Terror Attacks: Government Financial Support

Steve Barclay Excerpts

Wednesday 6th December 2017 Westminster Hall

[The Economic Secretary to the Treasury (Stephen Barclay)]

It is a pleasure, as always, to serve under your chairmanship, Mr Davies. I thank the hon. Member for Bermondsey and Old Southwark (Neil Coyle) for introducing this important debate. The House is united in our condemnation of the atrocity that was committed against his constituents and those of a number of other colleagues.

The hon. Gentleman expressed his understandable concern about the number of days taken in responding to the certification of terrorism, and what he perceived to be a delay by the Treasury. To clarify, the Treasury responded to the certificate within 48 hours of its receipt. Clearly the police were focusing on the investigation, and that may have played a part in the number of days that it took for the Treasury to receive that certificate, but the Treasury did respond within 48 hours of doing so.

I am very aware of the impact on businesses in the hon. Gentleman’s constituency following the attacks—indeed, he and I met to discuss it with a number of his affected constituents. As he set out, traders in Borough market have had a number of difficulties, particularly in accessing their insurance payments.

Accessible insurance is vital for businesses and individuals. It protects them financially from life-changing losses and gives firms extra security and confidence when going about their regular business. That is why, in 1993, when the insurance market stopped offering terrorism cover following the IRA attacks, the Government stepped in to establish Pool Re. That move was made to provide reinsurance cover, to stimulate the private market and to ensure that businesses could access protection again. Pool Re is now widely regarded as the global leader in the sector, shaping international standards for terrorism insurance cover. Since its launch, Pool Re has successfully reinvigorated the terrorism insurance market in the UK. Pool Re has also protected businesses, paying out more than £600 million, including for the recent attacks in Manchester, for example. The Government are committed to ensuring that Pool Re continues to protect businesses and enables effective terrorism insurance cover. We regularly monitor Pool Re in that context, and agree that in recent years a gap has appeared in its coverage. That is the legitimate point which sits at the core of the hon. Gentleman’s rationale for calling today’s debate.

The gap means that some businesses may not be insured for a loss of income in specific circumstances, where losses are incurred due to a terrorist attack but there is no physical damage. The lack of physical damage is particularly material in this instance. The Government recognise the need to address that, and I can therefore confirm that we are exploring options, including legislation, and aim to confirm our next steps early in the new year.

We have already shown that we are prepared to take action to modernise Pool Re and to support businesses in the UK. We recently finalised changes to the scheme, meaning that it will include cover for physical damage caused by a cyber trigger. That precautionary measure helps to future-proof Pool Re, and demonstrates our commitment to maintaining the UK’s position at the forefront of those nations reinforcing their economies against terrorism risks. In terms of Government funding in response to terrorism, we are ensuring, across Government, that affected communities have the right support in place to rebuild and recover from such attacks.

[Afzal Khan (Manchester, Gorton) (Lab)]

I thank the hon. Member for Bermondsey and Old Southwark (Neil Coyle) for securing the debate. I am the Member for Manchester, Gorton, and this year we experienced an attack in which 22 people were killed. Manchester then set up the “We Love Manchester” emergency fund in conjunction with the council, which raised millions of pounds. Communities and faith groups provide assistance after attacks, not just the Government and non-governmental organisations—something that will be highlighted in the all-party parliamentary group on British Muslims’ upcoming report on faith as an emergency service. What support is being given to those groups to continue their work, and what is the Minister doing to combat fake charities set up to raise funds after attacks or tragedies?

[Stephen Barclay]

The hon. Gentleman raises a legitimate point. None of us wants to see charities being set up to defraud by exploiting the good will of our constituents in response to such atrocities. He may be aware that the Prime Minister has established a Cabinet Office taskforce to co-ordinate the cross-Government response, to oversee progress and to expedite payments when necessary. She has recognised the issue and is engaged in addressing it.

I am also pleased to confirm that NHS England has made money available to the NHS north region to reimburse it for its efforts in respect of the Manchester attack. Unfortunately, some of the health effects will be long term, as I am sure the hon. Gentleman recognises. That is why another £1.6 million will be made available to provide mental health support for those affected. NHS England has also provided £1 million to the NHS London region for 2017-18 to assist the health system with meeting the costs of the additional mental health support required following the unprecedented level of major incidents that have occurred in London recently, including, of course, Grenfell—a further tragedy that we have debated in the House.

Although we must respond and have responded robustly to the immediate fallout of such atrocities, we must also focus on reducing the terror threat. Cross-Government spending on counter-terrorism is increasing by 30% in real terms from 2015 to 2020, and £700 million has been allocated to counter-terrorism policing this year. Furthermore, the Treasury has provided £24 million of additional funding to help meet costs arising from this year’s terror attacks that have affected police forces.

To conclude, I commend the hon. Member for introducing the debate, and for campaigning on behalf of the affected businesses in his constituency. The Government recognise the issue and are working closely with the relevant bodies to reach an appropriate solution. We always hope that we will never have to deal with yet another atrocity, but we must be prepared so that our communities, and the businesses and individuals who make them, do not unduly suffer from horrific attacks on our democracy.

Question put and agreed to.

Banking Sector: Fraudulent Accounts

Steve Barclay Excerpts

Tuesday 5th December 2017 Westminster Hall

[The Economic Secretary to the Treasury (Stephen Barclay)]

It is a pleasure, as always, to serve under your chairmanship, Mr Hollobone. I pay tribute to the tenacity with which my right hon. Friend the Member for Basingstoke (Mrs Miller) has championed the cause of her constituent, who has clearly suffered from the traumatic case that she rightly raises with the House today. She outlined that she has been working on this case for some time, including exchanging correspondence with Treasury Ministers last year. I welcome the opportunity to update her on the work of the taskforce that was set up, as she correctly said, by the Prime Minister and on developments with the payment systems regulator and others.

To be clear, banks must take action to prevent accounts being used for criminal purposes. The Financial Conduct Authority is responsible for ensuring that firms meet their legal and regulatory obligations. As my right hon. Friend is aware, the FCA is an independent body. That is vital to its role; its credibility, authority and value would be undermined if it were possible for the Government to simply intervene in its decision making.

I will discuss the positive steps that the regulators and industry are taking shortly, but I will first touch on the issue at the core of my right hon. Friend’s concerns. Bank accounts used for fraud and other criminal purposes are a serious concern of the Government, the FCA and the industry, particularly given that authorised push payment scams—the type of fraud to which she refers—are the second biggest payment fraud after card fraud. The FCA’s rules expressly require banks to have systems and controls to counter the risk that they are misused for the purpose of financial crime, including money laundering and fraud.

The money laundering regulations require banks to verify the identity of their customer and to assess the purpose and intended nature of the business relationship when a customer opens a bank account. A key part of the regulations is a requirement to carry out customer due diligence, which was another of my right hon. Friend’s core concerns. Customer due diligence measures mean verifying the customer’s identity on the basis of information or documents obtained from a reliable source that is independent of the customer. As I understand it, Lloyds maintains that when it opened the account, it was applying the “industry-wide acceptable documentation”, but I know that my right hon. Friend has concerns in that regard.

Since my appointment, I have encouraged the industry to consider the use of new technologies where they are as effective or more effective than existing practices. The increasing digitisation of financial services and products means that it is important that customers can prove who they are online. Firms should develop robust tools to ensure that they know who they are dealing with. In essence, there is scope through an electronic footprint to enhance the standard of customer due diligence in the future.

Where a bank assesses greater risk, it may take additional measures, including seeking additional documentation and checking the customer’s source of wealth or funds. Banks must conduct ongoing monitoring, including scrutiny of the transactions undertaken throughout the course of the relationship, to ensure consistency with the customer’s business and risk profile. Banks must also undertake reviews of customer records so that information obtained for the purpose of due diligence is kept up to date.

The FCA is responsible for supervising banks’ compliance with the money laundering regulations and for ensuring that they maintain systems and controls to prevent financial crime more generally. If the FCA finds evidence that a regulated firm has not undertaken due diligence checks, that firm would be in breach of the money laundering regulations. That addresses one of my right hon. Friend’s core questions about who is liable and who enforces the money laundering regulations: it is the FCA’s responsibility to ensure that firms have systems and controls in place to avoid money laundering.

[Mrs Miller]

The point that I made was that when I wrote to the FCA, it said that it did not take on individual cases. The Minister is right to say that it looks at systems and processes, but not at individual cases. I hope he might be able to refer me to who does look at individual cases, because, frankly, I have not worked that out in two years—but he is much cleverer than I am.

[Stephen Barclay]

I will come to some of the steps that are being taken to mitigate that. The key point is whether the standards applied met the requirements of the money laundering regulations or whether there was a loophole. I know that my right hon. Friend has corresponded with the FCA on that point.

As I say, if the FCA finds evidence that a firm has not undertaken its due diligence checks, that firm would be in breach of the money laundering regulations. Where a bank falls short of its obligations, the FCA has shown that it is capable of taking action through multi-million pound fines for two of the largest banks in recent years. At the same time, the FCA must ensure that its supervisory regime is proportionate and efficient and that its unintended consequences are minimised.

I am sure my right hon. Friend will appreciate and recognise that there is a balance to be struck in terms of the level of scrutiny required for due diligence checks. Recently, the hon. Member for Bristol West (Thangam Debbonaire) raised the issue that, at the other end of the spectrum, refugees often experience concerns about their ability to open a bank account because banks ask for levels of documentation that give them the impression that they are being prevented from opening accounts. So the balance is between a proportionate level of due diligence checks and a level that does not stop refugees, for example, being able to legally open a bank account.

My right hon. Friend the Member for Basingstoke also raised the issue of the Payment Systems Regulator, which is leading the work on this type of scam where someone is tricked into making a payment to the wrong account or into paying the fraudster directly. The Government have made it clear that more should be done to stop that happening and to mitigate the harm caused when it does happen. I am pleased to say that progress is being made. The PSR’s ongoing programme of work with industry aims to reduce the risk of the scams occurring and to reduce the damage that they cause. Existing initiatives include better data sharing between banks, a function to enable customers to be sure who they are transferring money to and best practice standards for the reporting of scams. The PSR has outlined milestones for those initiatives to ensure that the momentum is kept up.

Although the PSR accepts that not all scams can be prevented, it has taken a decisive step to align incentives and to reduce harm. It has proposed a contingent reimbursement scheme in which banks would reimburse victims when the banks have not met the required best practice standards, provided that the victims had taken appropriate care when making the payment. That speaks to a further point that my right hon. Friend made about compensation. The PSR’s consultation on that scheme is open until 12 January 2018. The consultation gives a clear sign to consumers that the regulator is on their side, and the PSR will respond to it in due course.

Banks and the FCA must do all they can to prevent fraudulent bank accounts from being opened in the first place, but fraud is a much wider problem. The joint fraud taskforce, as my right hon. Friend mentioned, was set up by the Prime Minister when she was Home Secretary in 2016 as a partnership between Government, law enforcement and the financial sector. The taskforce is working in innovative ways to deliver a more effective response to fraud, including by investing £3.1 million, with industry, in a campaign to improve the ability of people and businesses to protect themselves from fraud; working to understand how even more funds can be returned to fraud victims; pursuing a cross-industry strategic plan on so-called “card not present” fraud; and considering what makes victims susceptible to fraud and how to reduce vulnerability.

The Home Office has asked Her Majesty’s inspectorate of constabulary and fire and rescue services to conduct a review of police response to fraud at a local level, which my right hon. Friend also raised as a concern. The review will assess how local forces deal with demand, assess risk and provide victim care services and will examine the role of the City of London police as the national lead force for fraud.

I thank my right hon. Friend again for raising these issues. The Government recognise the terrible impact of this type of fraud on its victims. There are already strict rules that banks must comply with when opening new accounts, and the independent FCA is responsible for ensuring they do so. The PSR and the industry are doing robust work to tackle all types of fraud, working with the Government’s joint fraud taskforce. The Government will continue to drive appropriate action on these issues, which are so important to all of us in this House.

[Mrs Miller]

I sense that the Minister is drawing to a close. His remarks have addressed the generalities of the banking system, which I understand are hugely important to the regulator and the Government, but may I press him again on particular instances in which individual constituents such as mine have been let down? It is very difficult to see what recourse they have when banks fail to abide by their own codes of practices and rules, leaving them poorer for it.

[Stephen Barclay]

As I understand it, my right hon. Friend draws a distinction between systemic responsibility for the rules of a firm as a whole and responsibility for individual cases, but if I have mischaracterised that distinction, I am happy to write to her. My understanding is that responsibility for firm-wide systems and controls falls to the FCA, but specific one-off cases of fraud are in the police’s remit, so it is for the police to look at individual cases. I am very happy to follow up that point in further discussions.

[Mrs Miller]

May I detain the Minister a moment longer? The problem is that if a bank fails to gather information about a perpetrator of a crime who has opened a bank account, it leaves police unable to follow the perpetrator. Ultimately, it is very difficult for the police to find the criminals if information on their addresses and names has not been collected in the first place.

[Stephen Barclay]

I am acutely aware of the problem that my right hon. Friend raises. Whether the correct information was collected in her constituent’s case is an issue of fact: I understand from Lloyds that it was, but my right hon. Friend may care to differ. Her point about the remit of the police illustrates the reason the Prime Minister asked Her Majesty’s inspectorate of constabulary when she was Home Secretary to review the role of the police in addressing these issues.

All hon. Members recognise how traumatic these cases are. Prevention is better than cure, which is why the industry is taking measures through the PSR. Where fraud occurs, we need to look at how the responsibility of the banks aligns with potential compensation. The PSR consultation is open until mid-January, and I am sure my right hon. Friend will want to contribute to it. We need to look at the balance of responsibilities between the FCA as regulator and banks in individual cases.

I hope my right hon. Friend will be reassured to hear that, partly as a consequence of her tenacity in raising her constituent’s case, the Prime Minister has announced a review of police response and a suite of measures on the FCA, on standards and on the role of the PSR, to ensure that others do not suffer as my right hon. Friend’s constituent has.

Question put and agreed to.

Draft Risk Transformation Regulations 2017 Draft Risk Transformation (Tax) Regulations 2017

Steve Barclay Excerpts

Wednesday 29th November 2017 General Committees

[The Economic Secretary to the Treasury (Stephen Barclay)]

I beg to move,

That the Committee has considered the draft Risk Transformation Regulations 2017.

[The Chair]

With this it will be convenient to consider the draft Risk Transformation (Tax) Regulations 2017.

[Stephen Barclay]

It is a pleasure, Mr Davies, to serve under your chairmanship. The regulations introduce a bespoke regulatory and tax framework for insurance-linked securities business in the UK, completing a process that was announced at Budget 2015.

Insurance-linked securities enable insurers and reinsurers to transfer risk to the capital markets. That is an important and growing part of the global specialist reinsurance market. As of 2017, more than $90 billion-worth of insurance-linked securities have been issued. However, despite the importance of London as a global insurance hub, the rapid growth of the insurance-linked securities market has taken place elsewhere. That is why at Budget 2015 the then Chancellor announced that the Treasury, the Financial Conduct Authority and the Prudential Regulation Authority would work closely with the London insurance market to develop a fit-for-purpose framework for insurance-linked security business in the UK.

The regulations comprise four main elements. First, the regulations provide for UK regulators to apply a new authorisation and supervisory regime for the vehicles that issue insurance-linked securities in the UK. Secondly, the regulations introduce a new type of company called a protected cell company to enable multiple deals to be managed in a single company. Thirdly, the regulations set out the rules for the issuance of securities by protected cell companies, so that the interests of protection buyers and investors are protected. Finally, the tax regulations set out an appropriate and straightforward tax treatment for the transformer vehicles that issue these securities.

The Government are also introducing a new form of corporate body called a protected cell company in these regulations. A protected cell company allows for the efficient management of multiple insurance-linked security deals within a single company, rather than establishing a new vehicle for each individual deal.

The structure of a protected cell company requires each to be held in a cell, with each cell’s assets and liabilities ring-fenced from one another. That type of structure is already common in the insurance-linked securities market but has not been available in the UK until now. The PRA and the FCA will carefully supervise protected cell companies, with the PRA ensuring that each cell is fully capitalised.

The regulations ensure that only sophisticated or institutional investors can be offered insurance-linked securities in the UK and take on this risk. These are complicated financial instruments and it would be wrong for retail investors to be able to purchase them. Finally, the risk transformation tax regulations set out an appropriate and straightforward tax treatment for transformer vehicles that issue these securities in the UK.

To ensure that UK transformer vehicles are competitive and straightforward to use, under the regulations tax is charged at the level of the investor rather on the transformer vehicle itself. For UK investors, tax will be charged as normal, according to their circumstances. Non-UK investors will be taxed according to the rules of their home jurisdiction.

That tax treatment follows the policy aim of the UK’s existing tax regulations for insuring special purpose vehicles, which is set out in the Taxation of Insurance Securitisation Companies Regulations 2007, a document I know you are very familiar with, Mr Davies. The tax regulations we debate today provide for broadly similar outcomes but in a much more straightforward way.

In conclusion, Members have heard that insurance-linked securities are a growing market. Indeed, 2017 has seen record issuance of insurance-linked securities with more than $11 billion-worth in this year alone. It is, therefore, the right time for the UK to improve its offer in this market. The regulations have been welcomed by the industry and by the London Market Group, which represents London’s insurers and reinsurers. I commend the regulations to the Committee.

--- Later in debate ---

[Stephen Barclay]

I thank Committee members for their probing but very interesting questions about the rationale for this policy. The shadow Minister is right to say that we are proud of the insurance industry in the United Kingdom for its global reach and its potential. He mentioned the context of Brexit. These measures were initiated in the 2015 Budget, but Brexit reinforces the benefit of increasing the UK’s influence over this part of the market, which is already well established but is currently conducted offshore. Bringing it within the UK will give UK regulators—the Financial Conduct Authority and the Prudential Regulation Authority—more influence over it than they have under current arrangements. With Brexit, this is the kind of global business that the UK should be competing in. EU insurers already use these vehicles and deals outside the EU. We are discussing a business that is conducted outside the UK from which the UK has the potential to benefit, as opposed to a business that is currently conducted in Europe.

The shadow Minister raised safeguards. It is important to flag that, unlike conventional reinsurers, these vehicles do not pool risk; every deal must be fully collateralised. A transformer vehicle must raise and hold collateral that is at least sufficient to meet its insurance obligations, so an inherent safeguard is built into the design of these products. A further safeguard—it is important to reiterate this—is that the products can be accessed only by sophisticated or institutional investors, so there is no risk of retail investors failing to understand the products on the market.

Several Members raised the issue of tax. It is important to reiterate that the principle behind this tax treatment is similar to the way Lloyd’s members are currently taxed on their syndicate participation, albeit the mechanics of how it is achieved are different because of the different legal characteristics of the entities involved. Investors in Lloyd’s are treated as if they had participated in profit-generating insurance activities directly, rather than through an intermediary—a syndicate. Also, a vehicle cannot qualify for this tax treatment without authorisation from the UK regulatory framework—the Prudential Regulation Authority and the Financial Conduct Authority. That is a further safeguard.

The hon. Member for Aberdeen North, who speaks for the Scottish National party, asked, legitimately, whether any tax would be lost as a result of these measures. I reassure the Committee that the UK will not lose any revenue from this tax treatment, as none of the deals concerned are currently domiciled in the UK. There is already a similar treatment for transformer vehicles in UK legislation—the Taxation of Insurance Securitisation Companies Regulations 2007—but that legislation has been too complicated for the industry to use, so the draft regulations simplify the treatment of those vehicles.

It is also worth pointing out that international competitors already offer a similar tax treatment. Without a competitive and appropriate approach to this tax, the UK would lose out on business that is important to the future of our global reinsurance industry and to our position as a world leader in specialist reinsurance business. That was the shadow Minister’s opening point. As I said, UK investors will be taxed in the same way as they would be if they received interest or dividends from any other company. There is not an issue of lost taxation, because this tax will be applied to entities that are not currently domiciled in the UK.

I hope that I have addressed Members’ questions. I commend the draft regulations to the Committee.

Question put and agreed to.

DRAFT RISK TRANSFORMATION (TAX) REGULATIONS 2017

Resolved,

That the Committee has considered the draft Risk Transformation (Tax) Regulations 2017.—(Stephen Barclay.)

Counter-Terrorist Asset Freezing Regime: April-June 2017

Steve Barclay Excerpts

Wednesday 29th November 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA-2.010), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council resolutions 1373 and 1452.

This report covers the period from 1 April 2017 to 30 June 2017. This report also covers the UK implementation of the UN’s ISIL (Daesh) and al-Qaeda asset-freezing regime (ISIL-AQ) and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU.

Under the ISIL-AQ asset-freezing regime, the UN has responsibility for designations and the Treasury, through its Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (Asset-Freezing) Regulations 2011.

Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

A new EU asset-freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings. Once a designation is made under this regime it will appear in the table available online.

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

The table, available as an attachment online, sets out the key asset-freezing activity in the UK during the quarter.

Annex A: Designated persons under TAFA 2010 by name¹

Individuals

Hamed ABDOLLAHI*

Imad Khalil AL-ALAMI

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Usama HAMDAN

Hasan IZZ-AL-DIN*

Mohammed KHALED

Musa Abu MARZOUK

Khalid MISHAAL

Khalid Sheikh MOHAMMED*

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Entities

Basque Fatherland and Liberty (ETA)

Ejército de Liberación Nacional (ELN)*

Hizballah Military Wing, including external security organisation*

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL)*

Annex B: Persons designated by the EU under Council Regulation (EC) 2580/2001²

Persons

Hamed ABDOLLAHI*

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Mohammed BOUYERI

Hassan Hassan EL HAJJ

Hasan IZZ-AL-DIN*

Farad MELIAD

Khalid Sheikh MOHAMMED*

Dalokay SANLI

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Groups and entities

Abu Nidal Organisation (ANO)

Al-Aqsa E.V.

Al-Aqsa Martyrs’ Brigade

Babbar Khalsa

Communist Party of the Philippines, including New People’s Army (NPA), Philippines

Devrimci Halk Kurtuluş Partisi-Cephesi—DHKP/C (Revolutionary People’s Liberation Army/Front/Party)

Ejército de Liberación Nacional (National Liberation Army)*

Gama’a al-Islamiyya (a.k.a. Al-Gama’a al-Islamiyya) (Islamic Group—IG)

Hamas, including Hamas-Izz al-Din al-Qassem

Hizballah Military Wing, including external security organisation

Hizbul Mujahideen (HM)

Hofstadgroep

Islami Büyük Doğu Akincilar Cephesi (IBDA-C) (Great Islamic Eastern Warriors Front)

Khalistan Zindabad Force (KZF)

Kurdistan Workers Party (PKK) (a.k.a. Kongra-Gel)

Liberation Tigers of Tamil Eelam (LTTE)

Palestinian Islamic Jihad (PIJ)

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL) (Shining Path)*

Teyrbazen Azadiya Kurdistan (TAK)

¹For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

²For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

*EU listing rests on UK designation under TAFA 2010.

Attachments can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2017-11-29/HCWS286/.

[HCWS286]

Counter-Terrorist Asset Freezing Regime: January-March 2017

Steve Barclay Excerpts

Wednesday 29th November 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to report to Parliament, quarterly, on its operation of the UK’s asset-freezing regime mandated by UN Security Council resolutions 1373 and 1452.

This report covers the period from 1 January 2017 to 31 March 2017. This report also covers the UK implementation of the UN’s ISIL (Daesh) and al-Qaeda asset-freezing regime (ISIL-AQ) and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU.

Under the ISIL-AQ asset-freezing regime, the UN has responsibility for designations and the Treasury, through its Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (asset-freezing) regulations 2011.

Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

A new EU asset-freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings. Once a designation is made under this regime it will appear in the table available online.

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

The table, available as an attachment online, sets out the key asset-freezing activity in the UK during the quarter.

Annex A: Designated persons under TAFA 2010 by name¹

Individuals

Hamed ABDOLLAHI*

Imad Khalil AL-ALAMI

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Usama HAMDAN

Hasan IZZ-AL-DIN*

Mohammed KHALED

Musa Abu MARZOUK

Khalid MISHAAL

Khalid Sheikh MOHAMMED*

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Entities

Basque Fatherland and Liberty (ETA)

Ejército de Liberación Nacional (ELN)*

Hizballah Military Wing, including external security organisation*

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL)*

Annex B: Persons designated by the EU under Council Regulation (EC) 2580/2001²

Persons

Hamed ABDOLLAHI*

Abdelkarim Hussein AL-NASSER*

Ibrahim Salih AL-YACOUB*

Manssor ARBABSIAR*

Mohammed BOUYERI

Hassan Hassan EL HAJJ

Hasan IZZ-AL-DIN*

Farad MELIAD

Khalid Sheikh MOHAMMED*

Dalokay SANLI

Abdul Reza SHAHLAI*

Ali Gholam SHAKURI*

Qasem SOLEIMANI*

Groups and entities

Abu Nidal Organisation (ANO)

Al-Aqsa E.V.

Al-Aqsa Martyrs’ Brigade

Babbar Khalsa

Communist Party of the Philippines, including New People’s Army (NPA), Philippines

Devrimci Halk Kurtuluş Partisi-Cephesi—DHKP/C (Revolutionary People’s Liberation Army/Front/Party)

Ejército de Liberación Nacional (National Liberation Army)*

Gama’a al-Islamiyya (a.k.a. Al-Gama’a al-Islamiyya) (Islamic Group—IG)

Hamas, including Hamas-Izz al-Din al-Qassem

Hizballah Military Wing, including external security organisation

Hizbul Mujahideen (HM)

Hofstadgroep

Islami Büyük Doğu Akincilar Cephesi (IBDA-C) (Great Islamic Eastern Warriors Front)

Khalistan Zindabad Force (KZF)

Kurdistan Workers Party (PKK) (a.k.a. Kongra-Gel)

Liberation Tigers of Tamil Eelam (LTTE)

Palestinian Islamic Jihad (PIJ)

Popular Front for the Liberation of Palestine—General Command (PFLP-GC)*

Popular Front for the Liberation of Palestine (PFLP)*

Sendero Luminoso (SL) (Shining Path)*

Teyrbazen Azadiya Kurdistan (TAK)

¹For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

²For full listing details please refer to: https://www.gov.uk/government/publications/current-list-of-designated-persons-terrorism-and-terrorist-financing.

*EU listing rests on UK designation under TAFA 2010.

Attachments can be viewed online at: http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2017-11-29/HCWS285/.

[HCWS285]

Draft Banking Act 2009 (Service Providers to Payment Systems) Order 2017

Steve Barclay Excerpts

Tuesday 21st November 2017 General Committees

[The Economic Secretary to the Treasury (Stephen Barclay)]

I beg to move,

That the Committee has considered the draft Banking Act 2009 (Service Providers to Payment Systems) Order 2017.

It is a pleasure to serve under your chairmanship, Mr Robertson. The UK payments infrastructure is the plumbing of our financial system. Every year our payment systems process about 21 billion transactions, worth more than £75 trillion, between businesses and consumers. They underpin almost all commercial activity in the UK and are vital to the day-to-day lives of every member of the public. It is, therefore, extremely important that they are secure, stable and reliable.

In the Banking Act 2009, the Government gave the Bank of England formal powers of oversight over certain inter-bank payment systems, with the aim of promoting the robustness and resilience of key UK payment systems. The Act also gave Her Majesty’s Treasury powers to specify which inter-bank systems are to be overseen by the Bank. The Bank’s supervisory powers enable it to require information directly from the operators of relevant payment systems, and to issue directions or impose requirements on them, when necessary and appropriate.

The order extends the Bank of England’s powers to include oversight of service providers. Service providers can include companies that provide infrastructure and technology—the firms that provide the hardware or software—to the payment systems that enable the 21 billion transactions each year. The responsibility for carrying out the oversight lies with the Bank’s financial market infrastructure directorate, which reports to the Bank’s financial market infrastructure board. The Bank publishes an annual report on the supervision of market infra- structure, which is laid before Parliament. Under the 2009 Act, the Bank has the power to publish principles and codes of practice to be followed by the payment systems operators; require system rule changes; give directions and set standards; and impose penalties for failure to comply. The proposed changes would give the Bank the same powers over service providers. The Bank will publish its approach to oversight of critical service providers shortly, to ensure that it is as transparent as possible.

The legislation will not automatically bring any service providers under Bank oversight. As with payment systems, HM Treasury will specify which service providers to recognised payment systems are to be brought under oversight with an order. HM Treasury can specify only firms that provide services to payment systems that are not already overseen by the Bank for financial stability purposes—that is, systemically important payment systems.

The Act does not require any other criteria to be met for a service provider to be specified. However, when considering a service provider for specification, the Treasury will take into account a number of issues, including the systemic importance of the relevant payment system, the criticality of the service provider to that system and whether the system and the service provider can be substituted. It will also consider representations made by the Bank, the payment systems regulator, the Prudential Regulation Authority, the Financial Conduct Authority, the service provider and the relevant payment systems, as required by the Act.

In summary, the Government believe that oversight should be proportionate to the level of risk presented by a firm. The proposed legislation will give the Government, together with the Bank of England, the tools they need to address any risk and to promote the robustness and resilience of the UK’s payments infrastructure. I commend the order to the Committee and hope that colleagues will join me in supporting it.

--- Later in debate ---

[Stephen Barclay]

If I may first turn to the question posed by my hon. Friend the Member for Windsor about how many service providers would be designated. We do not intend to set a specific number, as this is about the Treasury’s ability to react to risk where that is perceived. It is a question of what is seen as proportionate from an oversight perspective, with regards to the services that those providers pay to those critical infrastructure systems.

On the question asked by the hon. Member for Stalybridge and Hyde about transparency and how we will specify a service provider, a number of factors will be taken into consideration, including the systemic importance of the payment service to which the service provider is providing services; the service provider’s criticality to that payments service; and the extent to which another provider could be substituted in due course. On the issue of transparency, the decision will be taken in consultation with, and on the basis of representations from, the Bank, the payment systems regulator, the PRA and the FCA.

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

I thank the Minister for giving way and I apologise for being late. This small business commissioner will employ fewer than 50 staff. Will that organisation really be capable of taking on the big multinationals that are likely to be the main miscreants in late payments to small businesses?

[Stephen Barclay]

This is about having oversight to set requirements on what information is needed, and being able to react to risk in a quick and proportionate way. This is a piece of enabling legislation that will allow the Bank to ask those questions of service providers rather than simply rely, as is currently the case, on the payment systems themselves to manage that risk. That is why this is a proportionate response. The order simply switches on a provision that is already in the existing legislation, but it allows the Bank to give force to it. The Banking Act already enables that; the issue is what it does once it is switched on. The order gives the Bank that power, facilitated by the Treasury.

Coming back to the point raised by the hon. Member for Stalybridge and Hyde about transparency, the decision will be taken in consultation with the relevant regulators, including the PRA and FCA, and following representations from the payments systems operators themselves. That reflects our proportionate approach.

In conclusion, the order will enable the Bank of England to oversee service providers to specify payment systems. In some cases those services are critical to the smooth running of our payment systems. The order will support the Bank’s supervision of systemically important payment systems and promote the robustness and resilience of the UK’s financial system.

I hope that the Committee has found this morning’s sitting informative and that it will join me in supporting the order.

Question put and agreed to.

Money Laundering and Terrorist Financing

Steve Barclay Excerpts

Thursday 26th October 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

The UK is one of the world’s largest and most open economies. The Government are committed to tackling the risk of illicit financial flows from money laundering and terrorist financing, and to protecting the UK as an attractive country for legitimate business and a leading global financial centre. As the threats from illicit finance and terrorist financing continue to evolve, so must our understanding of the risks and our response.

Today, the Government are publishing the UK’s second national risk assessment of money laundering and terrorist financing. This 2017 assessment, jointly published by the Treasury and the Home Office, shows how our understanding of and response to money laundering and terrorist financing have developed since the first assessment in 2015.

The key findings of the 2017 assessment are as follows:

High end money laundering and cash based money laundering remain the greatest areas of money laundering risk to the UK. New typologies continue to emerge, including money laundering through capital markets and increased exploitation of technology.

The distinctions between money laundering typologies are becoming increasingly blurred. Criminal funds are progressing from lower level laundering and are being accumulating into larger sums to be sent overseas using more sophisticated methods.

Professional services are a crucial gateway for criminals looking to disguise the origin of their funds.

Cash, alongside cash intensive sectors, remains the favoured method for terrorists to move funds through and out of the UK.

A wide-ranging set of reforms by Government and law enforcement over recent years is still in its early days, but is starting to take effect.

The UK has been at the forefront of recent global efforts to shut down money laundering and terrorist financing. The 2016 London anti-corruption summit led to over 600 specific commitments made by more than 40 countries and six major international organisations.

In 2015, the UK published its first ever national risk assessment of money laundering and terrorist financing. This set out candidly the areas where action was needed. In 2016, the Government published an action plan and committed to the most significant reforms to our anti-money laundering and counter-terrorist financing regime in over a decade.

Many of the actions in this plan have now been delivered or are underway. The Criminal Finances Act 2017 will provide tough new powers such as unexplained wealth orders. The Money Laundering Regulations 2017 bring the latest international regulatory standards into UK law. The publicly accessible register of people with significant control (PSC) was introduced in 2016, and records the beneficial owner of a company, thus improving corporate transparency. Progress continues with reforms to the suspicious activity reporting and supervisory regimes.

This 2017 assessment provides a critical component of continued partnership and prioritisation between Government, law enforcement, supervisors and the private sector.

A copy of the report has been deposited in the Library of the House.

[HCWS200]

Oral Answers to Questions

Steve Barclay Excerpts

Tuesday 24th October 2017 Commons Chamber

[Robert Neill (Bromley and Chislehurst) (Con)]

2. Whether his Department has made an assessment of the potential merits of recommendations from the London Finance Commission on fiscal devolution for London.

[The Economic Secretary to the Treasury (Stephen Barclay)]

I thank my hon. Friend for his work on the London Finance Commission, which recommended giving London a wide range of additional powers. The Government have committed to continue to work with the Greater London Authority and London Councils to ensure that London has the powers it needs to maintain its status as a world-leading city.

[Robert Neill]

I am grateful for that response, but will my hon. Friend particularly and urgently consider whether an element of fiscal devolution—for example, a tourist levy or something similar—might be part of a robust funding package for Crossrail 2, which is a critical part of national infrastructure and will give a boost worth around £150 billion to the whole UK economy?

[Stephen Barclay]

As my hon. Friend is aware, the Department for Transport is scrutinising the business case for Crossrail and discussing it with Transport for London. It is right that the London region does not retain disproportionate amounts of revenue. Some of the recommendations in the commission’s report are very broad ranging.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

If the ministerial team are to deliver anything for the London Finance Commission, will the Minister at least talk to the commission about the difficulty, with Brexit coming, of recruiting anyone to come to live and work in London? The search for talent is very difficult indeed. No one wants to work in this financial capital because of Brexit—what is he going to do about it?

[Stephen Barclay]

The hon. Gentleman needs to question whether Labour Members are fully signed up to the recommendations of the London Finance Commission. For example, many of his colleagues on the Opposition Benches may not support the retaining of almost half of all stamp duty across England.

[Paul Masterton (East Renfrewshire) (Con)]

3. What assessment he has made of the contribution of the UK internal market to the Scottish economy.

--- Later in debate ---

[Luke Graham (Ochil and South Perthshire) (Con)]

14. What assessment he has made of the effect of Government investment on infrastructure since 2010.

[The Economic Secretary to the Treasury (Stephen Barclay)]

Infrastructure is at the heart of the Government’s economic strategy, and our investment will boost productivity and growth. Since 2010, more than £250 billion has been spent on public and private sector infrastructure.

[Mr Wragg]

The biggest investments in transport infrastructure in generations, including the Ordsall rail curve in Greater Manchester, have been made possible by this Government. Will my hon. Friend commit to further investment in our rail network, particularly on local commuter routes through my constituency?

[Stephen Barclay]

My hon. Friend makes a good point. This Government have committed to the largest rail investment programme since Victorian times, including a £55.7 billion investment in High Speed 2. He will be aware of the Chancellor’s announcement in Manchester last month of £300 million to improve connectivity to High Speed 2 across the northern region.

[Luke Graham]

Will my hon. Friend confirm his commitment to the Tay cities and the Clackmannanshire and Stirling city deals, and will he commit to meeting the local leaders and me to discuss how we can deliver this transformational change for our region?

[Stephen Barclay]

The Government remain fully committed to agreeing both city deals, and to working constructively with the Scottish Government and local partners. I am, of course, very happy to meet my hon. Friend to discuss this further.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

A decent transport infrastructure is an essential platform for economic growth, but the Minister will be aware that public transport investment in the north-east is only £200 per head, whereas it is £2,000 per head in London. Will he now commit to investing in the north-east on the Tyne and Wear metro, and with public money, not some private finance initiative?

[Stephen Barclay]

The Government are committed to increasing infrastructure investment across all regions, including the north-east. Indeed, investment is 30% higher than it was under the Labour Government. It would be better for Opposition Members to recognise the record investment in infrastructure, which is driving productivity and growth.

[Mr Jim Cunningham (Coventry South) (Lab)]

Will the Minister say how much investment is going to the west midlands, as it is very important to the British economy?

[Stephen Barclay]

The investment going to the west midlands as part of the midlands engine and through the devolution deal is part of wider investment—the £23 billion of investment that has been announced through the national productivity investment fund. The hon. Gentleman will be aware of the Secretary of State for Transport’s announcement on rail spending between 2019 and 2024, which includes the £24 billion announced just last week.

[Alex Chalk (Cheltenham) (Con)]

12. What recent progress he has made on reducing the level of corporate tax evasion.

--- Later in debate ---

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

We are having difficulties with mobile banking in my constituency. I know of instances in which two different mobile banks have arrived in the same community while other communities have seen no mobile banks at all. We have problems with people queueing in rough weather and getting wet, and problems with paper banking. Will the Chancellor, or some other Minister, propose ways of reorganising mobile banking and making it more user-friendly, and of getting the banks to co-operate with each other to deliver a service that is vital in the highlands?

[The Economic Secretary to the Treasury (Stephen Barclay)]

Mobile branches are vital to many communities, and I am sure that many banks will have heard the hon. Gentleman express his concerns, but these are commercial decisions. It should be recognised that since 2011 the number of branch visits has fallen by roughly a third, that more than 600,000 people aged over 80 are now registered for internet banking, and that a fifth less cash is used for payments. Those changes in the market reflect the way in which branches, including mobile branches, are being used.

[Robert Neill (Bromley and Chislehurst) (Con)]

T9. Does my hon. Friend accept that the contribution made by UK financial services vastly outweighs any cost of our contribution to the European Union, and that securing a sensible deal from day one is not only an imperative, but much more likely to be achieved through the patient work of my right hon. Friend the Chancellor than through the anti-business rhetoric of Opposition Members?

[Stephen Barclay]

My hon. Friend is right. The UK financial services industry pays more than £71 billion to the Exchequer in tax and employs more than 1 million people directly and 2.2 million through the sector as a whole, two thirds of whom are outside London. Because of his work as chair of the all-party parliamentary group for Gibraltar, my hon. Friend will be aware of the importance not just of financial services in the UK, but of our links with industries in territories including Gibraltar.

[Rachael Maskell (York Central) (Lab/Co-op)]

Teachers have travelled from all over the country today to lobby Parliament about severe real-terms cuts in their pay. The Chief Secretary has said that she has lifted the pay cap owing to the pressure that Labour has placed on her, but will she confirm that her Department will fund the recommendations of the pay review body rather than cash-strapped local authorities?

Mortgages: Eligibility

Steve Barclay Excerpts

Monday 23rd October 2017 Westminster Hall

[The Economic Secretary to the Treasury (Stephen Barclay)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank all those who signed the petition—more than 140,000 people did so—and Members from across the House for this good-natured and constructive debate. The petition shows the importance of debating these issues, which clearly resonate with many people. It is right that the House should consider them.

I thank my hon. Friend the Member for Sutton and Cheam (Paul Scully) for his very helpful suggestion of a market-based solution for fintech, and I am happy to discuss that with him further. I also had a very constructive meeting with Lord Bird, who has done a lot of important work in this area, and came forward with important suggestions. The hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) also demonstrated a degree of cross-party consensus in terms of how we move forward on these issues.

To address directly the issue that the petition refers to—the extent to which paying rent should be evidence of affordability of a mortgage—it is important to note that affordability assessments are not just based on one factor. That is why mortgage affordability assessments include a requirement to assess possible changes to income. It is responsible for lenders to have a long-term perspective when making assessments.

Lenders can currently include payments of rent as a factor, but it is right to highlight that the Financial Conduct Authority independently makes those affordability assessments, or sets the terms relating to affordability for firms. My hon. Friend the Member for South Suffolk (James Cartlidge) drew on his professional experience and expertly explained that a wider suite of issues affects affordability—it is not just one’s past ability to pay rent.

Let me address the issues that hon. Members raised during the debate. My hon. Friend the Member for Sutton and Cheam called for reform of stamp duty. He will be aware that we are very close to a Budget, so I will take that as a Budget submission; I am sure that was the spirit in which he offered it to the House. It is obviously important that we balance people’s right to buy a second home or to buy to let against the impact that that has on other people’s ability to get on to the property ladder. I think that was the point that he was making. He also mentioned supporting the Rental Exchange scheme, which has already lifted 4.2 million social housing tenants into better credit. I encourage housing associations to play a more active role in raising awareness of important schemes such as that.

The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) raised, with great authority, the issue of ground rents. The Department for Communities and Local Government has published a consultation, as I am sure he knows, on that important subject. I assure him that the Treasury will take an active interest in the course of those discussions, but he can probably get a flavour of the Government’s position from the comments of the Secretary of State for Communities and Local Government, who said that too many homebuyers are being exploited. That goes to the heart of the hon. Gentleman’s concerns.

[Jim Fitzpatrick]

As a result of the Government’s Help to Buy scheme, a lot of Government money—taxpayer’s money—has gone into the pockets of developers, who are taking advantage of the good Government policies that encourage first-time buyers. They are taking that as clear profit. I know that the Government are very interested in that, so I look forward to seeing what they do in the Budget.

[Stephen Barclay]

I am happy to alert the Housing Minister to the hon. Gentleman’s concerns, but more than half the homes triggered by the policy are new, so Help to Buy has helped with the supply issue. I will raise that point with the relevant policy Minister.

My right hon. Friend the Member for Clwyd West (Mr Jones) asked why the Government are not solving the problem of including rental payments within credit scores through the standing order system. I encourage any stakeholders with views about how best to encourage rental payments within credit scores to write to me about that. Perhaps my right hon. Friend and I can have a further discussion about that point.

My hon. Friend the Member for South Suffolk said that credit scores are a good predictor of credit risk, and I agree. That is why capturing a history of payment on time in people’s credit scores will help lenders make better decisions. My hon. Friend’s point is very pertinent. He also mentioned the ability of self-employed people to get a mortgage. Mortgage regulation means that the self-certifying mortgages seen before the financial crisis are no longer available, and I think he and I would agree that that is a good thing. However, some lenders will accept relatively short payment histories—12 to 18-month periods—as evidence of income, which suggests constructive engagement on that point.

My hon. Friend also mentioned lending into retirement. There is no reason why older customers could not obtain a mortgage if they could demonstrate their ability to repay. The FCA continues to consider how the financial services sector can better work with older people through its ageing population strategy, which was published in September.

The hon. Member for Aberdeen North (Kirsty Blackman) raised the issue of the cost of living: people paying rent cannot save for a mortgage. The Government have clearly taken some measures in this space, such as the crackdown on payday loans, which was widely welcomed across the House. The FCA is reviewing the high cost of credit and the car finance markets, as well as issues such as persistent debt in the credit card market. There will be further updates in 2018.

The hon. Member for Bath (Wera Hobhouse) made an intervention about not encouraging debt. That emphasises the importance of the affordability assessments for mortgages being based on a holistic view of an individual’s finances, which in a way goes to the heart of the point that drove the petition—one cannot look at rental payments; one needs to take a holistic view in order to address the point that she pertinently intervened on.

The shadow Economic Secretary, the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), raised the issue of housing supply. We very much recognise the imperative of housing supply. That is why the Government launched our housing White Paper in February, which proposed an ambitious package of long-term reform: releasing more land for homes where people want to live; building the homes we need faster; getting more people building, and supporting those who need help to buy. A suite of measures in the White Paper already speaks to many of the issues to which he referred.

Those leasing their home face the challenge of saving for a deposit while paying rent. That was the tenor of much of what was raised by colleagues across the House, and the Government very much recognise that through policies with which Members will be familiar: the Help to Buy scheme, which has helped with in excess of 320,000 housing transactions, more than 270,000 of which were for first-time buyers; and the help to buy ISA and the lifetime ISA, which both top up savings for a deposit to buy a first home.

Helping individuals to save for a deposit, however, will not address the problem on its own. That is why the Government intervened through the Help to Buy mortgage guarantee scheme, to ensure that the mortgage market works for people who rely on high loan-to-value mortgages. The Government also committed an extra £10 billion to the Help to Buy equity loan scheme.

Fundamentally, however, we also recognise the need to build more homes. Since 2010 significant progress has been made, with almost 900,000 homes built, including 300,000 affordable ones. The White Paper sought to address that and to accelerate the pace at which homes, including affordable homes, are built.

Turning to the specifics of the petition, the Government agree that a history of paying rent on time is a factor that lenders can consider when assessing creditworthiness, but it is a factor alongside others—not the sole factor to take on board. It is important to stress that mortgage regulations do not prevent lenders from taking into account rent payment as one of the criteria on which to assess affordability.

I therefore want to outline some of the opportunities that exist for connecting housing associations and others with lenders—my hon. Friend the Member for Sutton and Cheam focused on that in his remarks—and how we encourage them all to work to build the profile of those who are renting and seeking to build their mortgage history. The diverse nature of the mortgage market means that prospective borrowers should shop around to take advantage of the variety of options that are available. It is also important to highlight the reforms that took place to prevent the poor lending practices seen before the crisis. Again pertinently, my hon. Friend the Member for South Suffolk highlighted that in his remarks—it is important for us to take on board the lessons of the financial crash of some time ago.

Today, to address such concerns, the banks are required to conduct a comprehensive examination of an individual’s expenditure and income, and an interest rate stress test of that individual’s ability to make repayments. I hope that is one of the measures that will satisfy the concerns expressed by my hon. Friend. Overall, the changes are designed to ensure that the problems of the past are not repeated, but that means that the bar for getting a mortgage can be higher.

My right hon. Friend the Member for Clwyd West mentioned opportunities for making better use of rental data in creditworthiness assessments. Options are available that allow renters to ensure that their rental history is captured in the information that credit reference agencies provide to lenders. That has the potential to improve the chances of someone getting a mortgage. He correctly cited the example of Experian and the potential for housing associations and credit reference agencies to work together to build more examples than the existing Experian one.

Part of the problem is that awareness of such schemes is low. The Government would like take-up to be increased and more ways to develop such models. I am happy to discuss the issue with my right hon. Friend. It is important to do things in a way that works with and builds on existing systems and processes, to avoid increasing costs for business and making it more expensive or difficult for people to access mortgages.

In the social housing sector, I want landlords to play a more active role in increasing awareness and take-up of the existing options. In the private rented sector, as well as the social housing sector, technology and innovation should be pivotal. The open banking changes, which will come into force in January 2018, will help to open up access to our data in a secure way, leading to all manner of innovations that will make it easier to build the creditworthiness models that have been discussed.

To conclude, although it is encouraging to see the number of mortgages granted to first-time buyers, now at the highest levels since the financial crisis, it is clear that many people still struggle to make the first step on to the housing ladder. Lenders and credit reference agencies being able to access data relating to a prospective borrower’s history of paying rent will benefit both the borrower and the lender. There are already private sector solutions, some of which we have heard about in the debate. I am keen to look for ways to raise awareness of those, and to look at how we use open banking to open up further possibilities in future. We have had a very constructive debate and I look forward to having further discussions with Members in the coming weeks.

Banking Act 2009

Steve Barclay Excerpts

Thursday 19th October 2017 Written Statements

[The Economic Secretary to the Treasury (Stephen Barclay)]

The Treasury has laid before the House of Commons a report required under section 231 of the Banking Act 2009 covering the period from 1 October 2016 to 31 March 2017. Copies of the document are available in the Vote Office.

[HCWS184]