuck on high SVRs for more than 10 years. Their mortgages were sold by the Government without their consent and without the proper protections. People trapped on these high interest rates do not have much chance to reduce the amount they owe. When their mortgage finishes when they are in their 60s or 70s, these mortgage loan sharks often put pressure on them to sell and threaten to repossess their home.

The FCA and the Government claim to have helped mortgage prisoners by changing the rules on affordability tests, but there has been very slow take-up of those new flexibilities. The FCA’s cost-benefit analysis, published when the rules were proposed, estimated that somewhere between 2,000 and 14,000 mortgage prisoners would switch using the new rules. The APPG has received reports from campaign groups that only 40 mortgage prisoners have been able to switch so far.

Mortgage prisoners have been neglected for more than 10 years. Families have been destroyed and homes have been lost. While the Minister commissions yet another review, every month mortgage prisoners struggle to make their monthly payment due to high interest rates. The delays will mean that more homes will be lost. As the consumer champion Martin Lewis has said, an SVR cap on closed-book mortgages

“would provide immediate emergency relief to those most at risk of financial ruin. No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”

We welcome support for the amendment from Martin Lewis and from Surviving Economic Abuse.

The Government have the option of coming up with an alternative proposal to provide the relief that mortgage prisoners so desperately need. So far, they have failed to do so. That is why I hope that all colleagues will support Lords amendment 8 tonight.

[Kevin Hollinrake]

I rise to speak to amendment 8. I listened carefully to the Minister’s comments, and he has engaged across the House very frequently on this issue. I know this challenge is not of his making. It is not even of this Government’s making, but it is the responsibility of the Government of the day to solve it, because it is a problem of a Government’s making—indeed, it is of a Conservative Government’s, or coalition Government’s making. We are duty-bound to find a solution.

We have heard some very good speeches, including some very fine points about markets and intervention in markets. I am somebody who absolutely believes in markets. The markets have revolutionised my life and I have seen them revolutionise many others—how much wealth they create, how many jobs and opportunities they create, and what a great job they do for consumers in driving down prices and driving up service. But there is no market here. This is an extreme example of market failure. Inactive lenders do not set their SVRs based on recruitment of new customers, which is what should happen in a marketplace. It is not defensible to say, “We cannot intervene in this way in terms of an SVR cap because it is an intervention in markets.” The two things are not compatible.

Finance (No. 2) Bill

Seema Malhotra Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

I wanted to make that point and express my own gratitude to those who help in the voluntary sector, and to remind people what clause 5 and the other clauses are really about. They are about families struggling in trying and difficult circumstances through no fault of their own. I know that the Minister is a very decent man, and I urge him to rethink and lobby his colleagues, particularly the Chancellor, who, I am afraid, has a bit of a habit of dashing in with some very warm words but could perhaps look further at some of the detail. Families need that help at this difficult time.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

[Inaudible.]

[The First Deputy Chairman]

We are having some difficulty hearing Seema Malhotra, I am afraid. Do you want to try again, Seema?

[Seema Malhotra]

[Inaudible.]

[The First Deputy Chairman]

I think what we should probably do is go to our next speaker and come back to Seema. We will go now to Sir John Redwood.

--- Later in debate ---

Similarly, given that deep economic inequalities persist between white and black, Asian and minority ethnic people and their households, we have to ensure that our tax system is not a driver of racial injustice. Unfortunately, the pay gap between white and black and Asian communities is entrenched in the UK approach to tax, which on the whole favours higher earners. To tackle this inequality in our society we need to look at addressing the fact that, as previous research has shown, top earners are overwhelmingly white and male and more likely to be based in London and the south-east. We need to address those inequalities sooner rather than later.

[Seema Malhotra [V]]

In my limited remarks, I want to support the arguments made by my hon. Friend the Member for Ealing North (James Murray), and to speak in support of Labour’s new clause 23, to which I have added my name, seeking an equality impact assessment of the measures in the Bill that affect family incomes. This includes the impact of specified sections of the legislation on households at different levels of income, on people with protected characteristics, and across the regions and nations of the UK.

About 700,000 people have lost their jobs since February last year, and many more families have seen a drop in their household income. Over 39,000 are now on universal credit in Hounslow alone, and we have seen a huge rise in the use of food banks. There is no doubt about the importance of financial inclusion at this time. The Financial Inclusion Commission, on which I sit, has highlighted how there are now millions more people facing economic hardship as a result of the covid-19 pandemic. However, the UK entered the crisis with half its population financially vulnerable: 12 million categorised as financially struggling or generally on low incomes, and 13 million as financially squeezed. Covid has laid bare existing weaknesses, vulnerabilities and structural inequalities, and StepChange research shows that 10% of people say they will certainly or probably be unable to pay for essentials in the next 12 months.

We know child poverty, already extremely high, is rising, so it is inexplicable, when the Government themselves have said in the Budget report that the

“economic impact of restrictions has not been felt equally”,

that they have not themselves published an impact assessment. It should not be for the Opposition to table this vital amendment. It seems that instead of taking action to boost our community recoveries, the Conservatives are choosing to reward families up and down the country for their sacrifices with council tax hikes, the freeze to the personal allowance from next April a whole year before corporation tax rises kick in, a real-terms pay cut for key workers and cuts to universal credit later this year, a move now even opposed 100 Tory MPs.

Even when the Chancellor has done the right thing, such as extending furlough, as Labour called for, these moves need to be underpinned by a strong social security system that provides support when people need it. People need to be protected from financial exclusion and families need a clear route out of financial difficulty when they are struggling. The Chancellor could also look at how Sadiq Khan is working to promote financial inclusion through partnership with the financial sector, social enterprises and credit unions, and at his plans for a new team dedicated to economic fairness.

But instead of economic fairness, what we know is coming is the £20-a-week cut to universal credit for millions of families within six months, just when the OBR predicts that unemployment will peak. It is a cut that takes out-of-work support to its lowest levels since the 1990s. That is why Labour has also called for urgent social security measures, including converting universal credit advances to grants instead of loans, ending the five-week wait, suspending the benefits cap and uprating legacy benefits to match the increase in universal credit. About 2.2 million people on legacy benefits have been deprived of the uplift, and given that three quarters of those claimants are disabled and on employment and support allowance, this has created a two-tier social security system that has left many struggling to cope. Evidence from the Disability Benefits Consortium found that 67% of disabled claimants have had to go without some essential items at points during the pandemic.

Minority ethnic communities have been hardest hit by both the health and economic crisis. The Resolution Foundation found that, at the end of last year, unemployment among young black graduates had risen to 34%, up from 22% before the pandemic, and almost three times that of young white graduates during the same period. StepChange research also shows that those from an ethnic minority are twice as likely, compared with the GB average, to say that they have experienced hardship, borrowed to make ends meet or have run down savings.

In conclusion, the Chancellor is hitting families up and down the country, with a quadruple hammer blow of council tax rises, cuts to universal credit, real pay cuts for key workers and the freeze to the personal allowance. If the Chancellor wants to work for a fairer Britain and build a more inclusive and financially inclusive economy, he needs to know who his policies are helping and who they are not. That is why we need an impact assessment, as called for in new clause 23, and the Government should support it today.

[Rebecca Long Bailey (Salford and Eccles) (Lab) [V]]

I speak to oppose clause 5 stand part, and in support of amendments 2, 3 and 4 in the name of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and others, as well as amendments in the name of my hon. Friend the Member for Streatham (Bell Ribeiro-Addy) and amendments from the Labour Front Bench.

The Chancellor committed to doing whatever is necessary to support people and businesses through the coronavirus pandemic. I want to believe him, but the £20 a week covid uplift to universal credit will be cut just at the time when the OBR has predicted that unemployment will peak. There has been no uplift at all, as we have heard, in covid support for those on legacy benefits or affected by the benefit cap. At the same time, an equivalent cut in working tax credit for households that have not yet made the move to universal credit will be imposed.

Further councils, whose budgets have been decimated over recent years, will be forced to increase council tax by up to 5%, pressuring household budgets even further, so the Bill is already sorely deficient in honouring the Chancellor’s original promise. However, in clause 5—the proposal to freeze the personal tax allowance—the promise is sadly contradicted entirely. The reality of the clause is that, if there is wage inflation over the next five years, someone earning just under the threshold now, for example, who then receives an inflationary pay increase for 2022-23 will start to pay tax.

As the Resolution Foundation has found, the poorest fifth of households are twice as likely to have seen their debts rise rather than fall during the crisis, so taking some of those lowest earners beyond the personal allowance threshold as their wages might slightly increase with inflation could result in their financial devastation. I therefore supported calls to remove clause 5, or at the very least for the Government to compromise and delay the changes.

I will also briefly mention clause 32 on self-employment income support. I do not disagree with the sentiment of the clause but, as the Government know, the support still does not go far enough. More than 2 million remain excluded from any Government support at all and, as I have repeatedly told this House, some have sadly taken their own lives as a result. I once again urge the Government to provide an immediate emergency grant to those affected, install new monthly arrangements while restrictions remain in place in complete parity with the extension of the coronavirus job retention scheme and the self-employment income support scheme, and remove the hard edges to eligibility criteria. Finally, they should backdate payments for a full and final settlement to deliver parity and fairness for those excluded from meaningful support.

Financial Services Bill

Seema Malhotra Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

I hope very much that my hon. Friend on the Front Bench will make it clear that, when the genocide debate takes place later this month, we expect the Minister to say from the Dispatch Box what Britain is doing to ensure that these five alleged perpetrators are brought to justice.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

I support amendments 1, 2 and 8 and the remarks made by our Front-Bench team to oppose any post-Brexit race to the bottom in regulation. It is also vital that we move towards a deal on equivalence in financial services with the EU.

Financial regulation has to adapt to market innovations to ensure that consumers are well protected, and it is under this call for consumer protection that I also speak in support of new clauses 24 to 26. These push for a fair deal for the 250,000 mortgage prisoners stuck for 10 years paying high interest rates. The all-party parliamentary group on mortgage prisoners, which I co-chair, has been contacted by hundreds of mortgage prisoners, who describe the worry and the stress that comes from being trapped as they are. The Minister suggested that the SVRs paid by mortgage prisoners are just 0.4% higher than SVRs at other lenders. Our case studies, which include nurses, teachers, members of the armed forces and small businesspeople, tell another story.

It is inappropriate to compare the rates that borrowers with inactive lenders are currently paying with those paid by SVR customers at other active lenders. If mortgage prisoners were with an active lender and up to date with payments, they would have access to a product transfer giving them a lower fixed rate. I will illustrate this through two constituents. The first is with an active lender. Last year, when she contacted my office, she was paying an SVR of 4.14%, but as she was with an active lender, we were able to help make representations. She is now on a two-year fixed rate of 1.79%, and saving over £5,000 a year in mortgage payments.

The second constituent’s Northern Rock mortgage was sold to Landmark and is ultimately owned by Cerberus—a mortgage with a fully regulated high street bank sold off to a vulture fund. The family are not being offered any new deals, costing them over £6,000 a year more than if they were with an active lender. I cannot put into words the stress that this has caused the family, who have nearly lost their home more than once.

When the Government sold these loans to Cerberus, UK Asset Resolution told Lord McFall that returning these mortgages to the private sector would result in their being offered fixed rates. In a “Panorama” investigation two years ago, a UKAR spokesperson said that Cerberus had the ability to lend to former Northern Rock customers and that they had believed they intended to do so. They said:

“The reply to Lord McFall sent on behalf of the UKAR board of directors was based on information presented to UKAR and the board had no reason to disbelieve this at that time.”

If UKAR was misled by Cerberus, to date there have been no consequences, and today we have Landmark refusing to offer my constituent any fixed rates. Capping SVRs for mortgage prisoners is an issue of consumer protection.

I turn briefly to new clauses 24 and 26. Expanding the regulatory perimeter to help mortgage prisoners is supported by the APPG and the UK Mortgage Prisoners campaign group, and there is support from the Building Societies Association, which has said:

“It is essential that the FCA and the Government take action urgently to ensure that consumers whose mortgage is sold to an unregulated lender have robust consumer protections extending to interest rates.”

An expansion of the regulatory perimeter would give the FCA all the power it needs, in the words of the Governor of the Bank of England to the Treasury Committee in his appointment hearing, to “conclusively address” the question of mortgage prisoners. New clause 26 says that consumers would need to consent before their mortgage is sold on to an inactive lender. Supporting these amendments provides immediate help to mortgage prisoners who have suffered far too long and are now hit harder by the pandemic.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Before I call Andrew Jones, I should say that after Stella Creasy I will reduce the limit to three minutes.

Economic Update

Seema Malhotra Excerpts

Wednesday 8th July 2020 Commons Chamber

[Rishi Sunak]

I am very happy to accept my hon. Friend’s invitation. He is absolutely right. The best way for us to provide opportunity for people is to give them the skills and the education they need, whether through universities, institutes of technology, further education, schools or apprenticeships. Providing people with that knowledge is what will enable them to build a better future for their lives. That is something that he and I both feel very passionately about. We will, as a Government, deliver that.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

I am genuinely surprised that the Chancellor has not today brought forward a flexible furlough scheme for aviation, which he knows will have a longer recovery tail. I hope that, as he keeps in touch with the industry, he will also keep in touch with MPs from aviation communities for place-based support. He is right that young people and others will need support and access to jobs, and I welcome the kick-start scheme. However, with experts estimating that over 30,000 work coaches are needed and unemployment in the sector set to hit a record high in October, the Secretary of State for Work and Pensions expects 4,500 new work coaches to be in place by then. Is the Chancellor concerned that there will not be enough in place to meet demand when we most need it, and what more does he think can be done?

[Rishi Sunak]

I commend and applaud all the efforts the Work and Pensions Secretary and her team are doing at the moment. Just for reference, they are doubling the number of work coaches and doing it in record time. We will have 13,500 in just eight months—a 100% increase. It is worth comparing that to what happened in 2008-09, when the Department for Work and Pensions recruited just 10,000, a 60% increase, which took 12 months. We will go as fast as is necessary, but no one can accuse us of not doing as much as we can, as quickly as we can, to provide people with the support that they need.

Economic Update

Seema Malhotra Excerpts

Tuesday 17th March 2020 Commons Chamber

[Rishi Sunak]

Hopefully it will benefit today from the significant measures that have been put in place to provide forward business rate relief and immediate cash support through grants. That should provide the business with some reassurance that help is on its way to enable it to protect jobs, with more to come.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Yesterday a constituent of mine was laid off from his employment, along with 50 colleagues. He described how he watched the company’s owners trying to hold back tears as they let go people who have worked for them for decades. Why will the Chancellor not cut off this problem at the root by providing to British businesses the same reassurance that President Macron has provided to French businesses: that no business will go bankrupt?

[Rishi Sunak]

As I have already said, the French Government announced €300 billion of loan guarantees yesterday. We have gone a step further with £330 of loan guarantees, equivalent to 15% of our GDP, to provide the same level of support. Beyond that, the fiscal measures that we have taken between last week and today are comparable in scale to those undertaken by any major economy.

Oral Answers to Questions

Seema Malhotra Excerpts

Tuesday 11th February 2020 Commons Chamber

[John Glen]

I always listen very carefully to what my hon. Friend says. I think the best way forward would be for me to meet him to discuss his specific proposals and see what can be done.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

14. How many people will be affected by the 2019 loan charge after the Government have implemented the recommendations of Sir Amyas Morse’s review.

[Mr Laurence Robertson (Tewkesbury) (Con)]

20. How many people will be affected by the 2019 loan charge after the Government have implemented the recommendations of Sir Amyas Morse’s review.

[The Financial Secretary to the Treasury (Jesse Norman)]

Of the estimated 50,000 individuals affected by the loan charge, the Government currently estimate that more than 30,000 will benefit from the changes. That includes about 11,000 people who will be taken out of paying altogether. In addition, individuals who have settled or who are settling their tax liability with Her Majesty’s Revenue and Customs will be out of scope of the charge.

[Seema Malhotra]

Neither the law nor HMRC made clear the position regarding loans and self-employed people. Indeed, it was not until 2016 that it was announced that the law would be changed to include the self-employed and others who did not even find out until a year or two later, such as my constituent Dhruv Salotra. Will the Financial Secretary do the obvious thing, get rid of all retrospection and apply the loan charge from when the law was clear and applied to everyone, including the self-employed, and, in addition, clamp down on those who promoted these disguised renumeration schemes in the first place?

[Jesse Norman]

The hon. Lady is absolutely right that it is important to crack down on promoters, and at the Budget we will bring forward a package about how to do that. Her wider point, however, is wrong: this is not a retrospective measure. It is also true that the Government have to some extent been vindicated by Sir Amyas Morse, who found that the loan charge was an appropriate way to respond to tax avoidance and, after detailed argumentation, suggested a date in December 2010 as the correct date from which to date the legality of it.

Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019

Seema Malhotra Excerpts

Monday 7th October 2019 General Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a joy to be here under your chairmanship, Mr Hanson, discussing customs once again. Along with the hon. Member for Bootle, the right hon. Member for Central Devon and many others, I have fond memories of going through the customs Bill in the House.

I have quite a few questions, mostly about the process that the legislation has followed and the logic behind our discussing the regulations today. I am very keen to know why this delegated legislation was not brought before the House in good time, before the Prorogation that did not exist. Given that we knew that the previous legislation, as the hon. Member for Bootle mentioned, took us up to only 1 October, why was this change not made previously?

Added to that, why was the change not introduced in good enough time for it to go to the sifting Committee, the European Statutory Instruments Committee, where it could have gone through the normal sifting processes and been looked at by that group of people? I am a member of the sifting Committee, and I have found it incredibly useful to go through the instruments that require sifting. We are able to give Committee members, and other Members across the House, a heads-up on things that require more scrutiny. More notice for Members is always a good thing. We have a ridiculous number of statutory instruments on the agenda today, and we have had a fairly short time to look at them. I would not imagine that the scrutiny that has been done is the best it could possibly have been, as we have not had as much time as we should have had.

The reason why I believe that the Government should or could have brought forward the information before now is the fact that they mention in the explanatory memorandum that an event was held with industry in January, when HMRC heard from industry that it did not have the capacity to comply with the security and safety changes as of exit day. The Government should have known at that point that changes would be required to the legislation, and should have made them much earlier. I would appreciate it if the Minister could let us know why that has not happened. I am focusing particularly on giving HMRC discretionary power to allow up to 12 months extra for a waiver to be granted to individuals.

Paragraph 13.3 of the explanatory notes states:

“Guidance will be published online and on social media platforms and HMRC have customer contact centres that can provide advice on what to do leading up to the UK departure date.”

Can the Minister confirm whether that guidance has already been published, seeing as this instrument was put forward in made affirmative form, and that the Government could therefore have assumed that it was likely to go through, given the choice of process? Has that guidance been published?

This morning, when I walked to school with my daughter, she asked me how many days until Halloween, because Halloween is much more important to her than Brexit day. I looked at my watch and said, “It’s 24 days.” That is 24 days for these companies to look at potential new guidance that may or may not be online at this moment in time. I do not think that that is enough time for companies to work out what they will need to do, or not do; as the hon. Member for Bootle said, there is not a huge amount of clarity about which goods, companies and organisations will be able to get the waiver, and which ones will not.

There are a huge number of instances, especially in the customs Act, but also in a number of areas around financial services, for example, in which HMRC has been given a huge amount of discretion on how to take things forward. It is being given a huge amount of power as to how to take things forward and write guidance. I understand that HMRC is the expert on this and needs a certain amount of discretionary power, but it seems to me that we are giving quite a lot of discretionary power to HMRC on this basis.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

The hon. Lady is making an important point about an area of concern. The explanatory memorandum says,

“HMRC will only use the power if needed to respond to business un-readiness that is greater than anticipated.”

It is not clear how “greater than anticipated” will be determined, how transparent the use of the power will be, or who will not be granted an extension.

[Kirsty Blackman]

I absolutely agree with the hon. Lady. In reality, the legislation does not provide more clarity to businesses. In fact, it provides less, because they do not know whether HMRC will be able to grant them the waiver using this discretionary power. Businesses will still have to prepare to put in safety and security declarations because there is no clarity from the Government on whether they definitely will or will not be included in the new regime. It would have been sensible of the UK Government to lift the clauses from the Union customs code and use them to make the customs Act work, but they chose not to.

Spending Round 2019

Seema Malhotra Excerpts

Wednesday 4th September 2019 Commons Chamber

[Sajid Javid]

I agree with my hon. Friend, and she has made this point powerfully on a number of occasions. In the past, for example, we talked about making sure that police funding reflects local need. I hope she will have noted that in my remarks today I talked a lot about levelling up across the country, whether in infrastructure investment or in investment in public services, and I can give her an assurance that Cornwall will not be left behind.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I look forward to sharing plans for the Southern Rail access to Heathrow, which I hope will form an important part of the Chancellor’s new infrastructure strategy.

This month, Hounslow clinical commissioning group was due to present the full business case for the planned and urgently needed Heston health centre redevelopment to its governing body. However, the project is on hold after questions about whether the local improvement finance trust scheme, which was originally advised by the Department of Health and Social Care as the best-value funding option, could still go ahead following confusion around the Treasury’s policy on LIFT schemes last year. Will the Chancellor meet me to review the situation, so that we can see whether the existing plans can be approved or whether any of the alternative capital funding he has announced will be available to enable this important and urgent development to go ahead?

[Sajid Javid]

I will happily discuss with officials the issue that the hon. Lady has raised, and I am sure that they will be happy to meet her.

Financial Exclusion: Access to Cash

Seema Malhotra Excerpts

Tuesday 21st May 2019 Westminster Hall

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I beg to move,

That this House has considered financial exclusion and the future of access to cash.

It is an honour to serve under your chairship, Sir Henry. I thank the Backbench Business Committee for granting our request to hold the debate. I also thank the Access to Cash Review panel, Joe Fortune from the Co-op party, the RSA, Responsible Finance, Hounslow Council, UK Finance, the Payment Systems Regulator, the Treasury Committee Clerks, Visa, Mastercard, the Financial Inclusion Commission, Citizens Advice, the Money Advice Service, Age UK and many others for their help in preparing for the debate. I mention them as an indication of how widespread the concern is and how much of a contribution many stakeholders are making. I also declare an interest as a recent nominee to become a new commissioner on the Financial Inclusion Commission.

There is considerable interest in the debate, so I will try to keep my remarks to about 15 or 16 minutes. I will set out some of the context; where progress is being made, which we should recognise; opportunities that we should seize, including a particular mention for credit unions; and the importance of joining up to move forward together. I will also cover the potential for and importance of future legislation, which the Government have so far resisted and I am sure the Minister will mention.

As the map of stakeholders shows, access to cash is an important and complex issue that can no longer be primarily led by industry. We need a joined-up plan led by the Government that looks at the cost and effectiveness of our wholesale cash infrastructure, programmes for digital inclusion and incentives to diversify services based on complex customer needs. We need to ensure that those services can reach people, and that we both maintain free access to cash for those who need or choose cash as their method of payment and ensure that cash remains accepted.

There is clear cross-party interest, which the Chair of the Treasury Committee referred to in her recent correspondence with the Chancellor. That gives me hope and confidence that we are setting the right foundations for moving forward and addressing the challenges ahead.

Fundamentally, the bigger picture is inclusive economic growth and flexibility, security and choice in personal and family finance. Cuts to welfare, stagnant wages and economic instability in the last decade have exacerbated the precarious position of millions of people in the UK. The Money Advice Service estimates that 22% of UK adults have less than £100 in savings, which makes them highly vulnerable to a financial shock such as job loss or an unexpected bill. Some 8 million people rely on high-cost credit to pay essential household expenses, and may frequently turn to alternative forms of finance such as high-cost lenders or illegal loan sharks to make ends meet. Recent Financial Conduct Authority data shows that the number of high-cost short-term credit firms has decreased, but the volume of lending has increased.

Ten years ago, six in 10 transactions were made in cash, but by March 2019, that number had halved to three in 10. The combined number of banks and building societies is falling steadily, and in 2018, the number of free-to-use ATMs fell for the first time in 20 years.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Lady on securing the debate. The issue of free-to-use ATMs is particularly acute in rural areas, and especially among elderly and more vulnerable communities, which should be at the forefront of the debate.

[Seema Malhotra]

The hon. Gentleman puts on the record an important and well-made point, which I will address later.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I, too, congratulate my hon. Friend on securing the debate. Does she agree that when banks, such as the Yorkshire Bank in Royton, close with an agreement to relocate a cash machine in a convenience store, the agreement must be that it will remain free to use? In Royton, just a year into that agreement, a charge has been introduced.

[Seema Malhotra]

My hon. Friend makes an important point about the situation in his constituency, and that is why regulation is increasingly important. In future, the issue will be maintaining not just access to cash but free access to cash.

There has been a renewed focus on the issue of the last bank standing in a community. As Sian Williams of Toynbee Hall pointed out, however, when we get to that point, it is often too late. There is an urgent need to join up, particularly in areas that are more likely to be left behind. Financial institutions have not tended to talk to one another, so towns and communities have been left with piecemeal and inaccessible financial services.

The change has not been orderly. In the RSA’s excellent report published earlier this year, “Cashing Out: The hidden costs and consequences of moving to a cashless society”, the situation is described as a “disorderly dash from cash” with

“a misalignment of incentives between individual banking institutions seeking to shed their costly physical infrastructure…and the needs of…thousands of communities that remain reliant”

on what, for them, are essential financial services. The report finds that substantial numbers of people rely wholly on cash and that access to bank branches is about not just the older generation but the younger generation, small and medium-sized enterprises and increasing numbers of self-employed people, who all have an important stake in the debate.

This year, the Access to Cash Review’s significant report found that 17% of Brits say that they would not cope without cash. As has been said, they are the most vulnerable people, such as the disabled, the poorest and the elderly, who are unlikely to be early adopters of contactless technology. Figures from the Financial Inclusion Commission suggest that they are also more likely to be among the approximately 700,000 people in the UK who want a bank account but, for various reasons, cannot open one.

There are significant regional, area-based and income-based disparities. More than 15% of people with an income under £10,000 rely completely on cash, in contrast with only 2.5% of those in the highest income bracket. People who have less access to cash are already subject to a poverty premium; they have been left behind by contactless and digital payment technologies and cannot shop around to get the best deals.

There are also difficulties for disabled people. Eleanor Southwood’s evidence to the Treasury Committee recounted how people who are blind or partially sighted can struggle to use a taxi driver’s touch screen PIN pad, and then often need to give away their PIN. It is important to think about the role of assistive technology in this space. As chair of the all-party parliamentary group for assistive technology, I understand the potentially transformative impact of accessible technology and why it needs to be part of the debate about how financial services move forward.

The gaps in broadband provision, including in rural communities, can make access to cashless payments more difficult. Indeed, broadband notspots are not confined to rural areas; an estimated 1,000 households in my constituency do not have access to decent-speed broadband. Hounslow Council’s work to help to end notspots is a key part of the jigsaw, which will take years to deal with.

The question is how we are going to respond to the drivers of such changes, including new technologies, lifestyles and uneven economic progress, and the consequences of the increasing cost of our nation’s wholesale cash infrastructure, alongside the need for better financial education and financial inclusion. I thank the hon. Member for Solihull (Julian Knight) for being here and for his work on the all-party parliamentary group on financial education for young people.

I will say a few words about supporting the cash infrastructure. We know that The Telegraph reported last year that there were about 123 cash deserts—postcode areas that do not have a single ATM in their geographical coverage—and there are more than that now. A further 116 areas have just a single ATM, 36 of which are fee-paying ATMs. The Association of Convenience Stores also highlights how convenience retailers and ATMs enable financial inclusion, but they are also under threat from high business rates bills and cuts to interchange fees.

In addition, research by the University of Bristol on the distribution of ATMs in that city has found that the provision of cash is almost opposite to the geographical need for it. Lower-income communities are poorly served by current cash infrastructure. ATMs are changing from free to fee-charging, with deprived areas disproportionately hit. Of the 16 ATMs in Bristol that changed from free to fee-charging between October 2018 and March 2019, 11 were located in deprived areas.

[Holly Lynch (Halifax) (Lab)]

My hon. Friend is making a characteristically passionate speech. We have heard about the provision of cash machines in rural areas and in deprived areas, but does she agree that another consideration is the provision of cash in market towns? When the last bank closed in the small market town of Sowerby Bridge in my constituency, taking the cash machine with it, there was a detrimental impact on the market, and on its traders, who deal exclusively in cash. We really need to reflect on that problem as, I am sure, it is replicated all over the country.

[Seema Malhotra]

My hon. Friend makes an important point. I agree that this whole debate also needs to be part of a strategy for towns, which are often left out of how progress is made, how policy is implemented and who is the first to benefit when new resources are rolled out. The provision of financial services and ATMs is absolutely vital for ensuring economic progress and the viability of businesses.

[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

The banks are closing down everywhere and are using the excuse that we can use post offices to access cash. Yesterday it was announced that 1,000 post offices are to go and more to follow. Sub-postmasters are not making the same money as the banks. That is now going to lead to a more cashless society. That, to me, is what the banks are heading for.

[Seema Malhotra]

My hon. Friend’s extremely important point is one I was about to go on to. We have seen this debate previously in relation to post offices, and have then seen post offices become an important part of the strategy for maintaining access to cash—Mastercard and others are also working with them. Research from the Post Office shows that about 44% of small businesses believe that the convenience of cash is essential to their business, and also that they use post offices. Yet, alongside this debate, we see these warnings, and alongside the challenges that the post office network faces, deprived and rural communities will have even poorer access to cash.

[Ruth George (High Peak) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that the change in the post office contracts, particularly in the local and local plus contracts, meaning that post offices get only £12 for handling £1,000 of cash, is driving down the provision of post offices in rural communities and towns in particular?

[Seema Malhotra]

My hon. Friend is absolutely right. Post offices in my constituency have raised similar concerns.

[Charlie Elphicke (Dover) (Con)]

I congratulate the hon. Lady on securing the debate. Should we also not look at what I see as the opportunities to improve the situation, including the opportunity to ensure more free cash machines supported by the banking system, which I hope the Treasury will take on? There is also an opportunity to require retail businesses to accept cash. The other day I walked into a Vodafone shop and they said that they did not accept cash—they had gone completely cashless. I thought, “What about vulnerable people? What can we do for vulnerable people?” Does the hon. Lady not agree that it is really important to do that as well, and to maximise the opportunity for the post office network to ensure that vulnerable people can still access cash and financial services in their often rural communities?

--- Later in debate ---

[Seema Malhotra]

The hon. Gentleman makes an important point. Indeed, he has made similar important contributions in his work on the Treasury Committee. He talks about the acceptance of cash needing to be part of the debate, and I know that other hon. Members will be speaking on that issue later. It is an important part of the jigsaw.

I want to make a few points about our policy response and about how we need to move forward. The report from the Access to Cash Review made five broad and important recommendations: to guarantee access to cash, to ensure that cash continues to be widely accepted, to create a more resilient wholesale cash infrastructure, to make digital payments an option for everyone and to ensure joined-up regulation of cash. Within that, there are important roles for national and local government, banks, regulators, FinTech, building societies, payment systems operators and others. I also want to mention credit unions and their role, and I hope that the Minister will be able to respond to this important issue, as we plan for the next decade and beyond.

There are 1.9 million members saving £2.4 billion in the UK’s 500 credit unions. Credit unions are financial co-operatives and are therefore member-owned and democratically run. They have huge potential to play much more of a role, but that will need support and Government leadership. The Treasury Committee recently raised concerns about credit unions either going bust or having to consolidate to survive, and there is an urgent need to consider how we better support them. I want to make a few suggestions about how we can support the expansion of the UK credit union sector. A response from the Minister today on that would be helpful, and perhaps we can continue the discussion after this debate, which is only an hour and a half long.

The first suggestion is to appoint a Minister for credit unions [Interruption.] Yes, but I hope that the Minister has a cross-cutting responsibility and is committed to placing credit unions at the centre of retail financial services to ensure more competition and choice in banking. The Minister will know that the Treasury is responsible for credit union legislation and that other Departments also have an important stake, especially the Department for Work and Pensions and the Cabinet Office. I hope he can discuss how, in his role, he will continue to join up that work across Government and where we might see faster progress.

The second suggestion is that all workers be given the right to save in a credit union directly from their pay. Some 39% of the population have no savings, and to counter that we believe that all employees should be given the right to save directly in a credit union, by payroll deduction and at no cost to them.

Thirdly, all schoolchildren ought to be given the right to join a credit union school savings club. Good savings habits for life should be encouraged at an early age. All policies in this area should reference credit unions as able to take such deposits, in the same way as banks and building societies can.

Fourthly, early changes should be introduced in the new legislative programme, to take the opportunity to build on the pre-election Treasury consultation on credit unions and dismantle obstacles that prevent the transformation of the UK credit union movement into a player with the significance of its international peers. Elsewhere, although there are market differences, credit unions are significant players: in Ireland 73% of the population are members of credit unions and in North America the figure is 43%.

I am pleased that, following the publication of the Access to Cash Review report, there were moves to respond to it very quickly. The Bank of England announced that it would convene relevant stakeholders to design a new system for distributing cash on the basis of the concerns that had been identified. The Treasury Committee took evidence and produced an important report on consumers’ access to financial services, which was published last week. The Treasury announced that it was commencing a new joint authorities cash-strategy group, involving the Treasury itself, the Payment Systems Regulator, the Financial Conduct Authority and the Bank of England. There will indeed be much work for the new body to do.

I would be grateful if in his response the Minister updated Members on strategy formulation, and how the work of the group will operate alongside the work being done by the Bank of England. There needs to be more joined-up working, rather than silos, overlap and duplication. I would also be grateful if he told us what progress he expects to be made by the autumn, when I understand the Access to Cash Review panel plans to meet and review its progress; which consumer bodies will be involved in the development of the strategy, particularly co-operative institutions; and how the group will respond to the individual recommendations made by the Access to Cash Review panel.

We face unique challenges in the modern world, and we need to make sure that both Parliament and the Government are responding to those challenges. Access to cash is not a problem that is unique to the United Kingdom, and neither is the need for robust legislation—as and when necessary—and regulation to ensure it. The Swedish legislature was recently forced to create a cross-party commission on access to cash, due to a public outcry after hospitals announced that they would no longer accept cash payments. Swedish bodies and representatives repeatedly told the Access to Cash Review that we needed to act now, as it is much harder to re-establish cash infrastructure than to preserve it.

Local authorities are an important part of this jigsaw and of our response. My local council in Hounslow, led by Steve Curran and Lily Bath, is taking steps towards financial inclusion, which is vital as local authorities are at the forefront of helping local citizens deal with a lot of changes. Those changes have come through welfare reforms, but also from the housing crisis that we face—a number of people are in temporary accommodation, and may have been waiting for a long time—and are affecting people’s access to services in many ways, as well as their resilience.

I am pleased that there are more innovations in communication and that better research into segmentation is under way, including understanding the financial capabilities of council tenants. A higher than expected number of those tenants do not have bank accounts into which payments can be made, whether welfare or other payments. That is why it is important that we all, including local authorities, revisit the idea of closer working with credit unions. Given the importance of this work, Parliament and Government must act to promote the role of local government in making sure that we preserve access to cash and financial services.

To conclude, joining up how we move forward together is increasingly important, because of the complex map of the stakeholders involved. We are not going to get multiple chances at this; change is going to take time, and it has to be done right. It has to be done with the right research, the right underpinning and the right policy frameworks, with confidence, and with the message that if all those involved in financial services who have a stake and a role, including banks and those involved in cash infrastructure, do not play their part effectively, there will be regulation and legislation. We also need considerable programmes for digital inclusion, and incentives to diversify services within the industry. We need to make sure that those services continue to reach the people who need them and that cash continues to be accepted.

I also hope that we can have a discussion about how this issue forms part of wider economic strategies, including industrial strategy. Labour has talked about regional banks providing an opportunity to ensure financial inclusion; there are examples from abroad that we can learn from, including the Sparkassen, and the Mann Deshi bank in India—I have been looking at whether we can do some reverse learning from that bank in my constituency. Mobile technology, which some of our financial services have already begun to use, has been vital in supporting women, particularly in rural areas—to set up their own businesses and manage their household finances.

I thank organisations such as City Pay it Forward that make an important contribution to increasing financial education in our schools; as I mentioned before, I consider that to be extremely important. Our new local charity, Hounslow’s Promise, is working to make sure that we have financial understanding and financial literacy, which are vital to ensuring that people can take advantage of new services that are on offer.

[Sir Henry Bellingham (in the Chair)]

I thank the hon. Lady for her knowledgeable, detailed and excellent speech. We are going to have to introduce a voluntary time limit of three minutes, which I ask right hon. and hon. colleagues to try to stick to.

--- Later in debate ---

[Seema Malhotra]

I thank the Minister and the shadow Minister for their remarks. I also thank the Minister for recognising that this is a confusing time, that the rate of change is faster than we had predicted, and that cash is required. He made a very important point on cash being a back-up if a system of technology fails. I thank all hon. Members who have taken part in the debate, including the hon. Member for Hitchin and Harpenden (Bim Afolami), who helped me pitch this subject to the Backbench Business Committee.

We absolutely cannot sleepwalk into a cashless society. Equally, we cannot turn the clock back on progress. However, the market is failing and we need to intervene. We also need to ensure that it continues to be affordable to accept cash, requiring joined-up action to reduce the cost, reform our cash infrastructure and ensure efficiency and resilience. Where needed, we must also incentivise joint industry working in the design of consumer services and products that are based on need. If that requires further supply-side reforms to enable hubs and provide more opportunities to work together, we need to grasp that challenge—both in terms of policy and of shifting our culture. I recognise some of the interesting ideas coming from Mastercard and Visa—including jam-jarring to help with savings, and support for credit union infrastructure—but there needs to be so much more.

I thank Natalie Ceeney and her panel for their work on the Access to Cash Review. Government action is welcome, but it cannot be on a slow burn—for example, the no-interest loan scheme pilot, which was announced last year, has not yet progressed. We need to continue working together on this issue, and I look forward to doing so.

Question put and agreed to.

Resolved,

That this House has considered financial exclusion and the future of access to cash.

[Sir Henry Bellingham (in the Chair)]

I thank right hon. and hon. Members for their patience and restraint in restricting their speeches to the limit. This has been an excellent debate.

Oral Answers to Questions

Seema Malhotra Excerpts

Tuesday 21st May 2019 Commons Chamber

[Elizabeth Truss]

I welcome my right hon. Friend’s efforts to build bridges across London and to improve London’s infrastructure. The London mayoral elections are coming up, and I suggest that people vote for somebody who is going to make change happen much quicker.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Will the Minister commit to ensuring that survivors of domestic abuse with insecure immigration status have safe and confidential reporting systems, without fear of being returned to their country of origin?