Budget Responsibility Bill

Stella Creasy Excerpts

Committee of the whole House
Wednesday 4th September 2024 Commons Chamber

[Andrew Griffith]

It is a delight as ever to serve under your chairmanship, Ms Ghani. I congratulate the hon. Member for Loughborough (Dr Sandher) on his maiden speech and his kind comments about his predecessor Jane Hunt, a great colleague of this House. It was one of my great pleasures in my previous role as Minister for science and research to visit the fine university he now represents; I wish him and them well, and I wish him all the best of luck with those on his Front Bench in procuring the financial support he seeks.

This is a disreputable Bill, if we are brutally honest. It is a piece of political theatre, which all of us on both sides of this House should think very strongly about giving our support to. This history of this place is of legislation made in haste, which this House subsequently repents at leisure. I say this in all seriousness and in the spirit of this place: at a time when there is low trust in politics, did our constituents—did the hon. Gentleman’s constituents, when they trooped to the ballot box and returned him to this place only weeks ago—seriously expect that our role would be to give away even more of our responsibilities? Can any of us, hand on heart, say that our constituents know what and who the OBR is? Did the electors of Bristol North West, Hampstead and Highgate, Richmond Park or, indeed, Arundel and South Downs send us to this place only to give away our duties and responsibility to the unnamed, unknown and unelected officials—well-meaning, no doubt—of the Office for Budget Responsibility? Hands on the face of a stopped clock are sometimes more accurate than the OBR forecasts, as they are at least correct twice a day for sure.

In truth, this legislation, put together at breakneck speed, has more holes than a Swiss cheese. If we look at clause 1(3), who decides the “costing”? Proposed new section 4A exempts any measure that is intended, at the time of its introduction, to be temporary. Members of this House will be familiar with the fact that income tax itself, one of the largest ever fiscal measures, was intended to be temporary; perhaps the Minister will address that fact when he winds up. Income tax was introduced by Pitt the Younger in 1799 as a temporary measure. Well, here we are, 225 years later, and that temporary measure is still going extremely strong.

Who defines what is and is not a fiscal measure—a measure with a potential impact on the GDP of this country? Many things decided in this House will have a direct or indirect impact on the GDP of this country; the decision by Tony Blair to take us to war without a vote in this House undoubtedly had an impact on our GDP. Decisions to introduce a four-day working week—if this House so chooses to make them, as is its right—would have a material impact on the GDP of this country. The Centre for Business and Economic Research estimates that every bank holiday costs this country a sum approaching £3.6 billion. Three, four, five or six bank holidays add up to a 1% impact on GDP, which I speculate may be the threshold for the OBR to intervene.

On trade deals, if those on the Government Benches fulfilled their ambition to realign with Europe—to federate and once again abrogate our trade to Europe—that would potentially have a material fiscal impact on GDP. There are very few domains of this House—very few of the decisions that our constituents have sent us here to legislate and decide on their behalf—that would not potentially fall foul of this rule.

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

I will delight the hon. Gentleman, because, as I am sure he saw on the amendment paper, I have tabled an amendment that would look at trade deals. One of the reasons why I felt compelled to do that, and explore this question that he raises about the economic impact, is that while he was in government and, indeed, a Treasury Minister, the Government did not publish any information for the very trade deals he is talking about. I will always welcome a sinner who repenteth but, for the avoidance of doubt, is he saying that he now believes there should be independent scrutiny of things such as the trade and co-operation agreement?

[Andrew Griffith]

It is good to have a proper debate. I certainly think that if we want and seek good government—which, like the human condition, is not a perfect state, but a state that we should seek constantly to perfect—the highest levels of transparency and the very important exercise in Government publishing of impact assessments when they make material decisions, as required by Cabinet Office guidance, are things that the whole House should join hands and agree on. It is one of the reasons why I asked my colleague, my hon. Friend the Member for Droitwich and Evesham (Nigel Huddleston), whether the Government had published an impact assessment on their callous decision to withdraw the winter fuel allowance from so many pensioners. The hon. Member for Walthamstow (Ms Creasy) will well know that the process of trade deals undergoes extensive scrutiny in this House, and I took one of those trade deals through that process of scrutiny in a former life.

I will conclude, because I simply want to alert hon. Members to what they are potentially doing as they seek to support this Bill. It is not for partisan or political advantage, but about the important role of Parliament, which has been litigated many times in this Chamber and in debate.

[Andrew Griffith]

As ever, the hon. Member makes an important and weighty contribution. He is exactly right about the direction of travel. On both sides of the House, we will all find our own particular point on the envelope when it comes to the balance around organisations that can hold us to account and, in particular, hold a mirror to Government and ensure that this House acts with the best, most accurate and well-meaning data.

My core point is that we are sent here by our constituents. I again congratulate the hon. Member for Loughborough, who has been sent here on behalf of his constituents and has given a fine speech today, but I do not believe—he may intervene and correct me—that the citizens of Loughborough, whether they voted for Jane Hunt or for him, intended that one of the very first actions he and we would take as legislators would be to award more of our powers and place more fetters on ourselves. This is the right Chamber for accountability. We should hold ourselves to account; we have a number of ways in which to do that to ourselves. The hon. Member for Blackley and Middleton South (Graham Stringer) makes a very real point about quangos, arm’s length bodies and how we hold ourselves to account.

That is my point. I understand that many colleagues wish to get in. I support the amendment put forward by my hon. Friend the Member for Droitwich and Evesham, because it is quite right that we have rules. I was an accountant by training, and the first thing we learn—whether someone is an accountant or in performance sport—is that we play by the rules as they are; we do not seek to rig the rules in our favour.

[Ms Creasy]

It is a pleasure to speak in the same debate as the maiden speech given by my hon. Friend the Member for Loughborough (Dr Sandher). I am sure other speeches are coming that will show just how impressive the new generation of MPs is across the House.

It is also a joy to follow the hon. Member for Arundel and South Downs (Andrew Griffith), because I have always enjoyed the experience of listening to him. When he was a Treasury Minister in the previous Government, I watched him, debated with him and tried to encourage him to take on the buy now, pay later lenders—that is related to what I will say about legal loan sharking. But I have to be honest: being lectured by former Conservative Ministers about fiscal probity is a bit like being lectured by Toad of Toad Hall about safe driving, given the experiences of many of our constituents, which have led to the need for this legislation.

I put on record my support for this legislation, because frankly anybody who has had to renegotiate a mortgage since the Liz Truss Budget knows exactly why it is needed and why we must protect the British public from the consequences of bad decision making at a national level. As we saw in many examples under the previous Administration, the public have paid the price for that and will continue to do so.

[Andrew Griffith]

Of course, the legislation does not fetter previous Governments, but it would fetter the discretion of the hon. Lady’s own Front Benchers. In that context, does she not have the same confidence in her Front Bench that many others seem to enjoy?

[Ms Creasy]

I am a bit disappointed that the hon. Member did not seek to call me Ratty. I am also quite struck by the fact that he, a former Conservative Treasury Minister, rises not to hold himself accountable for the consequences of decisions made by the previous Government, or indeed to defend them, but simply to say, “You will be held to a higher fiscal standard.” We on the Labour Benches welcome a higher fiscal standard; that is the purpose of the legislation. Political decisions will still be made, but we will make them with the benefit of independent information. He will know that there were many debates in the previous Parliament, and indeed in those before it, in which independent information about and verification of the economic impact of policies mattered but were missing. Indeed, he mentions trade deals, which are an example of where we did not have independent information. I will comment on that only briefly, because my amendment has not been selected—he will be as disappointed as I am about that.

--- Later in debate ---

[Graham Stringer]

You are not as old guard as some.

[Ms Creasy]

Yes. But in that time, many of us have had persistent concerns, and one of mine has always been the private finance initiative. The Government are asking all of us to make and support some very tough decisions because of the economic mess that the country now finds itself in. My view is that we must look at all outgoings in that process. If somebody came to a constituency surgery because they had multiple outstanding loans and could not pay their rent, we would look at the debts that they held. That is the challenge with private finance: it is the legal loan-sharking of the public sector. Amendments 6 and 7 are about the process of getting a grip on our debts and ensuring that we learn from the damage that private finance has done.

Let us be clear: nobody can absolve themselves from private finance. Governments of all persuasions have sought to use that process—the ability to put only the repayments on the books, rather than the substantial cost of borrowing. That started under John Major; yes, there were multiple PFIs under the previous Labour Government; and indeed, the previous Conservative Government continued to use private finance until 2018. That is why, as of February this year, there are still 700 PFI schemes representing a capital value of £57 billion, but for which we will pay back £151 billion in the years ahead. We are asking pensioners to pay more for heating their homes, but we should be asking how we can pay less for the private finance debts that we have built up.

Private finance was about being able to build things such as schools and hospitals. Anybody who has an outstanding PFI debt in their constituency, or a school or hospital that urgently needs rebuilding, such as Whipps Cross hospital in my constituency, understands the importance of being able to access private finance. For the avoidance of doubt, I am not saying through my amendments that we should never work with the private sector; I am saying that PFI was a catastrophically bad deal and that, cumulatively, it would meet the legislation’s targets of 1% of GDP, so it is a fiscally significant policy. My amendments are about trying to understand how we will deal with cumulative debt and cumulatively fiscally significant policies.

[Graham Stringer]

I agree completely with my hon. Friend. As a member of the even older guard than hers—

[Ms Creasy]

The original OG!

[Graham Stringer]

I am certainly the old guard from the start of the previous Labour Government. That is relevant because I had a discussion at the time with the then Paymaster General, Geoffrey Robinson, about the cost of PFIs for hospitals. His answer was succinct: “If you want the hospitals, you have to go down the PFI route.” He said that because the Treasury rules were so rigid about finding money for socially needed projects—hospitals in that case—the Government had to work around them, at what would eventually be a huge cost to the taxpayer. There is a warning there about rigid rules and not dealing with reality.

[Ms Creasy]

It will not surprise my hon. Friend that I agree with him not just about his football team but in his analysis. The legislation is about having better fiscal rules and tougher constraints when Governments make decisions. We saw with the Liz Truss Budget how catastrophic those decisions can be.

Many Members will have come across PFI in their constituencies, but it is worth putting on the record just how big it is, because that is relevant to the legislation. We are talking about 700 projects, but each project can be hundreds of individual buildings. One of those 700 projects is made up of 80 schools, for example, which shows the scale that we are talking about. About half of PFIs are held between the Department of Health and Social Care and the Department for Education. That is how we built desperately needed schools and hospitals, but the cost is absolutely critical.

Some NHS trusts are now spending 13% of their total budget on PFI repayments—£2 billion a year for some. In practical terms, that means that some trusts are spending more to repay what is essentially a payday loan for the public sector than they are spending on drugs for their patients. It is a huge drain on our public finances. In 2020, during the pandemic, Norfolk and Norwich University Hospitals NHS Foundation Trust paid £66 million to service its PFI commitments—the same amount that it spent on lab equipment, surgical tools and personal protective equipment. University College London Hospitals NHS Foundation Trust has already paid out £200 million in dividends to the company that owns its PFI, so the money is not just going to repay a debt for building a hospital; it is going out in pure profit to those companies. That is why I draw the parallel with payday lenders and buy now, pay later companies: once you are hooked in, you have to keep paying the debt.

It is not just a problem in the NHS. Hanson academy in Bradford has reached a debt of £4.16 million because of its PFI debt. It is now referred to as the UK’s “orphan” school because nobody wants to run it or take it over, given its financial position. Liverpool city council pays £4 million a year for Parklands high school, which was, again, built under PFI but is no longer needed because of falling school rolls. The council has roughly £42 million left to pay back on that contract for an empty, dead building. The equity solutions company that owns it has posted profits of £340,000 from that project this year alone.

PFI companies have made £111 million in pre-tax profit from education projects alone. That is about £800,000 per project, and the equivalent of 5,5000 new teachers’ salaries. The companies took on the risk of those deals to rebuild our public infrastructure, but the reality is that we do not let schools and hospitals go bust, so they took on the ability to print money. That is what the deals are doing. I will wager that every new and returning MP has had a conversation with someone in local government, a local hospital or a local school who talks about the damage that PFI is doing to their budgets, as if it is non-negotiable.

My amendments are about changing that culture. One challenge is that we have let those companies run rampant. That does not mean that we should not work with the private sector; it means that we should learn lessons, and I think we could learn some very simple ones. For a start, a lot of the companies are incorporated in overseas territories, which raises questions about the amount of tax that they are paying on those deals. Tax was originally part of the Treasury assessment of the deals, which was why working in that way was considered good value for money, and why my hon. Friend the Member for Blackley and Middleton South (Graham Stringer) was told that it was the best way to get a school or hospital.

We could also learn from payday lending by capping what the companies pay. After all, we cap the returns on defence projects. It makes no economic or ethical sense that we cap what can be earned from a military contract, but when someone builds a school or a hospital, they have free rein.

Above all, we need to know how much we owe, because even the Infrastructure and Projects Authority within Government could not get a grip on the total reality of our PFI commitments to date. That is partly because this has been done at a local government level, through devolution and in silos within companies, but it seems a very simple thing: even if those debts are being held overseas, the people paying them are very much here. In Northampton, there are 42 schools costing £30 million per annum, including £4.2 million in pre-tax profits in 2021-22, and Northampton’s budgets as a local authority are in a very difficult position right now. The firm that owns all those schools is based in Guernsey. In Birmingham, 11 schools are part of the Birmingham Schools Partnership, owned by Innisfree. Innisfree owns 260 schools across this country, as well as my local hospital in Whipps Cross. It is based in Jersey and is making millions of pounds in profit from these deals. We have never consolidated those loans to ask ourselves whether we could renegotiate them as a country and therefore claw some money back, because we do not know who we owe what to, or how much it is going to cost.

Amendments 6 and 7 deal with the challenges posed by the threshold of this legislation. It is absolutely right to set a threshold for what is fiscally significant, and individual PFIs would not go anywhere near a threshold of 1% of GDP, which is about £28 billion. However, when we add them up, it is very clear from what we already know about our PFI commitments that they do. As such, these amendments are intended to probe the Government about how we deal with debts and spending that might not meet that threshold individually, but might do so cumulatively, and to look at what we can do in the future to make sure that if we work with the private sector—again, I am not saying that we should never do so; I am saying that we should learn from PFI—we make better decisions. After all, this legislation is about making better-informed, independent decisions.

That is why I also tabled amendment 8, to learn the lessons from trade deals. The hon. Member for Arundel and South Downs is right: the Government’s decision to go for the trade and co-operation agreement—the hardest of Brexits—has cost us an estimated 4% of GDP, so again, that would be a fiscally significant decision. It would be as catastrophic as that Liz Truss Budget—indeed, many of us can see that it has been—but we did not have an independent assessment. Amendment 6 and amendment 7, which is an enabling amendment, would ensure that we have an independent assessment of cumulative spending looking at these issues.

I know that the Minister is as interested as I am in what we can do to tackle the drain that PFI represents and work better with the private sector. I hope that this legislation and the concept of putting PFI on the books is the start of a conversation about better public spending, and I hope that Toad of Toad Hall will recognise that maybe this time it is good that they are in the passenger seat.

[Sarah Olney (Richmond Park) (LD)]

I will speak in favour of amendments 1 to 4, which were tabled in my name. Once again, I welcome this Bill and this Government’s intent to rebuild trust with the financial markets and across our economy as a whole. The Liberal Democrats are optimistic about the new Government’s stated commitment to building a strong platform for economic growth, particularly after years of Conservative turmoil. I remain hopeful that this Bill can support fiscal responsibility and transparency and help prevent a repeat of the Conservatives’ disastrous mini-Budget. The amendments tabled in my name would strengthen the legislation so that that aim can be achieved.

I welcome the concern that the hon. Member for Arundel and South Downs (Andrew Griffith) has shown for my constituents in Richmond Park and their thoughts about this legislation, but I wonder where his concern for my constituents was when the Government of which he was a part cheered on, championed and voted for that disastrous mini-Budget that so undermined our stable economy, to the detriment of the wellbeing of individuals, communities and businesses.

Liberal Democrats understand how much our constituents have suffered from the increase in mortgage payments, higher fuel bills and escalating food prices. We understand the disastrous effects of the chaos and uncertainty wrought by the previous Conservative Government in their horrendous mismanagement of the economy, and we know that future prosperity can only be built upon a firm foundation. We know the heavy burden that our constituents continue to feel in their pockets and their personal finances, and we know that they deserve better.

As I have previously acknowledged, the broad positive response that this Bill has evoked across the business and finance sector is indicative of the desire for stability, and we welcome the engagement from economists—such as the new hon. Member for Loughborough (Dr Sandher), who I wish well in the beard of the year contest—and industry experts who advise of the beneficial impact this Bill will have on confidence in the public finances. We have carefully scrutinised the details of the Bill to make sure it will achieve its intended aims.

In particular, we have looked closely at the threshold for fiscally significant measures, which will be set at 1% of GDP or approximately £30 billion, and whether the proposed fiscal lock could be circumvented by Governments announcing major changes that fall just below that threshold. Although we understand that the bar has been set relatively high to prevent a large-scale irresponsible fiscal event such as the disastrous mini-Budget, we are aware of the limitations this places on the Bill, especially when it comes to measures that might have relatively small up-front costs to the Government but significant indirect fiscal or economic effects. I therefore ask Treasury Ministers whether a GDP measure alone can adequately capture the impact on the economy of a spending or taxation measure, and whether the Government should examine the possibility of using additional criteria when setting the threshold.

Budget Responsibility Bill

Stella Creasy Excerpts

2nd reading
Tuesday 30th July 2024 Commons Chamber

[Gareth Davies (Grantham and Bourne) (Con)]

Madam Deputy Speaker, congratulations on your election. Let me take my first opportunity to congratulate the right hon. and hon. Members in the new Treasury ministerial team, who have taken up some of the best jobs in government. I loved every minute of my time in the Treasury, even when I had to come to this place to face my shadows. I will always be grateful to the officials who so ably supported me and the team.

As the Member of Parliament for Grantham, the home of our country’s first female Prime Minister, I congratulate our country’s first female Chancellor. It is right that we highlight that. While the two are not politically aligned, we can all recognise when a ceiling has been shattered and no matter who is breaking it, we certainly recognise that on this side of the House.

The Bill before us seeks to amend the Budget Responsibility and National Audit Act 2011—a Bill, introduced by a Conservative Chancellor, that created the Office for Budget Responsibility. The Bill should be understood in that context, building on a previous Bill that replaced the system where His Majesty’s Treasury would produce its own forecasts and the Chancellor of the Exchequer would essentially mark their own homework. Back then, that was an essential piece of legislation, given what had gone on before. Between 2000 and 2010 the then Labour Government’s so-called forecasts for growth in the economy were out by an average of £13 billion and their forecasts for the budget deficit three years ahead were out by an average of £40 billion. Their forecasts therefore lacked any credibility at all.

It was not just their forecasts that led to the creation of the OBR; it was their management of the economy. Much has already been said by the shadow Chancellor about the higher inflation, higher deficit and higher unemployment that the Conservatives inherited from Labour in 2010. What is, however, sometimes forgotten is that total public spending accounted for almost half the national income when Labour last left office. Welfare spending ballooned by a staggering 45%, and that runaway spending meant that we inherited the largest budget deficit of any economy in Europe with the sole exception of Ireland. The idea that Labour has an unblemished record when it comes to the public finances is, therefore, plain wrong. We Conservatives created the OBR, in Parliament, to guard against Labour’s fiscal unaccountability and recklessness with the public finances. We continue to support the role of the OBR in providing open, fully transparent, independent forecasts for all to see, no matter who is in government.

It was genuinely good to hear that the Chancellor recognised the importance of the OBR when she said that because of the OBR, in her words,

“You don’t need to win an election to find out the state of public finances.”

She was absolutely right about that. That is why yesterday’s supposed revelations simply won’t wash. In fact, if she is so supportive of the OBR, I ask a simple question: why was yesterday’s statement based on internal Treasury analysis, not OBR analysis? Surely if they are very supportive of the OBR they would have asked the OBR to conduct the analysis. The OBR has always said that it would be ready to produce analysis at any time, on short notice.

That was yesterday, and today we are here to talk about the Bill before us. While we are supportive of the OBR, we think it is right that the House should consider a number of concerns that we have, on which we will seek clarification. First, the Bill will require the Treasury to request, and the OBR to produce, a report on fiscally significant measures announced by the Government, with the exception of temporary, emergency measures. The definitions of these terms—"fiscally significant”, “temporary” and “emergency”—will be set out in a charter for budget responsibility as the Chief Secretary outlined. The draft charter text, published alongside the Bill, deems measures to be fiscally significant if they cost the equivalent of 1% of GDP in any financial year. It defines as temporary any measure intended to end within two years, and the draft charter text gives the OBR discretion to reasonably disagree with the Treasury’s interpretation of what constitutes emergency.

Despite some of the rhetoric, we note that nowhere in the Bill or the surrounding documents is the OBR empowered to prevent a Government from taking fiscally significant action of any kind. The effect of this Bill is to ensure that an OBR costing accompanies any fiscally significant action the Government take—nothing more, nothing less. The way in which the Chancellor described this Bill as a so-called lock to prevent certain activity is—to be generous on my first outing—overly ambitious. The Bill is described as introducing a fiscal lock, which the Chancellor promises will prevent large-scale unfunded commitments, but that is not what it does. There is no fiscal lock, and if anything, it is a forecast lock. The potential impact of the Bill is so limited and specific as to lead some to wonder whether, for all the animated hyperbole of the Chancellor yesterday, this is the prioritisation of gimmicks over governing, despite what the Prime Minister said on the King’s Speech.

Secondly, and I say this genuinely constructively, the Government need to be better prepared to clarify what is meant by “emergency”. The draft charter gives the OBR the power to reasonably disagree with the Government’s interpretation of what is an emergency, but this raises questions about whether the OBR is equipped to make such a decision in the first place. What counts as an emergency should mostly be clear-cut, but what about instances that are less obvious, or when unforeseen circumstances come down the track? The OBR would then be straying into political decision making, which would rightly raise constitutional issues. Even if it is ultimately for Ministers to decide on such matters, any resulting disagreement between the Government and the OBR about whether the circumstances amount to an emergency could undermine the credibility of the Government, the OBR or both.

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

I am genuinely perplexed whether the hon. Gentleman is with the former Member for South West Norfolk, who wanted to see the OBR abolished and not part of any decision making, or feels that the Bill does not go far enough. Either way, does he recognise and accept, as thousands of mortgage payers in this country now do, the disaster of the previous Conservative Prime Minister’s Budget, the impact it has had and the need never to go back to those days?

[Gareth Davies]

We support the OBR. I have been clear on that. We created the OBR, so to suggest that we do not support it is incorrect. I would just pull the hon. Member up on some economic facts. The reason interest rates were so high and mortgages went up is that we faced a global challenge, which this Government will now experience. In office, the Government have to deal with events, and what caused inflation around the world was two things: the war in Ukraine, which pushed up wholesale gas prices to record highs; and the fallout from a once-in-a-century pandemic that the Labour party seems to have forgotten about. Those two factors resulted in 11% inflation, which resulted in the Chancellor and Prime Minister at the time prioritising bringing down inflation, which we did, to 2%. We have now handed this Government 2% inflation, half the deficit we inherited in 2010, half the unemployment and the fastest growth in the G7, so it is a little bit rich to suggest that we take lessons from the Labour party on economic performance.

Our third and final concern—we have others, but I am in keeping this short on Second Reading—is that, in the event that the lock is triggered, the OBR does not need to produce one of its standard reports, even though the Treasury, under the Bill, is required to request such a report to avoid breaking the lock. The Bill creates, therefore, the possibility of an entirely new OBR report, which is not envisaged by the original Act. I would be grateful if the Exchequer Secretary explained that and what it means in practice when he sums up. Although standard OBR reports must be published, it is not clear whether that applies to other reports that the OBR may prepare. If this requirement does not apply, are the Government happy to give the OBR the power to decide whether its costings are published? That is potentially very concerning for transparency.

The official Opposition look forward to more detailed scrutiny of the Bill and its practical implications. Be in no doubt: we support the OBR, which we created to bring in much-needed transparency to our fiscal framework after years of fiscal folly and false promises by the Labour party. At the same time, let us not pretend that the OBR should be the ultimate judge of good policy, that nothing bad can happen under its watchful eye and that nothing good can happen beyond its gaze. Labour Members know this: it is precisely what they argued 15 years ago when we first debated the Bill that led to the OBR’s creation. The OBR should not become too political. It should be a referee, not a player, in the fight for fiscal accountability. In the end, we stand by the principle that the British people, through their elected representatives, should always have the deciding say on public policy. We look forward to debating this further in the months ahead. We will not be voting against this Bill on Second Reading. I look forward to the debate.

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

I feel as though I am almost in Alice in Wonderland world when I listen to the Opposition response to this legislation. I certainly feel concerned that they, with the Cheshire Cat and possibly following the Queen of Hearts, might have been trying to pretend that their previous Conservative Prime Minister did not exist, or indeed that the former Member for Spelthorne was never ever the Chancellor. Those of us paying for a mortgage—and I declare a direct interest—know all too well that they were in charge and about the damage that they did with their disastrous mini-Budget, which is why this legislation is so important.

I would wager that that what their constituents would tell them if they suggested that the economic harm the previous Government did to this country, for which we will all be paying for generations to come, was solely to do with Ukraine or the pandemic. That mini-Budget was a political choice, but worse than that, it was a politically uninformed choice. The Government at the time consciously and purposefully made the decision on ideological grounds to press ahead with a Budget that cost 1% of our GDP, and to hell with the consequences, as we have all seen. That is why this legislation is so important.

I will always welcome a sinner who repenteth, so I am pleased that the shadow Minister recognises the value of independent scrutiny and, indeed, urges us all to go further. We will always welcome such an approach, because it is right and because our constituents deserve better, because we can see how bad things are and how broken this country is. What this Bill has at its heart are the funds to repair the damage done by the previous Administration. That is why the Chief Secretary to the Treasury is here today with this Bill to be clear with us about why it matters, why we put things on the books and why sound money is at the heart of it.

The markets did not react by accident and put up all our mortgages; they saw with terror the damage that bad leadership in the Treasury can do and have accordingly asked us to meet that challenge. Frankly, there is nothing progressive about crashing the economy, and that is exactly what the previous Government did. By putting on the record the need to report independently on fiscally significant measures, we are starting with a clean sheet and saying that we will not take such a reckless approach with other people’s money. At the end of the day, that is what this is: the tax revenues that are generated are the moneys of our constituents, and it is therefore right that we are careful about how we administer them.

However, I recognise that there are challenges in this legislation. I am speaking today because I hope to hear from the Ministers on the Front Bench further clarity about the concept of “fiscally significant”. As somebody who has always liked to be hawkish about public money, I think it is important that we are clear where we are investing, and I very much urge the Treasury to think about investing to save. I see in our broken society the damage that is done by poverty, poor public services and the higher costs that come with that, so I want us to be clear about the funding we have, where it is coming from and why every penny matters.

[Mr Mark Francois (Rayleigh and Wickford) (Con)]

As the hon. Lady knows, the new Government have intimated that they may decide to mirror much new EU legislation, which could well have budgetary consequences. She and I have not quite always seen eye to eye on Europe, but does she agree, in that context, that it is actually a bad mistake to do what the Government want to do tonight and abolish the European Scrutiny Committee?

[Ms Creasy]

The right hon. Member pre-empts many of my concerns. There is a very strong story to tell about good fiscal discipline, but it is not possible to do that independently in a modern, global economy, so the scrutiny that we can provide in this place of a whole range of regulations does matter. Those include financial regulations—I think particularly about the City and issues around a financial transaction tax, for example. I have not yet convinced him of the merits of working more closely with Europe, but I am confident that one day we can do so. I agree with him, however, that this House should be fully part of that, just as I believe in the principles behind the Bill—that disinfectant comes from transparency and our ability to see what is going on. That is why the Government are so right to bring this legislation forward.

Let me move on to some areas where it is right to ask what we mean by fiscally significant. The right hon. Member and I might disagree about the deal we do in resetting our relationship with Europe, but there can be no doubt that that will have a clear economic impact on this country. I think of the hauliers who are considering whether they will give up bringing goods to the UK because of the Brexit border tax. The previous Government admitted that that measure was inflationary and could have a significant impact not just on our food security, but on our economy, pushing up the cost of living. Many of our constituents know that there is still too much month at the end of their money, and we should challenge any measure that makes that harder. That will also inflect our tax take.

The point I am getting to is that if we are talking about measures that are so fiscally significant that they count for 1% of GDP, a trade deal would easily meet that criterion. We need to be clear in the Bill what we ask of the Office for Budget Responsibility—which, after all, has provided evidence on the impact, for example, of leaving the European Union—and whether we consider its role in such matters. If we are going to put everything on the books, let us make sure that the public understand fully the decisions that we make and where the information comes from.

Another area in which we as a House need to act is our outgoings, especially when we are being asked to make very difficult choices about some of the most vulnerable in our communities, such as people who rely on welfare, or pensioners who rely on the winter fuel payment. We have to be honest: this country is pretty much bankrupt as a result of the previous Administration. If somebody in that dire financial position came into one of our surgeries, we would sit with them and talk about a debt relief order. We would look at their costs and particularly at consolidating the debts that they may have.

Many colleagues here will know that for many years I have been concerned about legal loan sharking. That is not just in people’s private lives, but in the public sector, and I consider the private finance initiative to be the legal loan sharking of the public sector. If we are talking about fiscally significant measures—measures that meet the test of £28 billion—we should consider that we have £151 billion of outgoings committed to private finance companies in this country, against £57 billion-worth of assets. Most people can see that those figures do not add up.

Local authorities spend around £18 billion every two to five years on PFI repayments, of which about £4 billion is interest costs. That would suggest an average interest rate of around 35%. If somebody came into a surgery with a loan at a 35% interest rate, we would encourage them to go to a debt relief order. Our country is no different, and this matters because, individually, local authorities might not meet that fiscally significant threshold, but collectively, they will for us. We are not going to let hospitals and schools go bust and go out of business. Parklands high school in Liverpool was built under PFI. It was closed because there was not a demand for the places, but Liverpool city council is still playing £12,000 a day for that closed school. It has repayments of £42 million left and the company that owns it is making a profit of around £340,000 a year from the scheme.

Private finance companies are on our books, and they should be on our books nationally. They should be considered fiscally significant. We can do things to consolidate those loans and to reduce the outgoings that will come. My contribution to the Bill and the amendments that I might table, depending on what Ministers say, will relate to the fact that I think we need to be clear that everything that is fiscally significant—decisions that we might not proceed with and ones that we do—should be subject to that level of scrutiny.

The National Audit Office has given us plenty of information about the poor value for money of private finance initiatives. Many Members who have these schools and hospitals in their constituencies will have seen this at first hand. There is evidence from the Department of Health and Social Care about what could be done to consolidate loans that probably would generate savings that would be fiscally significant, when we talk about the sums involved. It would be fantastic to see the Office for Budget Responsibility pick this matter up as part of our knowing how much we have to pay out as a country; how much of a contribution we need to make. This money is going to private companies that, on the whole, are not paying tax in this country, so it is not generating revenue that can go back into paying for the repairs that need to come.

The previous Government started to look at these issues and then walked away. I know that this Government, with their commitment to fiscal discipline and fiscal transparency, will want to be open about the benefits, costs and fiscal significance both of the trade deals that we might make and of private finance initiatives. I look forward to hearing from Ministers about that. This is a very different world—[Interruption.] The shadow Minister is smiling. I am sure that he misses his colleague from Spelthorne, but I know he will not miss the opportunity to say sorry to all our constituents for the mess we have been left in and the reason why we need this legislation on the discipline of the OBR, and for the failure to tackle the long-term problems that have left legal loan sharks and poor trading opportunities for our constituents, because they are going to pick up the pieces for generations to come.

[Madam Deputy Speaker (Judith Cummins)]

I call the Liberal Democrat spokesperson.

Public Spending: Inheritance

Stella Creasy Excerpts

Monday 29th July 2024 Commons Chamber

[Rachel Reeves]

I am not sure if hon. Gentleman was paying attention. The £22 billion black hole is this year. The Institute for Fiscal Studies was warning about a black hole of £18 billion over the lifetime of the Parliament. Those are two very different things and both of them can be true. What we are showing today is an in-year gap of £22 billion that the hon. Gentleman did not know about, that no one on this side of the House knew about, that the OBR did not know about, and that the country did not know about. This is new information that is being published today, above and beyond what anyone knew when we were campaigning in the election.

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

Frankly, the Conservatives’ response leaves something to be desired. After 14 years of stripping the engine of this country’s economy, their response is simply taking the piston.

I am so proud that we now have a Chancellor who is not penny wise and pound foolish, but is conscious that all our constituents will have to pick up the pieces after the past 14 years. Can the Chancellor tell us a little more about her audit and what it has identified about the money wasted by the previous Government and their mismanagement of capital projects? We now know, for example, that the failure to rebuild Whipps Cross hospital has cost us an extra £15 million in the last few years alone. Our constituents will pay the price of the last Government for many years to come. This new Labour Government need to be honest with them. Sorry seems to be the hardest word for the Conservatives to say, but can the Chancellor tell us just how much money it will cost?

[Rachel Reeves]

This country is owed a £22 billion apology by the Conservative party, and my hon. Friend is right to highlight the overspends, including on the hospitals programme; there is a £4 billion gap between what was announced and what is needed for those hospitals. There is also a £6.4 billion overspend on the asylum system. That was all unfunded and undisclosed until I disclosed it today.

UK Economy

Stella Creasy Excerpts

Monday 19th February 2024 Commons Chamber

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

The Minister says the Government’s priority is backing British business, cutting inflation and reducing the pressure on British families. When the Government admit this measure will increase inflation, when British business is tearing its hair out at the chaos caused by not knowing what the charge will be and who will pay it—with less than 10 weeks to go—and when British consumers will find that it causes food shortages and an increase in food prices, why on earth are the Government going ahead with the Brexit border tax? Will the Minister commit here and now to cancelling it, so that we can stop this inflationary measure—yes or no?

[Bim Afolami]

I thank the hon. Lady for focusing on inflation. She is right that it is critical, and bringing it down is a focus for the Government. The House has heard her point about the European Union, but I would add that we have a clear plan for bringing down inflation, which we will continue to carry out. She has to ask those on her Front Bench why they do not have one.

Economic Growth

Stella Creasy Excerpts

Tuesday 14th November 2023 Commons Chamber

[Jeremy Hunt]

I do not accept that we are not an extremely attractive place. We have third largest renewables sector in Europe and are the largest European provider of offshore wind. Can we do more? Yes, we can, particularly by improving access to the grid. The House should expect to hear more from us on that.

We had a lot of talk from the shadow Chancellor about the cost of living crisis, but she barely mentioned that the biggest pressure on the cost of living is caused by the rise in inflation—in fact, it did not get a mention at all in her conference speech. Because we have taken difficult decisions, inflation has fallen by 40% since its peak. Core inflation is now lower than in nearly half the entire EU membership. I say gently to her that if she were to reflate the economy by ramping up borrowing by £28 billion a year, prices would go up and families would end up paying more for their petrol, their food, their electricity and their mortgages. That is why that is the wrong approach.

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

One issue on borrowing that has not been talked about is that it is now four years since this place agreed that we should regulate the buy now, pay later lenders. Under this Government’s watch, the number of people borrowing from these companies to make ends meet during the cost of living crisis has doubled, and 40% of those people are struggling and borrowing from other lenders to pay their debts, yet we have still seen no regulation at all from the Government. If the Chancellor wants to prove that he is actually on the side of the people and understands the bills that they have racked up paying for this Tory Government’s failures, will he finally commit to regulating these loan sharks?

[Jeremy Hunt]

As the hon. Member might have heard if she had been at oral questions, we are acting on this and have been consulting on a solution since March this year—I started that at the spring Budget—but we want to get the answer right. We want to crack down on rogue lenders but also ensure that the financing that appropriate people can offer responsibly is available.

I want to talk about the pressures on ordinary families, because the shadow Chancellor also talked about incomes and the tax burden on working families. What has happened since 2010 to adults on the lowest legally payable wage? When we took over from Labour, that wage was £5.93 an hour; today, it is £10.42 an hour. After inflation, gross pay for those on the lowest legally payable wage has gone up by 20%. The number of people on low pay, defined as less than two thirds of median hourly earnings, has halved. At the same time, because Conservative Governments want to make work pay, we increased the thresholds before which people start to pay tax or national insurance from £5,700 to £12,570. Take-home pay after tax for people on the adult main minimum wage has therefore gone up by more than 25% after inflation. That is a bigger percentage increase than for people on much higher incomes.

--- Later in debate ---

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

The question that all our constituents are asking is: “Is that it? After 13 years, is that all this Government have to offer?” This is a King’s Speech so pointless that it could be an answer on the game show. It comes from a Prime Minister who is acting like one of the contestants on “I’m a Celebrity... Get Me Out of Here!”—desperate to do anything to stay in charge.

Frankly, our constituents deserve better. Many Members have spoken about the deep-seated challenges in our country, such as the lack of growth. After 13 years of this Government, we have a society in which the bank of mum and dad determines outcomes, not talent. In the last decade alone, housing and stocks and shares have earned far more than any hard work or effort that our constituents could undertake, because of sluggish productivity and the Government’s failure to invest in our communities.

Our kids cannot get apprenticeships; they are struggling to stay in university. [Interruption.] The Minister is shaking her head. I invite her to come and meet my local residents, who beg me for apprenticeships. They are still reeling from the impact of the pandemic. They are scarred by where they live and who their parents are, because that is what determines their outcomes. It is a mark of shame for us that we live in a country in which the exam results of black children are, on average, almost 10% lower than those of their white counterparts. Nothing is changing any time soon, and the King’s Speech will do little.

My hon. Friend the Member for Sheffield South East (Mr Betts) set out the housing crisis. When I see the other crises that we are facing, I suppose I should be careful what I wish for, because when faced with the climate crisis, the Government’s response is to go hard on fossil fuels rather than recognising that renewables are cheaper and that, if we are to tackle both the cost of living crisis and the climate crisis, we should put those things together rather than asking our communities to choose.

Of course, nothing in the King’s Speech deals with the elephant in the room that is Brexit. I am sad that the right hon. Member for North Somerset (Dr Fox) is no longer in his place after his valiant attempt to claim that Brexit has had a positive impact on our country and communities. The economic data suggests otherwise, so let me give him some other figures. Eurostat figures show that exports have fallen by 14% in the last year and that UK to EU trade of goods is down 16%. European Central Bank research shows that 77% of firms in this country say that the Brexit deal is not helping their sales. Indeed, our constituents are facing a £250 surcharge on their food bills alone.

The King’s Speech could have dealt with the fact that, in the coming year, Brexit’s impact on inflation will get a lot worse. Our constituents will face a £43-a-time charge on anything imported into the UK. Food will get more expensive—not my words but those of the Government’s own record. There will a £10 charge to enter the UK. What will that do to our stuttering tourism industry, which is trying to recover after the pandemic? The King’s Speech is silent on all those challenges, and tries to suggest that trade through the CPTPP will make up for the trade lost on our doorstep.

The King’s Speech offers a Criminal Justice Bill, which I welcome. It is time that we finally sorted out the inequality that means that my Walthamstow constituents have fewer human rights when it comes to choosing to have an abortion than constituents in Belfast. Sentencing guidelines will not deal with the fact that hundreds of women are now being prosecuted under outdated abortion legislation. It is time for decriminalisation, and perhaps one of the few positive things we can do in the year to come is to sort that.

I wish to correct the record. Earlier I said that in the time it has taken for the Government to fail to do anything about buy now, pay later lenders, the number of people borrowing from these companies has doubled—it has actually tripled. Forty per cent of people who are borrowing from buy now, pay later companies say they are in direct financial difficulty because of it, and these companies are benefiting from the Government’s failure to regulate them. I care as much about legal loan sharks in the private sector as I do about those in the public sector. The regulation of these companies is long overdue, and if this Government does not do it, waiting for a Labour Government to do it will mean another year and another explosion in the millions of people borrowing from them.

In the next year, we will see a crisis in our childcare industry, because the Government have pushed up the cost of childcare without providing the subsidy for it. We need to go further. It is not just about providing high-quality childcare; it is about helping every family to make the choices they want. Only 5% of dads report taking shared parental leave, because our shared parental leave system does not work; it asks the mum’s employer to pay the costs, rather than sharing them. Some 80% of dads say they do not have enough time with their kids as a result. These are challenges that we could deal with, but this King’s Speech will do nothing to solve them.

As I said, public sector legal loan sharks need to be dealt with, too. In the next year alone, private finance initiative deals will cost this country £9.8 billion in repayments. PFI is something that all Governments have used, and we need to tackle it. We have £200 billion-worth of commitments coming our way—money that could be going back into our public services if we fought for a better deal for our taxpayers.

What we are seeing is small responses to big challenges, not least to the biggest challenge of all, which is the uncertainty and conflict around the world. Everybody in this Chamber wants the bloodshed to stop in Israel and Gaza. Everybody in this Chamber, I hope, stands with people like my constituent whose parent has been kidnapped by Hamas and wants to see them returned and to see the dismantling of Hamas as a terrorist organisation. A humanitarian pause would require the same type of negotiation as a ceasefire. Let us stand together with our international partners and put pressure on those partners who can put pressure on Hamas to get people round the table. Let us challenge Israel to stand up for international humanitarian law, and let us stop the bloodshed. This King’s Speech does nothing to achieve that, but it could have done.

Draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023

Stella Creasy Excerpts

Wednesday 5th July 2023 General Committees

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

It is a pleasure belatedly to serve under your chairmanship for the first time, Ms McVey. I am possibly going to shock the Committee in many ways by saying that I agree with much of what the right hon. Member for North West Hampshire has said. He and I might come from different ends of the political spectrum, but we share an interest in local regulation and in doing that in a proportionate fashion, because we have seen at first hand what happens when it does not work.

I am possibly the only person here who served on the Committee that considered the Consumer Rights Act 2015, in that halcyon era in which we in this place were looking at good regulation, rather than having no regulation at all. I want to ask the Minister a set of questions that follow up what the right hon. Gentleman was talking about, and I agree with him that there was a good reason for not including trading standards on the list of bodies that were to have powers under that legislation.

At the time, we felt that the powers were quite strong, and we recognised that the comparator bodies—the others that had the powers, such as the Competition and Markets Authority and the Financial Conduct Authority—were about whole markets. This statutory instrument is very much about a local power and local trading standards. Indeed, it now looks as though trading standards will have stronger powers than local police forces to do searches.

There might be good reasons for that owing to the nature of the trade that trading standards is trying to tackle, and I want to come to that subject, but the Minister did not say anything about, for example, what has been done to monitor the use of the powers over the past eight years. Will he say what we know about when there have been raids, what happened and how the use of the powers is monitored? The difference between market-wide powers and locally applied powers could be very strong.

The next point I want to follow up is the capacity of trading standards to make good on this measure. It is one thing to confer powers, but quite another to have the people to implement them. We know that spending on trading standards fell by 52% between 2009 and 2019. In some areas of the country, there are no trading standards officers at all. Liverpool Council, for example, no longer has a trading standards department because something had to give considering how little money the Government have given the council to run services.

Most local authorities have just one qualified trading standards officer, but if we are to give people stronger powers than the police, we want them to be qualified people who understand the remit and understand why they are being given the powers. Again, I ask the Minister to say something about whether additional funding is going to be given. If this measure generates the impact that we want it to generate in tackling the illegal cigarette trade, revenue will be raised that could go into trading standards.

My colleagues in trading standards do a fantastic job trying to tackle the crimes that, after all, are the crimes that most of our constituents come to us about most of the time, and they would want to see more investment in trading standards. A £16 billion cut in the core revenues of trading standards means that there will not be the officers to use these powers, and certainly not officers trained to use the powers sensitively, unless there is investment.

There is a final point on which I would like to hear more from the Minister, which is the trade we are trying to tackle. We know that 21% of cigarettes sold in the UK are illicit. This is an international trade—gangs, funding and all sorts of criminal activities in our communities. Putting trading standards officers on the frontline of tackling that trade is a bold move owing to the nature of the people with whom they might be interacting. What conversations has the Minister had with the National Crime Agency?

[Kit Malthouse]

There is an unproven statement that much of the trade is organised crime, but I know from my time at the Home Office that this is a low-margin business. I am not convinced that the volume is coming through via organised crime; I think it is coming through in fast parcels—small packages from overseas. That is why I am so keen to see some kind of intervention at the border, and I worry slightly that the more we talk about organised crime and gangs, the more the effort gets put in that direction, whereas a huge volume is coming through orders on the internet.

[Stella Creasy]

We were so close to having unanimity in this place about the nature of the challenge. I think it is both. The right hon. Gentleman says that there are small packages—I was going to ask the Minister to say a bit more about what conversations he has had with Border Force—but the Lords Justice and Home Affairs Committee investigation into the matter set out that international gangs were involved. One German-Russian gang made £50 million over several years by importing cigarettes into the UK.

We are therefore potentially asking trading standards officers to interact with very serious and dangerous people, and it is important that this House does not ask trading standards to be the blue line in our local communities. If we are to ask trading standards officers to take on this serious trade—packages might be one piece of investigation work—to enter properties and to take on organised crime, they need support. Will the Minister say more about the conversations that he has had with the National Crime Agency or Border Force about how to keep trading standards officers safe? Everybody agrees that we want to tackle this trade and everybody wants more investment in trading standards. We will all support the draft order, but I hope that the Minister understands that those of us who wrote the original legislation have some concerns about what we are asking of a service that has been stripped bare over the last 13 years.

Mortgage Charter

Stella Creasy Excerpts

Monday 26th June 2023 Commons Chamber

[Jeremy Hunt]

My hon. Friend makes a good point. All lenders had some of those measures to a lesser or greater extent. What is significant about Friday is that they aligned their offer so that it is much easier to communicate to all families with mortgages. The charter has been agreed by 85% of the market, so a very large majority of mortgage lenders are agreeing to a simple set of terms that they will all follow so that it is easy for people to understand their rights.

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

The people watching this who have too much month at the end of their money need better and straight answers from the Chancellor. He has ducked the question about whether he thinks the Government will reach their own target to halve inflation, and he needs to be honest about what he thinks the consequences will be of only reaching an inflation target of 5%.

I join colleagues across the House who have raised concerns about the fact that the vast majority of mortgages are fixed. People facing the possibility of eviction even in a year’s time will be sick with worry. What assessment has he made of the impact if inflation only gets down to 5%? When will he learn the lessons from the energy companies, and not wait to hold the banks responsible for their role in all this?

[Jeremy Hunt]

I have a lot of respect for the hon. Lady, but she is being a little churlish about what the Government have done. I have not waited; I called in the banks and the lenders on Friday, and I got them to commit to a set of terms that will make life easier for 85% of families with mortgages if their mortgage comes up for renewal. On the Government’s target to halve inflation, both the Bank of England and the International Monetary Fund have said that we are on track.

IMF Economic Outlook

Stella Creasy Excerpts

Tuesday 31st January 2023 Commons Chamber

[James Cartlidge]

My hon. Friend is an absolute champion. He talks up this country and he is right: the facts back that up and show that we should be optimistic. Of course there are challenges, and we want to get on top of them, which is why we must work hard to support our independent Bank of England in getting inflation down. But, like him, I am optimistic that if we do that, we can see the sort of growth we had last year. That is what the IMF shows; its cumulative forecast is that over 2022 to 2024 we are predicted to have higher growth than Germany and Japan and at a similar rate to the US.

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

The Minister seems to be walking away from the question of what role Brexit has played in this economic outlook. I can understand why, since half his own constituents think Brexit was a mistake. The benefits of Brexit seem to be like a toddler’s imaginary friend—Ministers keep talking about them, but only they can see them. The Prime Minister’s spokesman today told us we are now seeing “significant benefits from Brexit.” Will the Minister set the record straight? Can he explain to the small businesses in our constituencies, which used to be able to export with ease to the European Union, a single market where they now face a better deal than they did before?

[James Cartlidge]

I am happy to stress, for example, the hugely important Solvency II reforms that we will undertake, which will free up enormous amounts of investment in infrastructure. Of course, infrastructure is crucial to future growth. As the Minister with responsibility for alcohol duty, I am pleased to say that we will have reform in August, meaning that we could have a duty differential between pubs and supermarkets. That is only possible because of Brexit. I think the most important thing by far is that when we faced the pandemic—the greatest challenge outside war time—this country was able to move fast with an amazing vaccine programme because of its independence, which reduced deaths, freed up our economy and allowed us to reopen and get growing again.

Financial Services and Markets Bill

Stella Creasy Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Andrew Griffith]

I am happy to confirm that we will pursue it with great urgency, as the Government should be doing with everything in this important domain. Although the Government will not be supporting new clause 11 today, it goes some way to address the issue, so I will look at it as a basis for potentially moving forward. The Bill enables us to do that, so we do not have to do it today. I commend the other amendments tabled in relation to preventing consumer harm.

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

The Minister has been talking about the importance of regulation. He will know that one area that is not regulated at all is buy now, pay later, and he will have seen new clause 28 in my name. A poll published today says that 40% of the British public will do their Christmas spending with a buy now, pay later loan. A quarter of those who use buy now, pay later are missing other payments, because they are getting into a cycle of unaffordable debt. We have been talking about regulating these companies for nearly three years now; the Government’s proposals talk about regulation possibly coming in another year’s time. Can he see a way to at least introduce the protection of the ombudsman, so that this Christmas does not leave families with a nasty wake-up call come 1 January?

[Andrew Griffith]

I will try to respond to the hon. Lady’s points further when I sum up, so I can make some progress. We had that debate several times in Committee. We have to be slightly cautious about the unintended consequences of taking into scope a much wider set of transactions that involve an element of deferred payment, but I am sympathetic to her points.

I thank my hon. Friend the Member for Harrow East for raising the topic of a statutory duty of care for consumers. Ensuring that consumers of financial services get the right protection they need remains a priority. The FCA comprehensively analysed the options for improving that, which led to the consumer duty that will come into force in July.

The hon. Member for Bath (Wera Hobhouse) tabled new clauses 34 and 35 to require trustees of occupational pension schemes and fund managers to act in the best interest of beneficiaries, which is indeed the position as it stands today, although I will listen carefully to her points. Trustees and fund managers will be subject to the FCA’s consumer duty, which puts on them a focus of delivering good outcomes for customers.

I turn to amendments relating to frauds and scams. The Bill is a huge step forward in tackling the growing problem of authorised push payment scams. I will be clear that, as I set out in my response to the hon. Member for Hampstead and Kilburn in Committee, the Government are committed to tackling fraud far more widely than in just financial services. She may like to know that the Home Office has now confirmed that a national fraud strategy will be published early in the new year.

Specifically for financial services, UK Finance publishes a half-year fraud update, which sets out how the industry is working together to respond to the fraud threat and to support customers. In relation to the amendments concerning the reimbursement of victims of authorised push payment scams, the payment systems regulator has already signalled its intention to deliver a higher degree of consumer protection.

On sustainable finance, no Government have done more on the climate. We have legislated to reach net zero greenhouse gas emissions by 2050. We support strengthening the UK financial services regulatory regime’s baking in of the climate, as underlined by clause 25, which requires the regulators in discharging their functions to have regard to the need to contribute to achieving compliance with net zero. The regulators will be required to report annually on how they have considered that regulatory principle. That is a significant step in our goal of making the UK a net zero-aligned financial centre, and builds on our green finance and net zero strategies across the whole gamut of regulatory activity. The Government committed to updating our green financial strategy and will announce further information on timing imminently.

--- Later in debate ---

[Sir Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I am grateful to catch your eye, Madam Deputy Speaker.

I congratulate the hon. Member for Blaenau Gwent (Nick Smith) on tabling new clause 10, for which he should receive much of the credit. This amendment has an extremely simple intent in laying a duty on the FCA to report to Parliament on

“(a) the adequacy and appropriateness of the FCA’s use of its regulatory powers; (b) the measures the FCA has taken to protect vulnerable consumers, including pensioners, people with disabilities, and people receiving forms of income support; and”—

finally and most importantly—

“(c) the FCA’s receptiveness to the recommendations of the Consumer Panel.”

I will now say why paragraph (c), in particular, is so important. The hon. Member has explained clearly why the FCA should regularly report to Parliament, and in my role as deputy Chairman of the Public Accounts Committee, I have constantly urged openness and transparency, wherever possible, so that our constituents can make full and proper judgments on the actions, or lack of them, of regulators such as the FCA.

Like the hon. Member for Blaenau Gwent, I will give the House an example. The PAC inquiry that we held in April and June this year highlighted the plight of some 2,000 of the 7,700 British Steel pensioners who in 2019 suffered significant financial shortfalls because of the wrong advice given by a significant number of independent financial advisers who advised pensioners to opt out of their valuable defined-benefit pension schemes. To add further insult to injury, the actions by the regulator caused a number of independent financial adviser companies to go out of business or merge with others, and therefore the compensation that pensioners received rightly was capped. I know this is a complicated subject but both the hon. Member and I are using it as an egregious example of why the FCA needs to be more accountable to Parliament and our constituents. This amendment stems from recommendations 5a and 5b in the PAC report “Investigation into the British Steel Pension Scheme”, published on 21 July:

“The FCA should be more proactive and consumer-focused in its engagement with stakeholders. It should have a better mechanism for responding to consumer harms and collect more evidence on a regular basis to pick up on issues that are being raised, especially from emerging risks in financial markets…The FCA must also review how effective the Financial Services Consumer Panel is at consumer protection and how it influences policy debates within the FCA from a consumer angle.”

The hon. Member and I have had discussions with the Economic Secretary, who is on the Front Bench today, and I believe he is sympathetic to the principle that the FCA needs to be much more accountable. If that is the case, I very much hope that he will concede the principle of this amendment and incorporate it as a Government amendment in the other place. Neither the hon. Member nor I wish to be prescriptive about how or when this reporting should take place to Parliament; that is a matter for the Government.

No financial institution will ultimately exist without its consumers. The whole point of the FCA as a regulatory authority is to protect their interests. Rather than having to work through long and complicated reports, there needs to be clear, easily available information on what regulators are doing, or not doing, on their behalf. All of this requires a fundamental shift in the regulator’s—the FCA’s—attitude to the consumer and a commitment to engage more when things go wrong.

Finally, I want to comment on the fraud aspects of the Bill. The PAC recently conducted an inquiry on fraud and discovered that 41% of all reported crime in June was accounted for by fraud, up from 30% in 2017, yet just 1% of police resources is being devoted to fraud crimes. So we urgently need to see the Government’s new comprehensive fraud strategy.

[Stella Creasy]

I rise to add my wholehearted support to the comments of my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy), to new clause 7, to my Front Bench, and indeed to the points made by the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown): many of us have had concerns about the FCA and its ability to represent consumers for many years, and it is good to see that work being done.

I shall focus on new clause 28. The bridge of the Titanic received seven warnings about icebergs. It was told exactly where the iceberg was, but on hearing those warnings it varied the direction of travel by one or two degrees yet kept going full steam ahead. The visible iceberg was 50 to 100 feet high and 200 to 400 feet long, yet still they ploughed into it. It does not take a rocket scientist to recognise that we have a personal debt crisis in this country with a cost of living crisis, that our constituents are struggling because there is too much month at the end of their money, and that those who make their money from those who are struggling are licking their lips.

This Bill is about financial regulation yet one of the most pernicious legal loan sharks is the buy now, pay later industry. The pool in which they fish is wide. This country has £205 billion-worth of consumer credit lending to account for, up £482 million on the previous month. People are borrowing not just to pay Peter and Paul, but to pay for their mortgages, to put food on their table, petrol in their car and clothes on their children’s backs. Let me be clear: I do not stand here with a hair shirt on saying nobody should borrow, but in that environment, when our constituents are being exploited by these companies, it is absolutely right to regulate them and protect our constituents, yet that is not what is happening here.

For nearly three years we have been warning the Government on the need to act on legal loans harks and the buy now, pay later companies—those warnings that came to the bridge of the Titanic. The Klarnas, the Laybuys and the Clearpays are the companies whose names we see when we go to check out online. They account for 6% of all online spending in the UK, and that is expected to double in the next two years. High thousands of reputable retailers have them on their websites. They have them not to help people to spread their payments as the companies claim, but because people spend on average 30% to 40% more if they use buy now, pay later.

But what people are telling us very clearly is that they are spending money they do not have. A quarter of all buy now, pay later users have been unable to pay for at least one essential because they are having to make repayments on buy now, pay later products. Some 25% of users have also missed a payment or made a late payment on a buy now, pay later loan in the last 12 months.

--- Later in debate ---

[Andrew Griffith]

I will not give way to my hon. Friend this time.

To conclude, financial and related professional services play a crucial role, as we have heard from many speakers. They contribute nearly £100 billion in taxes and, as my right hon. Friend the Member for Chelmsford reminded us, that pays for more than the cost of the salaries of every nurse in this country. The Government have an ambitious programme for an open, outward, sustainable, technologically advanced and internationally competitive sector that will unleash the most opportunities not just for those who work in it, but for communities across the United Kingdom.

[Stella Creasy]

I am sorry to interrupt the Minister in his final flow, but he did promise he would give me a direct answer. With 40% of people saying they are going to put their Christmas spending on buy now, pay later loans, and they have no regulatory protection, what is going to do to help them this Christmas?

[Andrew Griffith]

The hon. Lady knows from our conversations in the Bill Committee our ambition to look again afresh at the regulations in the consumer credit market. That is outwith this Bill, but it is a commitment that remains and that we will bring forward at the earliest opportunity.

Do not underestimate the power of this Bill. This is an unlock for our financial services. This is the start of delivering our Brexit freedoms. It is giving us back the opportunity to make ourselves competitive—a more prosperous economy, jobs for our children and grandchildren, tax revenues that will pay for our high-quality services, and higher GDP growth. All of that is contained in this Bill, at the same time as protecting the consumers that Members opposite talk about, and delivering on the ambition to put this on the statute book.

Question put and agreed to.

New clause 17 accordingly read a Second time, and added to the Bill.

6 pm

Proceedings interrupted (Programme Order, 7 September).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

New Clause 18

Composition of Panels

‘(1) FSMA 2000 is amended in accordance with subsections (2) to (8).

(2) After section 1M (FCA’s general duty to consult) insert—

“1MA Composition of Panels

(1) A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under any of sections 1N to 1QA or 138IA.

(2) Subsection (1) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(3) Regulations under subsection (2) may make provision in respect of a panel—

(a) generally, or

(b) only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).”

(3) In section 1N (FCA Practitioner Panel), after subsection (5) insert—

“(6) Subsections (4) and (5) are subject to section 1MA.”

(4) In section 1O (Smaller Business Practitioner Panel), after subsection (6) insert—

“(6A) Subsections (5) and (6) are subject to section 1MA.”

(5) In section 1P (Markets Practitioner Panel), after subsection (6) insert—

“(7) Subsections (4) to (6) are subject to section 1MA.”

(6) In section 1Q (Consumer Panel), after subsection (4) insert—

“(4A) Subsection (4) is subject to section 1MA.”

(7) After section 2L (PRA’s general duty to consult) insert—

“2LA Composition of Panels

(1) A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under any of sections 2M, 2MA or 138JA.

(2) Subsection (1) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(3) Regulations under subsection (2) may make provision in respect of a panel—

(a) generally, or

(b) only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).”

(8) In section 2M (the PRA Practitioner Panel), after subsection (5) insert—

“(6) Subsections (4) and (5) are subject to section 2LA.”

(9) In section 103 of the Financial Services (Banking Reform) Act 2013 (regulator’s general duty to consult) after subsection (5) insert—

“(5A) A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under subsection (3).

(5B) Subsection (5A) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(5C) Regulations under subsection (5B) may make provision in respect of a panel—

(a) generally, or

(b) only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).”’—(Andrew Griffith.)

This new clause disqualifies those who are paid by a regulator, the Bank of England or the Treasury from being appointed to a statutory advisory panel, subject to any exemptions the Treasury may set out in regulations.

Brought up, and added to the Bill.

New Clause 19

Consultation on Rules

‘(1) In section 138I of FSMA 2000 (consultation by the FCA), after subsection (4) insert—

“(4A) The FCA must include, in the account mentioned in subsection (4), a list of the respondents who made the representations, where those respondents have consented to the publication of their names.

(4B) The duty in subsection (4A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation).

(4C) For the purposes of this section, the exemption relating to functions conferred on the FCA mentioned in paragraph 11 of Schedule 2 to the Data Protection Act 2018 (exemption from application of listed GDPR provisions) does not apply.”

(2) In section 138J of FSMA 2000 (consultation by the PRA), after subsection (4) insert—

“(4A) The PRA must include, in the account mentioned in subsection (4), a list of the respondents who made the representations, where those respondents have consented to the publication of their names.

(4B) The duty in subsection (4A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation).

(4C) For the purposes of this section, the exemption relating to functions conferred on the PRA mentioned in paragraph 9 of Schedule 2 to the Data Protection Act 2018 (exemption from application of listed GDPR provisions) does not apply.”

(3) In section 104 of the Financial Services (Banking Reform) Act 2013 (consultation requirements), after subsection (5) insert—

“(5A) The Payment Systems Regulator must include, in the account mentioned in subsection (5), a list of the respondents who made the representations, where those respondents have consented to the publication of their names.

(5B) The duty in subsection (5A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation).

(5C) In this section “data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act).”’—(Andrew Griffith.)

This new clause would require the FCA, the PRA, the Payment Systems Regulator and the Bank of England to publish the names of respondents to their consultations on proposed new rules, where those respondents have consented to such publication.

Brought up, and added to the Bill.

New Clause 20

Unauthorised Co-ownership AIFs

‘(1) FSMA 2000 is amended as follows.

(2) In section 261E (authorised contractual schemes: holding of units)—

(a) before subsection (1) insert—

“(A1) This section sets out requirements for the purposes of section 261D(1)(a) (authorisation orders).”;

(b) in subsection (1) for “a contractual” substitute “the”.

(3) After section 261Z5 insert—

“Chapter 3B

Unauthorised co-ownership AIFs

261Z6 Power to make provision about unauthorised co-ownership AIFs

(1) The Treasury may by regulations make provision about unauthorised co-ownership AIFs that corresponds or is similar to, or applies with modifications, any of sections 261M to 261O and section 261P(1) and (2) (rights and liabilities of participants in authorised co-ownership schemes).

(2) Regulations under subsection (1) may make provision about unauthorised co-ownership AIFs generally, or about unauthorised co-ownership AIFs of a description specified in the regulations.

(3) In this section “unauthorised co-ownership AIF” means a co-ownership scheme that—

(a) is an AIF, and

(b) is not authorised for the purposes of this Act by an authorisation order in force under section 261D(1).”’—(Andrew Griffith.)

This new clause would enable the Treasury to make provision about the rights and liabilities of participants in unauthorised co-ownership AIFs which is similar to that made in relation to authorised co-ownership schemes in Chapter 3A of Part 17 of the Financial Services and Markets Act 2000.

Brought up, and added to the Bill.

New Clause 1

National strategy on financial fraud

‘(1) The Treasury must lay before the House of Commons a national strategy for the purpose of detecting, preventing and investigating fraud and associated financial crime within six months of the passing of this Act.

(2) In preparing the strategy, the Treasury must consult—

(a) the Secretary of State for the Home Office,

(b) the National Economic Crime Centre,

(c) law enforcement bodies which the Treasury considers relevant to the strategy,

(d) relevant regulators,

(e) financial services stakeholders,

(f) digital platforms, telecommunications companies, financial technology companies, and social media companies.

(3) The strategy must include arrangements for a data-sharing agreement involving—

(a) relevant law enforcement agencies,

(b) relevant regulators,

(c) financial services stakeholders,

(d) telecommunications stakeholders, and

(e) technology-based communication platforms,

for the purposes of detecting, preventing and investigating fraud and associated financial crime and, in particular, tracking stolen money which may pass through mule bank accounts or platforms operated by other financial services stakeholders.

(4) In this section “fraud and associated financial crime” includes, but is not limited to authorised push payment fraud, unauthorised facility takeover fraud, and online and offline identity fraud.

(5) In this section, “financial services stakeholders” includes banks, building societies, credit unions, investment firms, Electric Money Institutions, virtual asset providers and exchanges, and payment system operators.’—(Tulip Siddiq.)

This new clause would require the Treasury to publish a national strategy for the detection, prevention and investigation of fraud and associated financial crime, after having consulted relevant stakeholders. The strategy must include arrangements for a data sharing agreement between law enforcement agencies, regulators and others to track stolen money.

Brought up.

Question put, That the clause be added to the Bill.

Financial Services and Markets Bill

Stella Creasy Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Richard Fuller]

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

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

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

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

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

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

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

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

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

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

[Richard Fuller]

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

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

--- Later in debate ---

[Damian Hinds (East Hampshire) (Con)]

I welcome this ambitious piece of legislation. It is quite right that for a country and an economy such as ours, in which financial services play such a key role, we should be able to set UK-specific financial services regulation. I very much welcome the reframing of the regulatory objectives around long-term growth and international competitiveness. I want to speak to two specific aspects of the Bill that fall under “other miscellaneous provisions” but are nevertheless incredibly important: credit unions and compensation for the victims of fraud.

I turn first to credit unions, and in particular their role in financial inclusion and providing an alternative to high-cost, sub-prime lenders. Last night, I happened to be flicking through a well-thumbed copy of Hansard and looked at a debate from January 2014—hon. Members will remember it—when we were discussing payday lenders and the problems associated with them. We have come a long way since then. I think it is important sometimes to look back and say, “Where has regulatory change made a big difference?” We have had: the CMA report; the new FCA regime, including on payday affordability checks, roll-overs and restrictions on advertising; the measures on continuous payment authority, which I remember the hon. Member for Walthamstow (Stella Creasy)—no doubt, she would have wanted me to say this—championing so strongly; the cost of credit cap; and, most recently, the new FCA consumer duty.

More broadly, the Government put financial education on the national curriculum and, of course, supported credit unions with a commitment of up to £38 million for their development and further regulatory liberalisation.

[Stella Creasy]

I acknowledge what the right hon. Gentleman is trying to point out. However, does the evidence not show that it was the intervention of the financial ombudsman service that led to the downfall of companies, such as Wonga and Amigo, that were exploiting our constituents, rather than the intervention of the FCA, which oversaw unaffordable lending on its watch? Does that not show us why we need further FCA reform? It is the opposite of the point that he is making.

[Damian Hinds]

The hon. Lady makes an important point. It would be wrong—I am sure she did not mean to say it, even though it is what she just said—to say there was a single cause for those things. In fact, it is about changing the entire framework. In other parts of the market, for example home credit, there is a different set of reasons again why there has been a decline. We know the sub-prime segment shapeshifts the whole time, and we have also seen the recent growth of buy now, pay later. At a time of heightened financial stress, it is inevitable that new risks and new vulnerabilities manifest.

Wise heads always remind us that in seeking to curb the parts of the high-cost lending market that we do not like, there is always a danger that we instead push some part of that customer base into the arms of a high-cost lender whose idea of a late payment penalty is a cigarette burn to the forearm, so we must get the balance right. Regulation has been a success, but ultimately what we need is an alternative, because credit does form a part of people’s lives, and that is where credit unions and others, such as community development financial institutions, come into play.

We have seen development in the sector, but I would like to see a lot more. We have a great example in Northern Ireland—and indeed in the Republic of Ireland—of what a much more developed credit union sector can look like, and I would like to see that in mainland Britain. The proposals in the Bill will continue that development, amending the Credit Unions Act 1979 to allow for conditional sale and hire purchasing agreements to be undertaken by credit unions, along with the marketing of insurance services. I would only encourage the Government to go further, because our credit union sector is still small in Great Britain compared to Northern Ireland and there is much more that can be done. There is also more that can be done on CDFIs, whose growth, frankly, has been disappointing.

I encourage keeping an open mind on the regulatory aspects of the Bill. I do welcome the measures, but while the 3% per month interest cap is very reasonable, in some parts of financial services it is difficult to break even on that cap. Ironically, the demise of the market leader of the home credit business sector makes it more urgent for us to ensure there is very good provision from credit unions and other responsible lenders in its wake.

The other issue I want to comment on briefly is the provisions on authorised push payment scams and mandatory reimbursement. This gives me the opportunity to join others in the nice things they have been saying about my hon. Friend the Member for Salisbury (John Glen), the former Economic Secretary to the Treasury. I had the opportunity to work with him when I was Security Minister and he was bearing down on the awful growth in fraud. We have not just seen that growth in this country. Fraud and economic crime have been growing in countries throughout the world. There is a change in crime, and we need to respond accordingly. I welcome the change in the Bill, because it brings consistency and fairness and will enhance confidence for people using online financial services. One should never take away all responsibility from the consumer, of course, but that is a welcome move.

Very briefly, there are two things I would like the Government to look at, one for the Treasury specifically and one for the wider Government. First, for the Treasury, it is not clear to me why this provision applies just to the faster payment system. It is true that the vast majority of scams happen through faster payments, but they may not in future. It is right that the regulator should have the ability at least to extend that scope.

Secondly, a bigger point—not for my hon. Friend the Economic Secretary, he will be pleased to know, but for others in Government—is that we should extend the principle beyond the banks. It is difficult to get sympathy for banks and bankers, but right now they are bearing the entirety of the burden even though they are just the last link in the chain of the scam. They have responded very well, partly through regulation on such things as strong customer authentication and so on, but also by going further off their own bat. I think that is partly to do with their moral commitment to their customer base, but it is also about the liability they face through the contingent model. One wonders whether, if social media platforms, telecoms companies and others had had those same incentives, we might already have a lower level of fraud than we have today.

Save for those two encouragements to my hon. Friend the Minister for the Government to look at going further, I strongly welcome the Bill and all he is trying to do.

--- Later in debate ---

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

I do not want to disappoint my colleagues on the Government Benches, but I think that they know the issue on which I wish to focus in the time that is available to me. Before I start, I want to put on record, as a Co-operative and Labour MP, my support for the comments of my Labour colleagues on the importance of access to credit unions and of access to cash, which reflects the issue that I want to raise, particularly with regard to high-cost credit regulation.

I also wish to put on record some scepticism about the idea that there are wonderful opportunities as a result of Brexit. To my mind, there are simply problems that we will need to address, and I note that the former Minister, the hon. Member for Salisbury (John Glen), talked about the unlikelihood of a derogation from the existing regulations. Some may wonder whether this is the best use of parliamentary time, but I am willing to look at the legislation.

There is a genuine philosophical disagreement here about the concept of consumer protection. It is the lesson of high-cost credit regulation in this country that I do not think this legislation learns and it is our constituents who will pay the price.

Let me start by highlighting the points of agreement. I agree with the right hon. Member for East Hampshire (Damian Hinds) when he talks about this as an industry that is shape shifting—that it evolves to meet the times that it faces. Let me also put on record my appreciation of the work of the former Minister, the hon. Member for Salisbury. He and I have had many discussions about this industry and how best to address the threat that it poses to our constituents. Although we may not have agreed all the time, I have certainly respected the fact that he has been listening and looking at the evidence.

I am here today as a Cassandra, a broken record, to warn again of these industries and the latest antics of the companies, particularly the buy now, pay later lenders. Two years ago, we started to say that those lenders must be regulated, and I would argue that that was probably 18 months too late from recognising the threat that they pose.

The lessons of payday lending, guarantor lending and hire purchase agreements show that we simply cannot wait until the harm is evident among our constituents, especially when the abuse that is coming is self-evident already. Now that we are in a cost of living crisis, such caution is frankly unforgiveable, because it is our constituents who are paying the price. I hope that we can return to this matter in Committee. I am sure that the Minister now dealing with this Bill will recognise that, especially as the £1.8 billion that this country owes in personal debt—a rise of £62 billion—has not come from nowhere. Credit card borrowing in this country has jumped at its fastest rate in the past 17 years as people deal with the cost of living crisis.

When a third of households with children are cutting back on food to be able to pay their bills, it does not take a rocket scientist to work out that too much month at the end of somebody’s money and mouths to feed mean that credit must be found, and our constituents are turning to the high-cost lenders in their droves. I would be surprised if Members do not know what buy now, pay later is, because it is on every single website in this country now as a result of the delay in action. It has massively exploded as a result of the pandemic and now the cost of living crisis. Those companies are offering the opportunity to spread the payments, but they do not do so out of the goodness of their hearts; they do so because consumers spend 30% to 40% more. Add that toxicity to the way in which people are borrowing now to make ends meet: we are seeing buy now, pay later companies offering to put people’s energy bills onto these processes. We are seeing them offering the loans not for fast fashion, which is where people originally thought this kind of regulation was needed, but for basic goods and essentials. Millions of people in this country are now using this form of credit and getting into a hole that they cannot get out of. Those are not my words; it is what the evidence is now showing us. The previous Minister well knows that the evidence of harm is there. Indeed, that is what the FCA told us more than two years ago.

The average buy now, pay later user is paying off £293 of buy now, pay later debt, but that is at current prices. With inflation rocketing in the way that it is, the only ones that will win from that are those that offer the ability to apparently spread the payments, but that simply gets people into further and further debt. Most of these companies will not be clear with their lenders about the consequences. Indeed, many people do not even realise that it is a form of credit; they just think that they are spreading the payments on the websites.

Shoppers were charged £39 million in late repayment fees on buy now, pay later loans last year. I dread to think what the figure is now. There is agreement across this House that we need to regulate these companies, but what there is not is the political will to make sure that it happens before the pressure points come. We have already been through one Christmas where one pound in every four spent was on buy now, pay later. There are millions of people still paying off those debts. On the regulatory timetable that the Government are talking about, we will not see action before some time late next year. Minister, some time late next year is far too late for our constituents.

[John Glen]

I cannot resist. I think there is great consensus in the House on this matter. It is not a question of a lack of political will; I can assure the hon. Lady that it is about the complexity of delivering that legislation. In fact, the intent’s having been stated will have a meaningful effect on market practices and will change, and is changing, behaviours in the marketplace.

[Stella Creasy]

I thank the former Minister for his intervention, but my question is what that means for consumers. The lack of regulation means that my constituents cannot go to the ombudsman to seek redress if they think they have been mis-sold this form of credit. As people are drowning in buy now, pay later lending, they cannot seek assistance except from the companies themselves. We now see mainstream banks moving into buy now, pay later—the very bank that looks at someone’s account to decide how much they can spread payments and how much more they can afford to borrow, because this is a form of borrowing.

The hon. Gentleman may argue that the market is moving, but constituents need help now, because it is now that they are getting into debts that they cannot get out of. The challenge for us all is that the pace of change is horrifically slow, and that is where the damage to our constituents will come. If we all agree that regulation matters, let us get on with it. Furthermore, let us ensure that some of those basic changes, such as the ability for the ombudsman to intervene, happen.

This legislation shows that that matters, because it was the intervention of the ombudsman that made a difference with payday lending. The evidence is clear; the Financial Conduct Authority was overseeing Wonga while it continued to make loans that were unaffordable to its customers. It was only when the ombudsman intervened that Wonga was finally held to account for its behaviour, and as a result it went bust—and Wonga is not a one-off. Our constituents need proper consumer credit protection.

The Minister will know that it is my belief that there should be a proper credit capping process for all forms of credit, so that we do not have to play whack-a-mole. The right hon. Member for East Hampshire reflected that when he talked about shape-shifting: as one of these companies is regulated, another one comes up. In the intervening period, however, it would be perfectly possible to bring in the ombudsman. If we set out a separate regulatory regime for those companies, we are setting a precedent for other forms of credit to come and ask for separate and, frankly, special treatment.

What our constituents need is clarity about who to go to when they get into trouble. We all tell our constituents to go to a debt adviser, but if they have rights, those rights need to be transparent. At the moment, if people are borrowing on buy now, pay later, they have no rights, because it is not regulated. They only have the indulgence of those companies, and asking turkeys to tell us whether Christmas is a good idea rarely ends in a present for anybody.

It is right that we act as quickly as possible. I do not agree with the hon. Member for Salisbury when he says that the political will is there, because frankly this could have been done a while ago. The timetable that the Government have set out, which does not seek any form of actual intervention until some time in late 2023—and even then, it is about consulting on further measures—simply will not wash. Every Member of this House will have constituents coming to them for whom buy now, pay later debt will be part of their debt make-up, who may have put their mortgage on it, because there are companies offering the opportunity of spreading payments. Little wonder, when after all the Government are telling us they are going to spread our energy bills; the Government proposals to date are a form of buy now, pay later.

I wish I was wrong. I wish I had been wrong about payday lending, but we waited too long, and there are still millions of people in this country who are owed money through the compensation scheme from those payday lenders because we waited too long to intervene. We must not make the same mistake again.

I put the Minister on notice, and I ask for support from across the House, because I do not think this is a party political issue; it is about the pace of change. I will be proposing an amendment to this legislation that will give the Government the same time period of 28 days that the buy now, pay laters give our constituents to bring in that secondary legislation and give our constituents the protection of the ombudsman. It is a necessary and vital measure in a cost of living crisis to ensure that when people who cannot choose between eating or heating—because they cannot afford to do either—turn to buy now, pay later, they are not creating further problems for themselves down the road.

I know that hon. Members across the House agree that this kind of lending is a problem, but it is time for clarity, it is time for simplicity and it is time for that legislation. I hope that I will find supporters on the Government Benches, and I know that we will find supporters in the other place. Above all, I know that our constituents deserve better.