There have been 29 exchanges between Baroness Morgan of Cotes and HM Treasury
|Thu 4th June 2020||Covid-19: Economy (Lords Chamber)||3 interactions (320 words)|
|Tue 2nd July 2019||Oral Answers to Questions||3 interactions (67 words)|
|Thu 6th June 2019||Consumer Access: Financial Services (Westminster Hall)||22 interactions (3,526 words)|
|Tue 5th March 2019||Oral Answers to Questions||3 interactions (60 words)|
|Mon 4th March 2019||Tax Avoidance, Evasion and Compliance||3 interactions (138 words)|
|Mon 25th February 2019||Exiting the EU (Financial Services)||3 interactions (906 words)|
|Tue 19th February 2019||Making Tax Digital||3 interactions (160 words)|
|Mon 11th February 2019||Financial Services (Implementation of Legislation) Bill [Lords]||7 interactions (102 words)|
|Tue 29th January 2019||Oral Answers to Questions||3 interactions (76 words)|
|Tue 8th January 2019||Finance (No. 3) Bill||22 interactions (1,550 words)|
|Tue 18th December 2018||ONS Decisions: Student Loans||3 interactions (97 words)|
|Tue 11th December 2018||Oral Answers to Questions||5 interactions (146 words)|
|Wed 28th November 2018||Leaving the EU: Economic Analysis||3 interactions (273 words)|
|Tue 6th November 2018||Oral Answers to Questions||3 interactions (154 words)|
|Tue 11th September 2018||Oral Answers to Questions||3 interactions (67 words)|
|Mon 16th July 2018||Taxation (Cross-border Trade) Bill||6 interactions (73 words)|
|Tue 3rd July 2018||Oral Answers to Questions||3 interactions (79 words)|
|Tue 22nd May 2018||Oral Answers to Questions||3 interactions (71 words)|
|Thu 26th April 2018||Customs and Borders||13 interactions (1,239 words)|
|Tue 17th April 2018||Oral Answers to Questions||3 interactions (67 words)|
|Tue 27th February 2018||Oral Answers to Questions||3 interactions (116 words)|
|Thu 18th January 2018||RBS Global Restructuring Group and SMEs||11 interactions (1,175 words)|
|Tue 16th January 2018||Oral Answers to Questions||7 interactions (145 words)|
|Mon 8th January 2018||Taxation (Cross-border Trade) Bill||3 interactions (137 words)|
|Tue 28th November 2017||Oral Answers to Questions||7 interactions (189 words)|
|Wed 22nd November 2017||Budget Resolutions||14 interactions (2,027 words)|
|Tue 24th October 2017||Oral Answers to Questions||3 interactions (97 words)|
|Wed 6th September 2017||Ways and Means||9 interactions (1,947 words)|
|Tue 18th July 2017||Oral Answers to Questions||7 interactions (98 words)|
My Lords, I have three questions for the Minister about the measures we need to adopt. They go beyond the consequences of Covid-19 to use the opportunities it offers. First and most importantly, how will Her Majesty’s Government direct their economic advisers to address the climate emergency? How will they get to the position that all economic analysts model and forecast through the prism of mitigation of or adaptation to climate change? How can we bring in externalities from outside?
Secondly, how will economic analysis be framed to prioritise well-being? I follow the authors of The Spirit Level in asking economists to pay more attention to non-monetary elements of inequality, such as health, social problems and access to amenities, in the economy. They demonstrate that equality is conducive to a thriving economy. To those who say that some public goods cannot be priced and are outside the province of economics—literally invaluable—I point out that there have been ways of considering how we should compute values outside the cash economy at least since Mandeville’s The Fable of the Bees in 1723.
Thirdly, how will the Government ensure that citizens are party to economic environmental decisions? In this connection, will the Government now join the 88 nations which have ratified the Aarhus convention, which our former membership of the EU entitles us to do? We have experienced a high degree of public mistrust in political action. We need to repair this democratic deficit.
How should economic approaches adapt to the new world we shall find ourselves in so that we can use the opportunity to make it better?
According to the Institution of Civil Engineers, the construction industry is set to play a key role in restarting the economy and helping the nation recover from the impact of the crisis. If it is to facilitate these efforts, the Government need to help it weather the storm.
Jobs are coming under threat as the UK braces for a global recession due to Covid-19. In a year or so, with workloads significantly down, there will be a need to preserve skills to prevent future skills gaps and shortages in the industry. Socially valuable projects that are labour-intensive—particularly repair, maintenance and improvement work—will provide a stable pipeline of work while keeping people employed and creating a built environment fit for the future.
The noble Lord, Lord Bourne of Aberystwyth, made the point about apprentices. Would the Government consider suspending the apprenticeship levy indefinitely to provide immediate financial relief to construction employers, and implementing an apprenticeship guarantee?
Previously, there has been a tendency for the Government to focus on large-scale engineering projects that garner public attention but do not support large amounts of labour or a stable pipeline of work for the industry. In planning for future construction, would the Government recommend putting forward long-term, socially valuable projects that are labour intensive or keep more people in work? For instance, the energy performance of the UK’s existing housing stock must be improved if we are to achieve our long-term emissions targets.
The enhancement of UK housing stock to improve its energy efficiency would be a socially valuable project that would maintain and sustain employment. This type of work is intensive and equally spread geographically, making it an ideal project for employing the construction sector, supporting regional growth and getting the economy moving. I recognise that this is a complex task, but it would really reduce strain on the labour market and supply.
I have consistently made the case and explained to this House that there is fiscal headroom within the current fiscal rules. If we have a smooth exit from the European Union through a transition that will remove the economic uncertainty that is hanging over our economy, it will then be safe to release that headroom and make it available for additional public spending or, at the choice of the next Government, to reduce taxation. Either way, we have the headroom available once we have removed the Brexit uncertainty.
I announced at the spring statement that it is the Government’s intention to conduct a three-year spending review concluding this autumn, subject to a deal with the EU being completed. Departments are already commissioned to carry out the work necessary for such a spending review, but it will be for the new Government to decide whether the circumstances make it appropriate to conduct a full three-year spending review or a single-year exercise.
I commend the right hon. Lady, who came into this House at the same time as I did; indeed, she made her maiden speech just before I made mine, so we have had that relationship in Parliament for a long time. She is aware of my constituents the Armstrongs. I have written to her, the Minister and the Department about them. They ended up in company insolvency and then personal bankruptcy, despite repeatedly advising their bank and lawyers that Mr Armstrong was very unwell over a sustained period.
The right hon. Lady referred to vulnerability, and paragraph 179 of the Treasury Committee’s report refers to it very clearly, stating:
“We therefore support the FCA’s intention to do so through a more balanced definition of ‘vulnerability,’”.
Will that new recommendation ensure that we have the chance to protect people such as those I mentioned, whom she is aware of through her position as Chair of the Committee? Also, does she agree that not only the UK financial services industry but regulators at the FCA and the Financial Ombudsman Service must be part of any future work—
Break in Debate
This intervention will be brief, unlike the last one—apologies for that. Regulators at the FCA and the FOS need to do more to ensure that the most vulnerable in our society are afforded the appropriate response and interactions. Does the right hon. Lady agree that those regulators must do better?
As a member of the Treasury Committee, I was glad to get into what is a vital issue in Scotland and rural parts of the country, which are being left with no banks because they are closing. One of our recommendations is that post offices should be properly funded and have proper facilities, so that people can use them as banking hubs, but the banks—not the taxpayer or the Post Office—should pay for that, because they are saving a fortune in closing branches and they must take responsibility for customers. Post Office banking hubs cannot be an afterthought at the back of a corner shop; they must be proper facilities that people have confidence in.
I think I am going to call Marion Fellows, the Front-Bench spokesperson for the SNP.
Break in Debate
To be fair, I thought it was more.
It is a real pleasure to serve under your chairmanship, Mr Walker. I commend the right hon. Member for Loughborough (Nicky Morgan) and her Committee for this really valuable report, on which I think most of us are agreed. As always, I want to give the Scottish perspective—I think I have got it down to a fine art now.
According to Which?, Scotland has lost more than a third of its bank and building society branches in just eight years. Some 610 branches closed down between 2010 and 2018. Santander’s recent decision to close 15 branches in Scotland will have a devastating impact on staff, customers and local firms. Branches will be lost right across central Scotland, in Alloa, St Andrews, Troon, Forfar and other places. It is of deep regret that the decision was made without the bank undertaking a full consultation with staff and local communities, which will be devastated by the closure of local services, and it is unacceptable that they will be shut so rapidly; all the branches will close by the end of the year.
The Treasury Committee is right when it says:
“there are still large sections of society who rely on bank branches to carry out their banking needs.”
That includes elderly people—although not all of them; we cannot all be lumped together—and small businesses, especially in rural areas that rely on tourism, where people are using cash. Those businesses need to be able to bank that money locally; otherwise, they will lose even more business when they are not on their premises but 20 or 30 miles away, trying to get to the nearest bank branch.
A bank branch network, or at least a face-to-face banking solution, is still a vital component of the financial services sector. The right hon. Lady referred to how important that was in the case of TSB. A branch network must be preserved. The UK Government must step in and act; they can no longer argue that they cannot intervene. They made a similar argument on RBS closing branches, but we now know the Treasury thought it was all right to force RBS to pull finance from customers through the asset protection scheme. The effect on consumers of the closures must be factored into the Government’s decisions.
We support the Committee view that, if necessary,
“the Government should make changes to competition law to allow banks to share facilities in order to maintain a sustainable branch network”.
As the hon. Member for Gordon (Colin Clark) said, that cost should fall to the banks, not the customers. We also agree that
“intervention by Government or the FCA may be necessary to force banks to provide a physical network for consumers.”
We agree with the Committee that
“the Lending Standards Board—through its oversight of the Access to Banking Standard—should publish the examples of non-compliance by providers within its annual report on the Standard, to increase transparency and the potential for external scrutiny over branch closures.”
The SNP continues to lead the campaign at Westminster to protect our post office network. I have spoken in so many debates on post offices, and I sometimes feel I am in danger of repeating myself, but these things are worth saying over and over. We agree with the Committee that post offices
“should not be seen as a replacement for a branch network, but a complementary proposition where available.”
Following our campaigning, the SNP has welcomed news that from October 2019, Post Office Ltd will raise the rates of payment that sub-postmasters receive for taking personal and business banking deposits. That will represent a near threefold increase on current rates. In my time as an MP, I have been consistently lobbied by sub-postmasters, because they are subsidising banking services to their own detriment. The impact of the closure of a post office following the closure of a bank branch is devastating, and not just in rural areas. In urban areas, too, there are vulnerable people who cannot move distances and who are only happy carrying out financial transactions with people they know and trust. That is extremely important.
The announcement of the increase in payments comes just weeks after my colleague and hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands) secured a House of Commons debate on the sustainability of community and sub-post offices, in which he reiterated SNP calls to give sub-postmasters a fairer settlement. In recent months, as the SNP spokesperson for small business, I have written to the UK Government calling for changes to strengthen the post office network. Sub-postmasters have continually raised concerns about not receiving adequate financial remuneration. The National Federation of SubPostmasters found in a recent survey of its members that one in five post offices risk closing in the next year as the result of poor remuneration from Post Office Ltd; many postmasters are paid less than minimum wage for running their shops. That cannot go on. We need sustainable post offices, not as a substitute for the banks, but as a complement.
The UK Government must go further and commit to a full and independent review of sub-postmaster pay. I know the Minister is from the Treasury, but it would be good if he could have a chat with the Minister for small business on our behalf. In addition, plans to close Crown branches at the centre of our communities must be reversed to ensure the full range of services people have enjoyed are still available.
We agree with the Committee that
“The Post Office should not be subsidising the big six banks’ lack of a branch network...If a renegotiation of the current arrangements is necessary to make the scheme profitable, the Post Office should do so, with the full support of the Government.”
We should not measure the success of Post Office Ltd on profit alone, which seems to be the prevalent measure at the moment.
We agree with the Committee that when Post Offices are left as the only way for customers to carry out basic banking practices,
“the banks should be required to make provision for ‘banking hubs’ within the local Post Office. The ‘hub’ should be properly funded, with an agreed private and business banking provision set by the Department for Business, Energy, and Industrial Strategy (BEIS) and the Treasury. Postmasters must be trained, equipped and compensated to make the hubs viable. BEIS should make an immediate assessment of what the banking provision should be, the indicative cost per hub, and propose how the banks should fund it.”
The UK Government must act before a fifth of Scotland’s free ATMs start charging over the next year. That is another huge problem, especially for vulnerable people and those in isolated communities. They are having to travel further and further to access their own money, and are being charged more and more to do so. It is almost impossible to spend money in London during the week, and I frequently arrive back in my constituency with no cash. We are used to that in this place, but it is not like that everywhere across the UK, or for everyone.
The right hon. Lady is absolutely correct. The fact that somebody’s very constrained budget can be further constrained by their having to pay to extract their own money from their bank is absolutely ridiculous in this day and age. People are living hand to mouth, and the loss of £2.50 or more every time they take their money out of their bank via an ATM is absolutely unforgivable.
A cross-party group of MPs found that more than 3,000 ATMs have closed in the last 18 months. According to the Treasury Committee, unless the UK Government step in to protect free-to-access ATMs, the UK is at risk of
“inadvertently becoming a cashless society. For a large portion of society, including some of the most vulnerable, this would have stark consequences.”
The latest figures from LINK, the UK’s largest cash machine network, revealed that 1,300 ATMs were lost between the end of January and the beginning of July last year.
The consumer organisation Which? predicted that free cash machines would become a thing of the past, after it emerged that 1,700 ATMs in the UK switched to charging in the first three months of this year alone. Cash machines in Scotland have disappeared at a rate of 32 a month in the 11 months to April. According to Which?, Scotland lost 204 free-to-use cash machines, which is 4% of the network. That is unsustainable.
The ATM Industry Association has warned that a fifth of Scotland’s free ATMs will start charging customers in the next year. The association—its members include banks such as HSBC, independent ATM operators and payment systems such as Visa—says the problem revolves around a 10%, or 2p, cut in the fee that banks pay cash machine operators every time money is withdrawn. Banks are saving money by closing branches, then giving money to ATM providers. They warn that the move to charging cash machines will increase if LINK moves to cut the fee even further as part of a review that is due to be completed by the end of 2020.
Given the recent closures of bank branches and the lack of support provided to the post office network, the SNP is concerned that a lack of cash facilities will hurt families and small businesses across Scotland. For people in rural areas, and for the most vulnerable members of our communities who might have less access to transport and online support, often the only option is their local cash machine. It is totally inequitable that they effectively pay a tax on cash withdrawals.
The right hon. Lady talked about insurance companies and the difficulty in insuring when there are pre-existing conditions, something I recently had difficulty with. I totally empathise. Vulnerable people—especially people with mental health conditions, whom the right hon. Lady mentioned—need people on the other side of the table or desk who can help them overcome their fear, allay their suspicions, and help them to become fully working members of our society. Someone can be vulnerable one day and not vulnerable the next, and systems have to take account of that.
The right hon. Lady also talked about the difficulties with powers of attorney and the duty of care, which perhaps should be regulated. The SNP would not go against any of the recommendations on those subjects. It is absolutely inexcusable that Tory Ministers are refusing to lift a finger as communities face mass closures of local ATMs and bank branches; as we have heard, it is often the most vulnerable who use them. The consumer group Which? is calling on the UK Government to appoint a regulator to oversee cash infrastructure in the UK. It is vital that they consider the proposal and introduce practical solutions before the cash crisis loses Scotland a fifth of its ATMs.
The SNP echoes the Committee’s conclusion that the independent Access to Cash review’s recommendations should be accepted. They include recommendations to “guarantee consumer access to cash—ensuring that consumers can get cash wherever they live or work…take steps to keep cash accepted, whether by a local coffee shop or a large utility provider…call for radical change to the wholesale cash infrastructure, moving from a commercial model to more of a ‘utility’ approach, which will keep cash sustainable for longer…government, regulators and the industry should make digital inclusion in payments a priority…a clear government policy on cash, supported by a joined-up regulatory approach which treats cash as a system.”
We cannot go on leaving our most vulnerable communities and people behind. It is all right for people like us to do without cash, but it is not all right for huge swathes of our communities. I hope the Minister can agree to some of the Treasury Committee’s recommendations and help move forward the debate about post offices, bank hubs and so on.
It is a pleasure to take part in this debate with you in the Chair, Mr Walker. I thank the right hon. Member for Loughborough (Nicky Morgan) for securing the debate and for the important work she undertakes as Chair of the Treasury Committee. I am particularly pleased that the Committee emphasised the importance of access to financial services and financial inclusion. As we have shown in this relatively short debate, it is an issue that potentially touches us all, because we can all become vulnerable, and access and inclusion are crucial elements of a functioning economy.
The beginning of the report features a quote from Sian Williams, the director of the Financial Health Exchange at Toynbee Hall, that stood out when I was preparing for the debate:
“We are in an environment where you have to be able to transact to survive.”
The statistics provide a very worrying picture, because many people are struggling. The Financial Conduct Authority estimates that 3% of UK adults cannot transact in that way because they have no current account and no alternative e-money account. That is a significant minority, and it includes some of the most vulnerable people. That indicates that much stronger action is needed.
I will focus my remarks on vulnerability, poverty, the availability of credit—particularly low-cost credit—post office banking, bank branch closures and the policy process in this area, particularly as it applies to basic bank accounts. The report quite rightly considers the relationship between financial exclusion and different types of vulnerability. Obviously, a consultation is going on at the moment on whether current definitions of vulnerability are appropriate. There is a very welcome focus on mental illness in the report.
I was struck by the right hon. Lady’s remarks and the case study she mentioned. Actually, we were promised that we would have so-called jam-jarring available within financial services by now. It is not standard, and nor is it standard in relation to how people are paid their social security. Often people request that kind of approach so that they can manage their money properly. They are doing the right thing in acknowledging that they might have issues, but they are not being aided by the technology. As the hon. Member for Motherwell and Wishaw (Marion Fellows) said, it is often the most technologically literate who have the greatest resources and can make use of technological innovations. That needs to be accelerated, but we also need to acknowledge that although technology can empower, it can discriminate as well.
I have had discussions with people involved with the Money and Mental Health Policy Institute, who have pointed out that although it is possible to use people’s financial transactions to pinpoint and identify vulnerability, such information could be used to ration services and access, as well as to facilitate them. If it is used, for example, to take people to a pop-up chat with an adviser, who can say, “Are you sure this is what you want to be doing? Can I help you?”, that is fine, but if it makes it harder for people with mental illness to access services that we benefit from, that is inappropriate.
The report rightly focuses on access for vulnerable groups, such as elderly and disabled people, and on a number of risks that technology can embed, which result in people being unable to access the most basic financial services. In many cases, that is getting worse because of issues such as the use of touch-screen technology, which was mentioned earlier, and the speed at which high street banks are closing. I will come back to that point later.
The report contains useful recommendations about vulnerable people’s access to financial services. I support the recommendation that the Financial Conduct Authority should consult on how power of attorney works in relation to financial services. If that is done properly with appropriate safeguards, it could improve the situation for many carers and those they care for. The discussion in the report about that is very helpful.
The discussion in the report about the Equality Act 2010 is very useful. The Labour party is committed to strengthening the Act and other anti-discrimination law. There is clear evidence, which is repeated in the report, that it is not being complied with in a number of areas, and that is simply unacceptable. The exchange between the hon. Member for Strangford (Jim Shannon), who is no longer in his place, and the right hon. Member for Loughborough was very instructive in that regard. I am sure that every Member in this Chamber has a whole bag of cases involving people with various vulnerabilities who have not been treated in the way that we would expect. That has to end, because it is discrimination.
The report touches on issues relating to low-income households at various points. The discussion of the loyalty penalty was very interesting. Citizens Advice’s work shows that the average consumer pays up to £1,000 per year more because of the loyalty penalty. That is clearly totally unacceptable. The Competition and Markets Authority noted that people on low incomes are much more at risk of paying the loyalty penalty. For people in the bottom 10% of income, it could account for up to 8% of their spending.
The CMA’s recommendation about transparency is welcome. There should be more accountability. Regulators should publish the size of the loyalty penalty in key markets and for different firms annually, but as the report states, just informing the public about the loyalty penalty for each firm is not enough. It is clear that regulators currently have little ability to protect customer interests in that respect, so we need to focus on that much more strongly. The time is right to reform the regulatory system in that respect and for many other areas of financial services. The Labour party commissioned a review by Prem Sikka, the academic, to look into some ideas for reform, and it has now been published.
The points that the hon. Member for Motherwell and Wishaw made about access to cash were very relevant. Even with the current standards, we all know from our constituencies and elsewhere that there are pockets where access to cash is not available. It tends to be in areas where people have low spending power and are incredibly reliant on cash that there is not the provision that we expect.
The report did not examine the relationship between poverty and financial exclusion, as the 2017 report by the Financial Exclusion Committee in the other place did. I completely understand that the Treasury Committee had a slightly different focus. It would be useful to look at that issue in more detail, because in the Financial Exclusion Committee report, Gingerbread reported that single parents and low-income households often find that they are disproportionately excluded from financial services. Lower-income people often pay much more for financial services, compared with those with greater incomes. The Child Poverty Action Group said that that is the case, despite the fact that most low-income households manage their limited resources well. We are often told that the answer for people with few resources is to manage their money better. Well, many of them are extremely good at doing that already, and I was very pleased that the right hon. Member for Loughborough confirmed that. The Lords report also looked at the so-called poverty premium and how it exacerbates the effects of financial exclusion. It is important that we bear that in mind and continue to look at it.
Problems in accessing lower-cost credit primarily affect low-income households, and it is good that the report looked at that in detail. It praised the Government for their proposed pilot of a no-interest loan scheme in the 2018 Budget, but that arguably does not go far enough in tackling consumer debt. We still do not have a clear timetable for when that measure will be implemented. The Labour party and I believe that it is essential to go further. For example, we should cap the total amount that a person can pay in bank overdraft fees and interest payments on credit card debt. People who get caught by overdraft fees often use other forms of credit to pay it off because it is such an expensive debt and is extremely bad for them.
It is unfortunate that the Government have not really grasped the issues relating to debt enforcement. That is becoming more of an issue in many parts of the country, particularly given changes to the withdrawal of funds for council tax relief. Individuals are now being pursued for small amounts of money in many parts of the country. This report and the Justice Committee’s recent report show that we need much stronger action against poor practice in the debt enforcement industry. We should implement many of the measures recommended in the Treasury Committee report and, for example, introduce tougher regulations on debt enforcement firms, such as changes to terminology in payment letters. We must ensure that the language is understandable to people with varying literacy levels, and that information about how to seek help with debt is given equal prominence to demands for payment.
The report also examines the issue of those who are unable to access affordable credit because they lack a credit history. We believe that the Government’s approach so far has been inadequate. Obviously, there has been the pilot, and they have tried to get the private sector to take this forward. We need to have more of a discussion about how to ensure that people can build up a credit history. I hope the Treasury Committee will continue to do that, but the discussion in the report was useful.
Let me move on to the post bank and bank branch closures. The Labour party is looking at research that we commissioned on how the post bank approach can be revitalised and how we can ensure that it provides good quality services that are good for both the Post Office and local communities. We think it could be possible to do that on the basis of the research that we commissioned. There could be 3,600 additional post bank branches, compared with what we have currently. That would help communities that are currently struggling with access to banking facilities, and in many cases would also help high streets. We think that using and building on the existing infrastructure is probably the most sensible way forward. This is not about tweaking; it must be more fundamental. We cannot just load more activities on to already pressed postmasters. The comments of the hon. Member for Gordon (Colin Clark) were useful in that regard. This is not just about the post office network; we need other reforms elsewhere in the financial ecosystem, and we must also focus on the behaviour of the big banks. I concur with many of the comments of the hon. Member for Motherwell and Wishaw in that regard.
I want to talk a bit about the policy process in this area—in particular, the perils of not having a strong focus on implementation, and the initial legislation. The basic bank account legislation initially arose out of the EU payment accounts directive. Research conducted by Citizens Advice shows that, in practice, basic accounts are often still not very visible to consumers who might want to use them. Banks’ processes for determining what kind of account to give people rely too much on credit checks, and applying for a basic account is still too difficult for many people. The Committee recommended that the FCA should mandate banks to relax the restrictions on basic bank accounts and make them available to all—that is very sensible—and that it should require financial services to report how many basic current account openings they have rejected. That would be very helpful.
One particular problem that I have come across is that many of the most vulnerable and most excluded customers are informed that they cannot have a basic bank account because there has previously been some indication of fraud related to their financial activity, but no evidence of that has to be provided. In many cases, that fraud could be due to manipulation by others—for example, if people have been subject to domestic violence—or it could be because people had been addicted to substances and previously led chaotic lifestyles that are now behind them. Christians Against Poverty is concerned about that; it needs to be looked into and I hope the Government will do so.
We need a much stronger focus on the issue of access to financial services. We have mainly talked about access to basic banking—the Committee has a lot on its plate, so I do not want to suggest that it should deal with even more—but the savings infrastructure is another area in which there have been some worrying developments. Some 57% of UK adults do not have savings beyond £5,000. Help to Save was an interesting idea but it has not yet had the traction that many of us would have hoped. We still urge the Government to try to incorporate the credit union sector more closely with that initiative, and I hope that in future, the Government will view credit unions much more as part of the solution to many of the problems than they have in the past.
I am very grateful to the right hon. Lady for raising that point. That is a staggering statistic, which is due to a whole range of factors: the support that people receive, their ability to participate in the labour market, and the savings infrastructure. She raises an important point: people living with a disability are very often at much greater risk of needing to tap into savings at different points, particularly when, sadly, many sources of support for doing things such as home alterations have dried up. It is really important that we listen to Scope about that.
We must also acknowledge that the ride has been bumpy and we are not moving forward in every area as we would want to. Research from the Friends Provident Foundation and the University of Birmingham suggests that in 2006-07 there were just over 1 million people with no household bank account access, and although that number fell to 660,000 in 2012-13, the trend was reversed in 2013-14 when the number rose again to 730,000. We need to understand what is not right here, and we need much stronger action.
I commend the Treasury Committee for its focus on the issue, particularly on the impact on the lives of vulnerable and low-income people. The Opposition will continue to campaign for reform of the financial services sector to ensure greater access to financial services and, as a result, a stronger economy for everyone.
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Thank you, Mr Walker; it is a pleasure to serve under your chairmanship. I do not intend to use up all the time, unless there are many interventions from colleagues. It is a pleasure to follow the hon. Members for Motherwell and Wishaw (Marion Fellows) and for Oxford East (Anneliese Dodds). A dangerous precedent was set in the Lords by my colleague, the noble Lord Bates, who resigned after arriving 10 seconds late to a debate, so I am always careful to be on time now, although I am sure being 15 seconds late is allowed.
I thank both the Treasury Committee and its chair, my right hon. Friend the Member for Loughborough (Nicky Morgan), for securing the debate and for this important piece of work. As she knows, this debate comes just a few weeks before the Treasury will formally respond to the Committee’s comments and recommendations on behalf of the Government. I hope that she will forgive me for not pre-empting that by providing the full formal response, but I will try to set out our approach, our record in recent years and some further steps that we intend to take, as well as impress on her how seriously the Government take the issue and how carefully we will read and respond to the important recommendations in her Committee’s report.
Financial inclusion is a priority for this Government and has been for some time, particularly, as I hope my right hon. Friend will recognise, over the last two or three years, when in each successive Budget the Government have taken a number of important steps to address some of the issues that the report raises and on which it urges us to go much further. Like my right hon. Friend and others who have spoken, I think that financial inclusion is extremely important to build a unified society and economy. In her introduction, she made the important point that we have to take a wide view of what “vulnerability” means, because each and every one of us can be vulnerable at different stages in our lives, not just those whom one might stereotypically assume to be vulnerable.
That is reflected in the broad definition of “vulnerability” that the FCA is working towards. It has identified four indicators of potential vulnerability: low financial capability, low financial resilience, life events, which of course can happen to all of us, and physical and mental health conditions, which one might most clearly recognise as vulnerability. The Government, like the regulator, view this issue with the broadest possible definition.
I will say a few words on what we have done most recently. In November 2017, following a report from the Lords Financial Exclusion Committee, which the hon. Member for Oxford East mentioned, the Government announced the creation of the financial inclusion policy forum. The forum has now met three times and has successfully brought together for the first time the key leaders from across the industry, charities—including some of those mentioned today—and consumer groups, as well as Ministers from throughout Government and the regulators, to provide the leadership and co-ordination in tackling financial exclusion that the issue demands. The Government published our first financial inclusion report on 25 March this year, which takes stock of progress in the area. We intend to continue doing so annually.
Affordable credit was one of the core areas of the report. The policy forum is widely recognised by the sector as an important initiative and it has already managed to deliver tangible progress, although I hope it will go further in the months and years to come. A sub-group of the forum that was set up last summer to examine the issues of access to affordable credit made a number of recommendations. To build on that work, at last year’s Budget we announced a package of affordable credit measures aimed at supporting the affordable credit sector and offering more choice and a better deal to consumers who struggle to access mainstream credit.
Some of those measures have already been referenced in this debate. They include a £2 million affordable credit challenge fund, harnessing the UK’s undoubtedly great capability in the FinTech sector to address the specific challenges faced by social and community lenders. The Government have appointed Nesta as the delivery partner to run the challenge fund, and we expect to launch it in the summer—so, in the coming weeks.
Other measures include a change in the regulatory boundary of credit broking, to allow registered social landlords to refer their tenants to social and community lenders; a pilot prize-linked savings scheme to encourage the growth of the credit union sector and to encourage consumers to build up their personal savings, which we readily acknowledge are lower than most of us would like to see; and a feasibility study to design a pilot for a UK no-interest loans scheme, which we have already heard about. That scheme will be aimed at helping those at the margins of the financial system, for whom borrowing from social and community lenders can still be unaffordable. The Government have appointed London Economics, which is undertaking the study and will report back this summer. Depending on the results, we will then move quickly into the pilot design phase and then to implementation.
The Government are also directing an initial £55 million of dormant assets funding towards financial inclusion, primarily to address affordable credit. That will be deployed by a new, independent organisation, Fair4All Finance, which was launched in February. We are pleased with the rapid progress that is making, and excited to see it begin work with a range of partners to tackle financial exclusion, but clearly there is more to be done.
We heard some comments about basic bank accounts. We think, as right hon. and hon. Members here do, that they play an important role. I will take away the comments from the hon. Member for Oxford East about access to and knowledge of those bank accounts. A large number of people benefit from them. The last report that we received, published in December 2018, found that almost 7.5 million basic bank accounts were open at that time, deployed through the nine designated institutions. The banks that are required to provide basic bank accounts send reports to the Treasury, so we receive accurate information, but we could perhaps do more to monitor those banks’ activities and ensure that they are more visible to potential customers, particularly the most vulnerable. I will take away the hon. Lady’s comments in that regard.
The report made a number of recommendations on safeguarding access to cash. The Government recognise that the use of digital payment is growing very fast—among the fastest of any major economy: in Europe, only a few Nordic countries are moving to a more cashless society at a faster pace than our own. Although we acknowledge the many benefits for consumers and the economy, there is and will continue to be for many years to come—almost certainly throughout our lifetimes—a need for cash and traditional face-to-face methods of banking to continue alongside the new thriving digital economy. Running both the digital and the cash systems side by side in all parts of the country and for all consumers, including the most vulnerable, will be a considerable challenge to us as Government and policy makers in the years ahead, but one that we must meet.
We have set up the joint authority cash strategy group, which responds directly to one of the report’s recommendations. It brings together the Bank of England, the Payment Systems Regulator and the Financial Conduct Authority to provide comprehensive oversight of the UK’s cash infrastructure, from supply to customer access. That will complement the Bank of England’s work to reform the wholesale cash industry, to encourage innovation and guarantee resilience even in a much lower cash usage environment. The organisation has already started work, and I am happy to update the Committee and other interested Members in the month ahead as we develop this area of work.
Industry has played a central role, and will have one in future, to maintain access to cash, because with industry innovation we can do more at a lower cost. I was pleased to meet Natalie Ceeney recently to discuss the findings of her excellent “Access to Cash Review”, which showed that creative industry initiatives are already being developed, including encouraging greater use of cashback. We think that the industry, perhaps with Government help, can do more to encourage a resurgence in cashback, which was prevalent but is somewhat less so today. It could be part of the answer where ATMs are in decline. There might be opportunities for smaller shops such as convenience stores to return to offering cashback if they have stopped doing so. We would like to take that forward in future.
We have heard about ATMs, where there is undoubtedly a challenge. There remains a large network of free ATMs in this country—among the largest of any developed country in the world. In 2017, the number of free ATMs in the country reached its peak at 54,500, many of which were clustered in the wrong places, particularly in urban areas with the highest footfall. Since then the number has declined. Even though there might be a logical case for reducing the number of ATMs in areas with high footfall, where they are in less demand as more of us use contactless and digital payments, we want to ensure that we protect the people who live in harder-to-serve areas.
The number of ATM transactions is falling by around 6% year-on-year. Demand is reducing but it varies quite significantly in different parts of the country, as the hon. Member for Motherwell and Wishaw suggested. The last figures show that there was a 10% reduction in the use of ATMs in London, but the figure was as low as 2% in areas such as the east midlands, which my right hon. Friend the Member for Loughborough and I represent, and in Northern Ireland. There are large variations by region, age and socio-economic group. We need to pay careful attention to that. The LINK organisation has made an important commitment to maintain a good and appropriate geographical representation of ATMs, and a particular commitment that we intend to hold it to: that if the last ATM in one kilometre closes and no alternative is provided by the local post office in that radius, it will continue to seek an alternative location for an ATM and will use the subsidies that it provides without limit until an alternative is found. That is an important commitment, and we all need to hold LINK to account. I assure the Committee and colleagues here that I will play my role in doing that, as will my colleague, the Economic Secretary to the Treasury.
Post offices play a key role. They provide a good range of banking services—not a complete range, but most of the services that individuals and smaller businesses will require. Although the number of post offices continues to decline, it is more stable than it has been for a long time. There are 11,500 branches across the country, and we will continue to do all we can to support them. My hon. Friend the Member for Gordon (Colin Clark), who is no longer in the debate, raised the important question of fees for services that banks provide to those running post offices. There has been a negotiation that has led to a significant increase in the amount of money that banks pay of between two and three times the amount of money that post offices receive for offering those services. I am very alive to that issue and the need of those running post offices, often on low margins and taking very little money out of their business, to receive fair compensation for their work.
The wider question of digital inclusion, which the hon. Member for Motherwell and Wishaw raised, is very important. Although younger people and perhaps those in this debate enjoy using digital payments, people have to be able to use digital services and live in areas with 5G or broadband to access them. In rural areas, that is not always the case, although there have been great steps forward. We are alive to that issue and we are working on our digital strategy as a country to ensure that more people have access to basic digital training. Through education we are taking steps in that regard. We should recognise that some new products coming out of the FinTech sector will be very useful to those who have the digital skills to access them, whether that is income smoothing, budgeting skills or the ability to share payments and bills among flatmates. They will make life much easier, but that is dependent on having the digital skills to access those services.
Financial guidance is not limited to digital skills. Last year, we established a new single financial guidance body, the Money and Pensions Service—MAPS—by merging three existing bodies, Pension Wise, the Pensions Advisory Service and the Money Advice Service. The new body provides money guidance for members of the public at every stage of their financial journey. The Government’s commitment to improve people’s financial capability and the provision of financial education is reflected in MAPS’s strategic function to develop and co-ordinate a national strategy that will build on and further progress the Money Advice Service’s work on financial capability.
It is particularly important that children and young people receive good quality financial education to help them to shape their financial habits later in life. That is why financial literacy was made statutory in the national curriculum in England in 2014, which my right hon. Friend the Member for Loughborough will know from her work as Secretary of State for Education, as part of the curriculum for citizenship education for 11 to 16-year-olds. As reports from the all-party parliamentary group on financial education for young people have recognised, there is more to do to ensure that that education is delivered well in all parts of the country. We recognise that there is more we can do in that regard.
Public funding for debt advice in England has risen to £55 million in 2019-20. That provides help with debt to more than 560,000 people, an increase of 85,000 compared with 2018-19. In addition, during autumn 2018, the Government held a consultation on a breathing space scheme in response to campaigning by a number of Members. That will give vulnerable consumers 60 days’ respite from creditor action, giving them time to access debt advice and put their finances on a sustainable footing. The Government will publish our response to the consultation very shortly, and we have committed to laying regulations before the end of this year to establish breathing space.
The Committee’s report also made recommendations about how financial services can work better for vulnerable consumers. The Government have given the FCA strong powers to protect consumers, and we expect it to continue its work in this area. The FCA and other regulators no doubt will read with interest the comments and recommendations in the report; in turn, I will certainly pay careful attention to their responses.
We welcome the FCA’s work to improve our understanding of vulnerability in the context of financial services, including its forthcoming publication of guidance to firms on how to identify and treat vulnerable consumers. The breadth of the definition of vulnerability in the Committee’s report no doubt will influence and inform the FCA’s work in that regard. Through the Consumer Forum, the Government and regulators from across sectors are working to better understand vulnerable consumers. That will inform the actions taken by the Government and regulators in this space.
My right hon. Friend the Member for Loughborough asked particular questions about the duty of care. We will give that careful thought and respond in a couple of weeks’ time, as we will to her comments about the Equality Act. Those were very important questions. We will give more thought to them and respond to her, I hope in the next few weeks.
We all agree that access to useful and affordable financial products and services is essential to individuals, regardless of their background or income. Part of this is about ensuring that financial services are inclusive to all customers and protecting those who are financially vulnerable by making the right products and advice available. The banks are taking steps in that regard. I met the staff at my local bank in Newark last Friday and saw the quality of training that that bank, Lloyds, provides to protect vulnerable people, such as those who suffer from dementia and those at risk of scams, including new ones emerging as a result of the new digital economy. However, there is a great deal more that the sector and the Government can do.
The Government’s response to the Treasury Committee’s report will be published in the coming weeks. We will seek to address in detail all the recommendations that my right hon. Friend and her Committee made and outline the steps that we will take to build on the progress made on access to financial services. I thank the hon. Members who took part in the debate, and I thank my right hon. Friend for another interesting and rigorous report with insightful recommendations, on which I hope we can work together.
Let me conclude by saying to the hon. Member for Motherwell and Wishaw (Marion Fellows) that she was actually in the room, if not in her seat, at the start of the debate, and she knows full well that in this place it is being in the room that counts.
Question put and agreed to.
That this House has considered the Twenty-ninth Report of the Treasury Committee, Consumers’ access to financial services, HC 1642.
We are currently working on this with the Department of Health and Social Care.
I can tell my right hon. Friend that I am in conversation with the Financial Conduct Authority about its move to a relative rather than an absolute test. I note that there are a range of views out there about how this problem can be dealt with. The FCA has said that it will come back later this spring with its response, and I am happy to meet my right hon. Friend to discuss her concerns further.
I thank the hon. Gentleman for his reply. He spent some time focusing on the legislation that was due to come before the House this evening. Some amendments have been tabled, particularly the second one to which he referred, that could have significant constitutional ramifications for our Crown dependencies and overseas territories. For that reason, and given that the amendments were tabled only last Thursday, it is only right that we should have time to consider these important matters. They are not directly Treasury matters; they are more a matter for the Foreign and Commonwealth Office and the Ministry of Justice.
The hon. Gentleman refers to wanting to see public registers of beneficial ownership of companies, but he neglected to mention that we have already introduced these in respect of UK companies. That came in in 2016, and that database has been accessed in excess of 2 billion times. He mentioned that we have already made commitments to work with the overseas territories to bring in those measures by 2023. He asked me specifically what the meaning was, in the context of IR35, of focusing particularly on future compliance rather than on the history of the businesses that would be in scope of this measure. This is simply a clear indication that this is not about trawling through previous activities. It is about looking to the future and ensuring that we take a fair, proportionate and reasonable approach to IR35 as it goes into the private sector.
The hon. Gentleman asks me whether there were any implications for the loan charge. I know that people often conflate IR35 and the loan charge in relation to disguised remuneration, but as he will appreciate, they are entirely different things. There is no implication in any element of my statement on any change in respect of the loan charge.
The hon. Gentleman makes an important point, in relation to our national security, about the importance of general transparency in business and tax affairs internationally. I remind him that this Government and this country have been at the forefront of the base erosion and profit-shifting project with the OECD and that it is this country that has helped to drive our common reporting standards, which provide information across hundreds of overseas tax jurisdictions. With that, I will conclude, because I think that I have addressed the points that the hon. Gentleman has raised.
I thank my right hon. Friend for her questions. To reiterate, there is no connection between the loan charge and IR35; they are two distinctly different aspects of Government taxation policy. The purpose of my statement, in making it clear that we will not be actively or aggressively looking at previous activities in this area, was to show that we recognise that we need to get this right and that we need to support employers and contractors as we go through this process. That is the approach that we will take.
It is a pleasure to be here today and to have the opportunity to speak on these important provisions. Of course this is not the first time that I have sat across from the Minister—mainly in Committee Rooms—to discuss delegated legislation relating to no-deal provisions for financial instruments, but I am pleased that at least this debate is taking place in the Chamber.
I am grateful to Chair of the Treasury Committee, the right hon. Member for Loughborough (Nicky Morgan), for writing to the Leader of the House and the Economic Secretary to the Treasury to help secure this debate. It will not come as a surprise to Members that I robustly agree with the points she made in her letter about why this instrument merits a debate on the Floor of the House, given, as she says,
“the wide-reaching scope of powers that are being provided to the regulators.”
The Opposition made the same point in their request for a debate on the Floor of the House on the markets in financial instruments directive—MiFID—SI back in November. MiFID is a cornerstone of the regulatory architecture of UK capital markets, numbering tens of thousands of pages and enshrining important retail market protections. Yet that request was denied, and the Opposition made very clear at the time their objections and their concerns about the democratic implications of that. So although I am pleased that we now have the opportunity to participate in a wider debate about another significant item of regulation, it is not before time, and I wish that the Government had heeded our calls earlier.
We are now three months on from that MiFID SI and, thus, significantly closer to the potential reality that these items of legislation may end up on the statute book. We are now barely one month away from 29 March, yet we are still without a ratified EU exit deal. Therefore it is more important than ever that this legislation is properly scrutinised, as, unfortunately, the likelihood that it might be used increases. Tomorrow, myself and a number of colleagues currently in the Chamber will discuss the Financial Services (Implementation of Legislation) Bill in the Public Bill Committee. That Bill handles the EU regulations currently in train that will be implemented over the next two years. It worries the Opposition deeply that we are entering into a patchwork of regulation on financial services. We have debated dozens of SIs that allocate new powers to different institutions, including the FCA, the PRA, the Bank of England and the Treasury, yet we have no central means of assessing those new powers and what they look like in the round. Instead, they must be pieced together across different items of legislation, which is extremely challenging from a scrutiny perspective and risks clashes and inconsistencies. Should we crash out without a deal, it will be even more difficult, given the overall context, to keep track of which body was empowered to do what and for how long.
That is especially relevant when it comes to the instrument we are discussing today. The Financial Services and Markets Act 2000, like MiFID, is a sprawling piece of financial regulation that touches on many different areas of the market. It therefore impacts significantly on the powers that regulators will need to take on functions from the EU. It also interacts in several different ways with the overall programme of no-deal secondary legislation, most notably with the temporary permissions regime, as the Minister acknowledged. So, first, may I ask him to clarify why this instrument has been scheduled quite so late in the process, when we are just a month away from exit? What financial institutions require at this point more than anything is certainty. Leaving such a linchpin of UK markets until the eleventh hour seems as though it will place unnecessary stress on UK financial services firms, given that policies such as the temporary permissions regime were determined earlier in the process, in recognition of the time they would need to be implemented. The Treasury’s own estimate, in its impact assessment, of the number of firms that will need to familiarise themselves with this instrument, is 59,200. So this is significant pressure to place on a large number of firms so close to exit day, especially as the instrument outlines conditions that must be met by exit day.
For example, the instrument stipulates new rules for firms that are already in the process of making a part 7 insurance transfer between UK and EEA entities, with onshoring legislation introducing a savings provisions in relation to insurance business transfer schemes. But for it to be available in the two years following exit—as the Minister rightly said, to shadow the approach that would have been taken if we had a proper implementation period—an independent expert required for the transfer must have been appointed by exit day and a transaction fee must have been paid to the PRA. Can the Minister confidently say that firms that are impacted are aware of this and will have sufficient time to carry it out, given how close we are to exit day?
The Opposition’s other concern is the sweeping bestowing of yet more powers on to the regulator, without sufficient checks and balances. We have repeated our issues with that on numerous occasions in Committee. Although we have been told by the Government that these instruments do not represent policy judgments, in our view deciding where to allocate powers, along with their extent and duration, is intrinsically a policy judgment. Simply substituting the FCA for the European Securities and Markets Authority, and the Treasury for the European Commission, is not a straight swap. The two European institutions interact in a different way from the FCA and Treasury, with different checks and balances. These issues need proper discussion and scrutiny.
The impact assessment provided by the Treasury for this Bill maps out how regulators will be able to execute these new powers. It states that
“to apply the power, the relevant regulator will need to make a ‘direction’ which should be brought to the attention of the affected firm or group of firms. Before making a direction, the regulator will need to consult other regulators where the other regulator’s functions may be affected by the direction. The regulator will also need to consult HM Treasury. Directions will be published by the regulators unless doing so would adversely affect their statutory objectives.”
So we have here a mapping out of the intra-regulatory consultation, but where is the wider consultation that will take place with the affected firms and other stakeholders before proceeding? We are informed about this being “brought to the attention” of these bodies, not about a consultation. The Minister’s comments on that were slightly vague. He was talking about the whole package of financial services legislation, rather than about this specific aspect. Our concern is that this sounds like a power to make regulations simply via public notice, with limited accountability and recourse.
I am grateful for the time the Minister and his team have taken to brief me throughout this process. Nevertheless, we would be failing in our duty as the Opposition if we did not highlight our serious concerns about the use of the SI process to prepare us in this way. Some colleagues here today will have heard us list those objections in Committee previously, but to reiterate: we believe the magnitude and volume of changes proposed should have been consolidated into one piece of primary legislation that could have been better scrutinised. Indeed, at the session last week in the other place on subordinate legislation transparency and accountability, the Conservative peer Lord Lexden voiced the Committee’s concerns about the number of drafting errors in instruments. That is surely an indication that the scale of this project was too large. I must praise the Minister’s candour in acknowledging that there were drafting mistakes in this SI. As he knows—he has kindly taken on board this fact—I have identified a drafting error in one of the SIs that was presented to us. I do not believe this is the Minister’s fault, nor do I believe it is the fault of his civil servants, who are working enormously hard on this package of legislation. It is, however, an indicator of the fact that those who believe that preparations for no deal can be simple are kidding themselves and do not understand the magnitude of the task. We simply do not understand what issues we may be storing up for the future, especially as the consequences of a no-deal Brexit, in which this legislation would be used, are so hard to predict. I can only hope that we do not find out. The Opposition will do everything in our power to prevent a no-deal outcome, despite the Prime Minister’s reckless running down of the clock by postponing the meaningful vote yet again just yesterday.
I thank the Minister for all his work on these financial services SIs. I have debated some of them and the hon. Member for Oxford East (Anneliese Dodds) has debated some, but he has had to debate almost all of them. That is a terrible burden for one man to have to bear, and it illustrates that this process is hugely time consuming. It is eating up massive amounts of all our time. We might hope that we will not need to use these statutory instruments, but as we head towards Brexit, and with the Prime Minister’s announcements over the past 24 hours, it feels as though things are getting more and more perilous the closer we get.
In many cases it feels very much like we are rearranging the deckchairs on the Titanic, because we are less than five weeks from exit day and the Government are quite clearly running down the clock. We should be under no illusions that while a no deal is an absolute catastrophe, the deal being proposed is not good enough either. There are no merits to a no-deal Brexit plan for financial services, but whatever deal can be cobbled together, it will be nowhere near as good for financial services as what we have at the moment. Removing passporting, which is part of what this legislation is all about, will have a huge impact on financial services and how they operate.
It is no secret that I have very different opinions from many on the UK Government Benches, but this is no longer a question of differing opinions. The reality is that no competent Government would have let things get to this stage. We should not be coming here at the very last minute to discuss such legislation. The Minister was up front in saying that there were errors in the legislation, but that smacks of a process that is not good enough. Some things have been picked up as incorrect, but there may be other things, because this is a substantial SI. We have got it pretty late in the day, and it is incredibly detailed and complex.
I would like the Prime Minister to recognise the urgency of the situation and extend article 50, taking no deal off the table, to give us more time on all this. Ideally, I would like us to stay in the single market and the customs union, because that would make things hugely simpler, certainly for financial services and for everybody else in other sectors of the economy too.
The Scottish Government have been doing their best, preparing as best they can, but they cannot mitigate everything. We do not yet have the Treasury’s full analysis of the Prime Minister’s Brexit deal, despite this House having voted on it twice. Last week the Scottish Government invested in their own analysis, which was published last week in a report by our chief economist. The results were damning. It said that Scotland could see a fall in GDP by 7% in the first two years after Brexit. That would be an enormous blow to our industries and jobs and to the household incomes of the people of Scotland. To put things in context, the 2008 recession saw Scotland’s GDP fall by 5.7%. This shambolic UK Government, in hock to the most extreme elements on their Benches, are doing this on purpose.
The analysis looked at only the first two years after Brexit, but the long-term effects could be sustained and long lasting. The Fraser of Allander Institute in my constituency has conducted one of the most comprehensive studies to date of the effects of migration on the UK economy. Migration is a huge issue for the financial services sector, which has much talent from around the world that needs to be able to move backwards and forwards without any difficulties. The effect of reduced migration after Brexit will lower Scotland’s GDP by 9% over the next 20 years. Reduced migration is very much the intention of the Prime Minister’s deal—it proposes to slash immigration by 80%. That will have a massive impact. [Interruption.] Government Members may sigh, but this will have a huge impact on our financial services—on the skills and talents of people coming to live and work in Scotland. The London bubble may well be fine, but as we get further away from that bubble, the impact will be greater—on Edinburgh, on Aberdeen and on Glasgow. It will mean fewer of the working-age population contributing to the economy and enriching our lives. It is an unforgiveable, ideological obsession, which has no evidence to support it.
The impact of no deal is very serious indeed, and many businesses in my constituency are gravely concerned about their futures. This SI, as the Minister says, is intended to offer consistency for businesses in the event of a no-deal cliff edge. However, relying on transitional provisions such as the temporary permissions regimes offers very little in the way of reassurance for businesses. We are being encouraged to rush through significant pieces of legislation, right, left and centre, without proper scrutiny for those businesses to engage with, and the effects will be felt by nearly 60,000 businesses. It is just not possible for each of those businesses—small and large businesses and businesses of varying different types and of varying different sectors—to have their say on this to explain exactly how it will affect them. The effects will impact them, yet they will not have the opportunity to fully engage in the process.
The hon. Member for Oxford East (Anneliese Dodds) said that the temporary permissions regimes allows companies to provide services in the UK for up to three years after 29 March. I agree very much with what she and the right hon. Member for Loughborough (Nicky Morgan) said about the consistency of this process. We are seeing so many different pieces of legislation and so many different SIs, and that is causing inconsistency, which is a worry. Some firms may find that, for one part of their business there is one date, but for another part there is another date. That will cause additional confusion.
Furthermore, businesses may well infer from these stopgap measures that the Government are expecting chaos after Brexit, and that is a position I would find it difficult to disagree with. It is no wonder that, in this context, we are seeing investment in UK businesses grinding to a halt. Ernst & Young noted that £800 billion of assets have been moved from the UK to Europe since 2016, which is absolutely terrifying.
This SI also deals with mortgages. It talks about covering contracts after Brexit, but only if they are secured on residential property in the UK. There are different measures for properties outside the UK, which means yet more complication for people to deal with. The instrument also deals with investment firms and insurance. The impact assessment says that branches of EEA banks authorised in the UK will be treated in the same way as third country branches are treated now. That is yet more red tape and more paperwork. The SI deals with consumer credit, which is, of course, hugely important to all of our constituents in their daily lives. Those are just some of the highlights of this very complex SI, and they illustrate just how much more difficult things will be than they are at the moment.
The hon. Member for Oxford East mentioned scrutiny. Part 8 of the SI covers the setting of fees by the Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority. In effect, we are saying to those organisations, “Right, you go ahead and set your fees.” We will lose any idea of scrutiny over this. I am sure that those organisations will set reasonable fees, but can we be certain about that? We are giving that power to them. We are taking that power away from ourselves. There are no Brexiteers here saying, “Oh, we talked about taking back control.” Actually, we are not taking back control; we are losing any sense of control over this because we are delegating it all to those organisations. They may well have to report back, but we are still losing direct control.
The issue of familiarisation costs has been mentioned. A total of £1,900 per firm does not sound huge, but, as was mentioned earlier, it is affecting 59,200 firms, which is hugely significant. We should consider the fact that this is costing industry £110 million. This is money that industry should not have to be thinking about. Should we get to this Brexit cliff edge that the Prime Minister appears to be leading us towards, they will be spending this huge amount of money when they could have been investing it in other things, such as staff and research and development. This money is just being sucked up by Brexit, and we will be left all the poorer.
Let me return now to this idea of transitional provisions. As the provisions are transitional, it means that, at some point, we will have to come back to them. All of these SIs and pieces of legislation that we have been working on and divvying up will have to be revisited. That does not fill me with any great joy; I am sure that it does not fill the Minister with any great joy. As other Members have said, we need to see the UK Government’s wider plans. Where is the White Paper on financial services that will cover all of these things comprehensively, that will set out our direction of travel, and that will set out the principles of our financial services? It is hugely important to have these principles in place. In 2008, at the time of the crash, financial services lost their way. As part of the EU, we put these principles in place to get us back on track. We cannot see any dilution of those principles as we go forward, because we will end up in exactly the same disastrous place. I question the process and the legislation, but I remind the House that it is in the Prime Minister’s gift to withdraw the option of a no-deal Brexit. If she did that, it would render everything that we are talking about today completely useless, but we would be in a better place.
On the substantive content of the Bill, I have a point to which I would like to draw the House’s attention. In a letter to the Treasury, the Financial Markets Law Committee highlighted an area of legal uncertainty arising from the textual content of the SI. Section 137R(4) of the Financial Services and Markets Act 2000 grants the FCA the power to make rules applying to authorised persons in relation to communications by or approved by them if it considers that such rules are required to ensure compliance with certain “listed requirements”. The legislation goes on to explain that “listed requirements” means requirements under the law of the UK that appear to the FCA to correspond to the requirements of various EU legislation.
This definition leaves considerable scope for interpretation. I have raised in this House and in Committee my concerns about the nature of the withdrawal Act and the erosion of parliamentary scrutiny that it brings. It does appear that we are handing an awful lot of latitude to a public body in this example cited by the FMLC. It recommends that a more specific list, such as that included in the original drafting, would be more useful, albeit altered to reflect UK legislation. If we are to be in this position facing a no-deal Brexit, despite all evidence showing the damage that that will cause, we need to have more robust and more detailed plans in place.
Fundamentally, everybody in this House knows the position of the Scottish National party. In Scotland, we voted to remain in the EU. We have worked very hard on building up our financial services sector in Scotland. It is an important, high-skill and high-pay sector, which drives many of our towns and cities. To face the prospect of crashing out without a deal is an absolutely appalling situation. Everybody working in this sector deserves better than the plans that the Prime Minister has put forward and they certainly deserve better than a no deal, and she should take that off the table.
I thank the hon. Gentleman for his response to my statement. I am pleased that he, like me, recognises the value of the digital processing of tax returns. Indeed, he made a specific and welcome reference to its productivity advantages. However, he also referred to what I think he suggested were serious failings in our approach, suggesting that it was not the right approach. I could not disagree more. In my statement, I was at pains to emphasise the proportionate and measured way in which we had approached these matters. I said that when I first became Financial Secretary to the Treasury, I decided to delay the roll-out of MTD so that it related only to VAT-registered businesses by 2019, and carved out the very smallest businesses and individuals from these measures. Indeed, I gave reassurances to the House and the business community that nothing will be introduced in terms of income tax and corporation tax any earlier than 2020 and that we would see how the roll-out of the VAT MTD went before we took any further decisions in that respect.
The hon. Gentleman raised several specific questions, which I will address in turn. He asked whether there will be any additional costs as a result of today’s announcements to those businesses in scope of MTD, and the answer to that is most certainly not. He might be familiar with the estimates already produced that suggest that on average a business in the UK that is in the scope of these measures will face additional costs of some 60p per week, and that does not take into account the efficiency gains that can be expected or indeed the fact that in many cases those costs will be able to be written off against taxation.
The hon. Gentleman referred to the continuing estate transformation work and asked whether there was any link between that and MTD. I think there is in the sense that we have a clear drive to make sure that HMRC is a lean and efficient organisation itself in the 21st century and that its estate is not scattered across the country in numerous offices, some employing fewer than 10 staff, but is in state-of-the-art hubs where digital and IT approaches can be maximised.
The hon. Gentleman asked whether we had considered developing in-house software for MTD, and I think he might have been urging us to do so. I know that it is a passion of the Labour party to centralise and have monolithic organisations that do all the organising at the centre, but that is not the way of us on this side of the House; we believe that the market generally knows best, which is why I was delighted to have been able to announce that we have no fewer than 160 different competing products, and that number is growing by the month.
The hon. Gentleman asked whether the Government were confident that we would be signing up the right number of companies in time, and I would make a few important points on that. First, there is no cliff edge on 1 April; that is the date at which companies and individuals will be required to keep digital records, but for most companies the first time they will have to submit a VAT return under MTD will be for the first tranche around 6 August and for subsequent tranches in the months following that date. There is plenty of time for companies to sign up and get involved. Secondly, as I have already elaborated, we will take a proportionate, light-touch approach to penalties, working with companies and businesses to make sure that MTD roll-out is a success.
I thank my right hon. Friend for her questions and also for her work: she and her Committee have focused on this important matter. I can reassure her that we have no intention of being heavy-handed in any way in terms of businesses that might not quite be ready perhaps through no fault of their own or because they are not used to the new requirements. But there is an important point to make here: some 98% of businesses, including the small and medium-sized enterprises to which my right hon. Friend referred, are already filing their VAT digitally. I can reassure her that I will make sure, as the Minister responsible, that we take a proportionate and light-touch approach to the penalty regime in this matter.
(1 year, 6 months ago)Commons Chamber
Will my right hon. Friend give way?
I will give way first to my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), but wait with great anticipation for the intervention of my right hon. Friend the Member for Loughborough (Nicky Morgan).
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I thank my hon. Friend for his question. He is quite right, although the reference to the Securities Financing Transactions Regulation is, I think from memory, in clause 1(12), line 35 or thereabouts—the fourth file although the fifth measure in the list, the earlier two being combined. As to the main point on which he seeks clarification, the Bill will bring into effect those measures, as amended or otherwise, by affirmative statutory instrument at the time they are brought in. It will then be a case of the way in which those measures are dealt with in terms of the delegated powers to which he refers.
I would make two points. First, where we will end up with the various files that are the subject of the Bill will, to some degree, be determined by where we end up shortly after or after any no-deal exit. I would imagine that at that point the EU would also wish to be negotiating with us on those measures. Secondly, the files themselves, under the schedule as opposed to clause 1, are being negotiated at the moment. We therefore do not have clarity on the exact form they will take.
The second category of files, as I explained, are those that are still in negotiation. These are files that the UK has, in many cases, played a leading role in shaping, and that could bring significant benefits to UK consumers and businesses. The Bill also allows the Government to domesticate these files, in whole or in part, via affirmative statutory instrument. Given that the UK will not be at the negotiating table when the files are finalised, we will be unable to advocate for the interests of the UK’s financial services sector during those negotiations. The Bill therefore provides the Government with the ability to make adjustments to the files that go beyond the deficiency fixing powers for the agreed files. These powers are clearly defined and proportionate.
Order. The hon. Gentleman is a cerebral denizen of the House. I know he is arguing the toss about what he thinks is the inapplicability of the personal views or the professional opinion of the Chancellor, but he should not offer a lecture from a sedentary position. We are accustomed to hearing this eloquence when he is on his feet. We do not need to hear him when he is in his seat.
Yes I can. My understanding is that the OBR is basing its forecasting work on the same assumptions it used at Budget 2018 but, as my right hon. Friend has asked me, I can inform the House that the spring statement will be made on Wednesday 13 March. I remind the House that it is not a fiscal event but that, as I have said before, if the economic or fiscal outlook changes materially, it is always open to us to turn it into one.
I am extremely glad that that issue has come up, because the opportunities created by growth outside the EU have no relationship to our membership of the EU, and could possibly be undermined by our leaving the EU. If we want to compete in competitive emerging markets around the world, what better way is there to do so than from within the single market? I would wager with the hon. Gentleman that a country like Germany will do far better from that growth around the world through its continued membership of the European Union than we will. I am afraid that it is because of such statistics, which have no bearing on serious Government policy or reality, that this debate has got to where it is, but I will move away from a wider debate on Brexit and return to the Finance Bill before you tell me to do so, Mr Deputy Speaker.
I will now come to clause 89 and the relationship between Great Britain and Northern Ireland. Under the draft withdrawal agreement it is widely accepted that, under the backstop arrangements, Northern Ireland will remain in regulatory alignment with the European Union, which would be particularly the case for EU customs law but it would also apply to compliance with elements of EU single market regulation in the technical regulation of goods, state aid and other areas of north-south co-operation between Northern Ireland and the Republic. Of course, Northern Ireland would be included in parts of the EU VAT and excise regimes and in the single electricity market.
With that in mind, it is clear that the powers handed to the Treasury by this Bill may not be applicable in Northern Ireland in the legal and regulatory areas under which EU authority would remain. We are therefore seeking a review that clearly sets out any difference in application of these powers in respect of Great Britain and Northern Ireland, and I urge Members on both sides of the House to support new clause 3.
New clause 7 relates to clause 90 on establishing an emissions reduction trading regime. It would require the Government to review the expected effect of the carbon emissions tax on the UK’s capacity to meet internationally agreed climate targets. There has never been a more critical time to take urgent action on climate change to avoid environmental catastrophe. The report from the UN Intergovernmental Panel on Climate Change, published in October 2018, shows that we have just 12 years left to make unprecedented changes to prevent global warming increases above 1.5° C. Our exit from the European Union must not be used as an excuse to step back from action on climate change. Worryingly, clause 90 contains one of the Bill’s very few passing references to environmental issues, and our review, proposed in new clause 7, would ensure that the Government are held accountable for making progress on reducing emissions without using Brexit as an excuse for stalling.
This is evidently a Government in chaos, seemingly without any plan or strategy at all. The new clauses and amendments in this group would improve both the Finance Bill and the process by which we leave the European Union. They are sensible, proportionate and timely, and I commend them to the House.
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My right hon. Friend is very gracious in giving way. Does she accept that the UK trades profitably with the majority of the world’s GDP on World Trade Organisation terms? Therefore, this is not the cliff edge or crashing out that many people paint.
My right hon. Friend is being very gracious and I very much appreciate that.
Many of us in this place—I would like to think the majority of us—would prefer a good trade deal to WTO. That is not inconsistent, but I think what my right hon. Friend misses is that on a bad deal versus WTO we have got to get the balance right, because the EU has had such a bad track record on negotiating trade deals. We trade with the rest of the world on WTO terms very profitably and very successfully, even though many of us would prefer a good trade deal.
My right hon. Friend is making an extremely powerful argument. Does she recall that the trade deal between America and Canada, which was a “willing buyer, willing seller” trade deal, took many, many years? The idea that this is some wonderfully easy, smooth, simple process is, frankly, rubbish.
It is a pleasure to follow the right hon. Member for Loughborough (Nicky Morgan), because although we represent different parties and disagree on many issues, and although we will take different positions on the Prime Minister’s deal when it comes to a vote, on this issue we agree. I rise to speak to amendment 7 and to support amendment 8.
We agree on the dangers of no deal to the country. I tabled amendment 7 because I am really worried that delays, drift or brinkmanship mean that there is now a serious risk that we will end up crashing out of the EU with no deal in just 80 days’ time. I am worried that we could come to the crunch and Parliament would not have the powers to stop it happening. We have a responsibility not just to stand by. I believe that the Government should rule out no deal but, if they will not, Parliament must make sure that it has the powers to do so if it comes to the crunch.
Amendment 7 has support from across the House. It has been signed by Chairs of cross-party Committees—it has the support of the Chairs of the Treasury Committee, the Exiting the European Union Committee, the Liaison Committee and the Business, Energy and Industrial Strategy Committee and others, too—and it is supported by those with a wide range of views on the best way forward. It is supported by those who support the Prime Minister’s deal and those, like me, who do not, and it shows that those who take a wide range of views on the best way forward have come together to say that we should rule out the worst way forward.
Break in Debate
I do not believe I can, as I have been told that I have to proceed quickly.
For many years, the Government failed to take action, before clamping down purely on taxpayers and doing little to nothing to the enablers of this form of tax avoidance. I hope the Minister will be clear about this. He has talked about the promotion of defective schemes. When taxpayers are described as having done something illegal, which is what HMRC has said about the behaviour of those subject to the loan charge, why will the Government not say that those who promoted those schemes also promoted something illegal? They use this language about defective systems. I am sorry, but that is pusillanimous. Those who were unwittingly led into schemes that are now described as illegal must themselves be able to take action against those who wrongly advised them.
I hope that the Minister will look at that very carefully and accept the new clause. If he does not, I hope that he will accept my backstop, to coin a phrase, and have a meeting with me. I am glad he has intimated that he may be willing to do so to talk about how we can better help people who have ended up in a very difficult situation—some of them with their eyes wide open, but many of them not realising the impact of these schemes.
I support the way in which my right hon. Friend is addressing new clause 26, on which I find myself in a similar position to her. Although we want people to pay the correct taxes, I have constituents who may face losing their homes over this, after entering into what they thought were perfectly legal and allowable arrangements. Does she agree that the Treasury must address that?
Is my right hon. Friend aware that not only did quite a few people take advice, but they notified the Revenue of what they were doing and no objections were made at the time?
I am aware that we are fairly short of time, so I will not rerun many of the things I said in Committee—I am sure the Minister and those on the Opposition Front Bench will be delighted to hear that.
I want to highlight a few of the SNP amendments and new clauses in this group. We have a couple of new clauses asking once again whether the Government’s provisions will do what they intend. For example, we want them to review the changes to entrepreneurs’ relief. We also want them to look at the changes in relation to emergency vehicles, because we are particularly concerned about the potential rural impact. Those who have emergency vehicles in rural areas may have more cause to use them outside work time than people who use them in cities. We felt that that issue was not drawn out enough in Committee or in the information the Government provided previously.
New clause 17 is about Brexit analysis. It is important to note that, since the Brexit vote in June 2016, over $1 trillion has been pulled from UK equity funds, which is obviously a really large number. In any changes or preparations the Government carry out in relation to Brexit, therefore, they should note the impact on the economy, which, according to the Bank of England, has cost individual families £900 each so far, and there is also the impact on financial services, for example, which have historically been very strong in the UK.
New clauses 15, 11 and 14 again ask the Government to provide information through consultation reports. It is important that the Government tell us the consultation they did on the draft clauses they brought forward. On the ones they did not bring forward, why did they not do so?
On that point, I should mention that the Government have included a new schedule in this group. That is a relatively unusual thing for the Government to do at this stage, given that they could have included the schedule in the original Bill or brought it forward in Committee. Because the new schedule was not brought forward in the initial stages, the explanatory memorandum provided by the Government does not include details about it. It would have been helpful if it had been considered at an earlier stage or if the Members who sat through the Bill Committee had been notified that it was likely to come forward. Presumably, the Government knew about it before the Christmas recess, and it did not just appear out of the ether. That process could be improved.
The main thrust of my contribution in the short time I have remaining is about the removal of the link between the personal allowance and the minimum wage. I understand that the Government have removed it on the basis that the personal allowance has now reached £12,500 and that they therefore believe they do not need to keep the link. I understand why they are making that case, but if that link had been kept, with the Government required to do a review if the personal allowance threshold was set at less than £12,500, future Governments would have continued to be bound by it. That would have meant that the protection the Government felt was necessary for people on the lowest incomes would still be there in the future. I understand that the Government do not intend to reduce the personal allowance, but that protection could have been left in place without the law causing any problems. That is something I am concerned about.
It is particularly concerning when the living wage the Government have put in place is not a real living wage, but a pretend living wage. It also does not apply to anyone under 25, which is an issue the SNP has raised over and over again. Just because someone is 24 does not mean that their living costs are less than they would be if they were 26—they could have the same number of children and live in exactly the same accommodation. However, the Government believe that it is okay to pay them less just because they are under that age threshold. That is exacerbated by the fact that the minimum wage increases the Government have introduced this year increase by a higher percentage—not just a higher monetary value—the minimum wage received by those who are over 25. The gap is widening: those who are over 25 are getting a bigger increase in the minimum wage, while there is a smaller increase for the younger age groups. The Government need to take seriously the fact that they are saying apprentices are worth pennies, frankly, and that 16 and 17-year-olds are worth far less than people under the age of 25. We raised our concerns in Committee in relation to the removal of the number. I do not think it would have cost the Government anything to leave in the link to protect future generations.
I have been very clear in my response that this is fundamentally an accounting decision. It does not affect our decisions on higher education policies. The bodies that we are talking about—the ONS and the OBR—are independent bodies. It is right that the Government do not make decisions on how to treat these figures in our national statistics—they are made by independent bodies, and we fully respect that. The ONS is going to be working out more details. It would therefore be completely wrong for me, outside a fiscal event, to comment on the precise implications for the public finances.
I can reassure Members across the House that we will do the right thing by students, and we have done the right thing by students. We have a record number of students in our universities. We rightly have a system where students contribute to their degrees, which deliver them higher future earnings and greater prospects in later life.
It is a bit of a cheek hearing all this from Labour Members, whose party promised in the 2017 general election that it would write off all the student loan book and then—surprise, surprise—said after the election that it would not any more. I think it is a bit of a joke that Labour Members are coming to this House and trying to give us lectures about student finance.
My right hon. Friend, the Chair of the Treasury Committee, is correct. Ultimately, this is about making sure that our independent bodies are giving us advice about how our public finances should be presented in order to give the best possible picture. That is completely independent from our decisions about what is best for students. The fact is that this decision does not affect cash flows; it affects the presentation of accounts. We should not conflate that with the very right and proper debates we are having about making sure that our students have a finance system that supports them.
I am not sure whether the hon. Gentleman was in his place for the Budget, but I did in fact announce a digital services tax based on turnover. I also announced a reduction of one third in the business rates for independent retailers. I am very happy to have a meeting with him and explain the changes in detail.
If my right hon. Friend is asking whether there is anything that local authorities can do to help with the cash-flow challenges of seasonally based businesses, I am very happy to take that away and look at it and see whether there is anything that we can do to help in that way. The challenge, of course, is that business rates raise £25 billion a year and are a vital part of our overall tax system. If we are to change them, we must find a sustainable way of replacing them.
No. The right hon. Gentleman raised specifically the issue of a Brexit dividend, and the Chancellor has rightly always been very clear on that. There is uncertainty in the economy at the moment and this is one of the key reasons why, if we can agree a deal, get that deal to stick and get rid of that uncertainty, a huge level of investment will come to our shores and this will be a huge shot in the arm to the British economy.
Order. Before the Financial Secretary responds, and I note what the right hon. Lady said, I just say to the House that by contrast with the experience of earlier periods, during and indeed throughout my tenure, it has been my overwhelming and almost invariable practice—[Interruption.]—as the sedentary nod of the hon. Member for Wellingborough (Mr Bone) testifies, to call everybody in urgent questions and statements. That did not use to happen. It almost always happens with me, so if people would just be a little bit patient, rather than everybody thinking, “I am more important than the other person,” everybody will get in. I called the Father of the House and two Secretaries of State of some standing. [Interruption.] And the right hon. Member for Loughborough (Nicky Morgan) was a Secretary of State, but the Chair decides who to call and when, and I will always ensure that everybody gets a fair opportunity. It has to be that way. I have always treated the right hon. Lady with the very greatest of respect and I will always do so. I will also try to equalise the gender balance, but I hope that people will understand when I say that there are limits to what the Chair can do. The Chair also depends on who is present and who is standing. I am doing my best and I always will.
The Government are fully committed to achieving a good deal with the EU. We will make lots of assessments during that process, but our mind is focused on achieving that deal and the Government will achieve it.
That is certainly not the way forward. I can assure my right hon. Friend that we are doing everything we can to plan for all eventualities. That is why I am taking through a large number of statutory instruments to take account of all possibilities next year, but we are working on, and focused on, achieving a good deal.
The hon. Gentleman needs to look a little deeper. The real answer to low wages is improving productivity. The challenge for this Government—for any Government in this country—is to work with industry, trade unions and training institutions to ensure that we address our productivity challenge. That means investment in infrastructure and skills, support for businesses to improve management and access to capital for growing businesses. Only when business is growing, successful and productive can it pay the higher wages that we all want to see.
Not least because he will have important views about wage growth and inflation.
In a moment.
The reality, which is faced in the White Paper, is that if we do not deliver frictionless trade in the way in which companies such as Toyota need and demand, they will simply not be able to operate. Some 81% of Toyota cars produced at Burnaston are exported into the European Union. And before anybody says, “Well, there will be new markets”—those unicorns that our Government will be chasing in new deals—please understand how the modern manufacturing industry works. Companies such as Toyota already make cars in other parts of the world to satisfy and supply the local market.
Will my right hon. Friend give way?
I will give way to my right hon. Friend the Member for Loughborough and then I will come down the row.
Here is a surprise: I completely agree with my right hon. Friend.
The issue that the hon. Gentleman identifies is an important element of the tax avoidance that has been happening in our country. The vast majority of people pay the correct level of tax, but there have been schemes, such as the disguised remuneration schemes to which he refers, through which essentially very little tax indeed has been paid. The Government believe that that is wrong and that we should act to clean up the arrangements. We have given individuals until April 2019 to do exactly that. On the support that he mentions, HMRC’s door is of course always open for individuals in that situation to have discussions. I would urge all those individuals to make contact with HMRC to find a sensible way forward.
My right hon. Friend asks about Parliament’s role in dealing with the onshoring of a very large number of financial services regulations. Some of them will be dealt with through a parliamentary process, but other areas of financial services regulation are dealt with by the independent regulators—the Financial Conduct Authority and the Bank of England. I will write to her and give her as much detail as I can about how that will break down between the different categories.
I am of course happy to look at that case. Following my appearance at the Treasury Select Committee, I asked my officials to look at the guidance on the website, as I am anxious not to put misleading advice on there. The LISA is available for long-term savings. That was the scheme’s objective when it was set up.
Order. A five-minute limit on each Back-Bench speech will now apply.
I utterly agree with everything that my right hon. Friend has just said. I joined a free-trading Conservative party that was pro-business. Does she agree that inevitable delays and complexities, the additional form filling that is required and dead-weight costs on businesses can do nothing but reduce the competitiveness of British business, unless we have the kind of effective customs union that she is talking about?
Just on a small technical point, my right hon. Friend is absolutely right that a trade deal takes a long time to complete and negotiate, but the plan is to transfer across the existing trade deals that we enjoy within the European Union at the early stage and then renegotiate at our leisure where we can improve them, so we will ensure continued business afterwards without deviation.
I am glad to be able to speak in this debate, which was secured by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the right hon. Member for Loughborough (Nicky Morgan) and other Chairs of Select Committees.
A number of issues have been raised. In the interests of time, I do not propose to go over them, but they include the issue of no new barriers, the wider issues of regulatory convergence, the need to continue the ease of our trade and the dream of independent free trade agreements closing the gap created by what we will lose as a result of leaving the European Union, the single market and the customs union.
I want to raise a few of the wider economic issues that have not so far been addressed in this debate. The predecessor to the EU customs union first came into being about 65 years ago with a treaty establishing the European Steel and Coal Community. Some people seem to think that that makes it an anachronism. There is also an argument that the UK is now mainly a services economy, so an agreement that eases trade in goods is no longer as relevant as one that eases trade in services.
Putting aside the fact that goods remain around half of UK exports and so are still important and essential in their own right, the argument fails to grapple with the complexity of the modern economy that any stark dividing line between goods and services is false. Being in the customs union has relevance for services as well as for goods.
The UK economy is bound up in a complex network of EU supply chains for producing intricate products such as cars and pharmaceuticals. A substantial share of the value of these goods, ranging from 20% to 40% across most regions, according to estimates from the UK Trade Policy Observatory, is the services that go into them. Therefore, when a car rolls off the production line in Sunderland, Ellesmere Port or Luton, the value of that car includes the cost of accountants, administrators and auditors who the car company employs in making it. These services are then exported indirectly when we sell these cars abroad. Therefore, it is not only the goods but indirect services exports that rely on a near seamless passage that the customs union provides.
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On Monday, Michel Barnier laid bare for all to see what staying in the customs union would mean for the UK: effectively staying in the EU. In his speech he mentioned the need for state aid rules, and that would probably mean no bailing out of the steel industry or any other industry that needs it in future. I remind hon. Members of the situation of a Shetland leasing and processing company that was run by Shetland Islands Council. More than a decade ago it fell foul of the European Commission when a Labour MEP reported it for operating outside state aid rules.
Mr Barnier also mentioned the need for tax rules. All those who hoped for the end of taxation on women’s sanitary products, and thought that Brexit could finally make that happen, might be very disappointed. He also talked about the need for shared social and environmental standards, which would mean that although people had thought that live animal exports could be banned, that would not be likely to happen. He spoke of the need to clarify the role of the European Court of Justice, and, yes, that probably means that he wants the EU Court of Justice to continue to rule over our laws. If hon. Members want an example of that, I refer them to the Factortame case.
When I knocked on the doors of my constituents, I found that people were absolutely sick of an EU over which they have virtually no say making the laws that govern them. Last month, the Prime Minister clearly said that
“the jurisdiction of the ECJ in the UK must end.”
I wholeheartedly agree; let us make it so.
I will not give way because other Members wish to speak. I am really sorry.
The worst of all possible scenarios would be one in which we had to abide by and be ruled by the European Union, but without any say. I wonder how long it will be before we start hearing suggestions about EU access to our fishing grounds—my fishermen—to pay for trade. How long will it be before we hear what the cost of staying in such a customs union will be? No doubt we will still have to pay a divorce bill, but on top of that, if people voted for a customs union, we might face an annual bill for effectively staying in.
The Prime Minister has always maintained that no deal is better than a bad deal. I can think of no worse deal than effectively staying in the EU with all the costs, but no say over it. That would also be a massive betrayal of the British people, who voted to leave. South East Cornwall voted to leave for the reasons I have outlined, and Cornwall voted to leave. Most importantly, the whole country voted to leave, and to do anything else would be a massive betrayal of the people we are supposed to represent. Brexit means Brexit; leave means leave. We just need to get on with it.
As the hon. Gentleman knows, the tidal lagoon project is under careful consideration by the Government, and a decision will be made and announced in due course.
I am happy to tell my right hon. Friend that we have had a very productive first meeting with the CBI and the Trades Union Congress to flesh out the shape of the national retraining partnership, which is clearly going to be a crucial part of our investment in skills in future. I do take her point on childcare. We have of course seen the Select Committee’s report and will respond to it in due course.
The Government recognise that it is very important that we focus on the poorest people in our society. That is why we have increased the national living wage by 4.7%, which will mean a pay rise of £600 for those working full time. We have also increased the personal allowance, frozen fuel duty and increased childcare support to attend to the concerns that the hon. Gentleman has raised.
I acknowledge the vital work that my right hon. Friend and her Committee are undertaking in this important area. We will be implementing a breathing space as part of the work of the single financial guidance body. The Bill establishing that body is in Committee, as my right hon. Friend will know. I am absolutely determined that we will get this right and listen to best practice across the country. We committed in our manifesto to a six-week breathing space, and we will look carefully at the representations received from across the country.
Order. There will now be a time limit of five minutes.
Does my right hon. Friend agree that apologies simply are not good enough? For the many of our constituents who have suffered in their business interests and personal lives, we need this inquiry and tribunal so that we achieve justice for our constituents.
I have read the exchange about this matter between the right hon. Lady and the FCA. Does she agree that it is a real concern that that correspondence conveys the impression that the FCA is rather intimidated by the potential actions of RBS? Should it not be the other way around?
I congratulate my hon. Friend the Member for Norwich South (Clive Lewis) on securing the debate. It is also a real pleasure to follow the right hon. Member for Loughborough (Nicky Morgan).
For me, the most alarming aspect of the whole issue of the banking sector’s treatment of SMEs is the conspiracy of denial that has existed between banks and their professional advisers. That has been reinforced by the very institutions that are supposed to regulate the financial sector. My constituent Mr Kash Shabir is a victim of what is at the very least grossly unethical practice—it is much more likely to be criminal fraud—at the hands of Lloyds bank, the same bank that was behind the HBOS Reading fraud. His case is a lead case, having formed the backbone of an inquiry by the then Business, Innovation and Skills Committee in March 2015, under the chairmanship of my hon. Friend the Member for West Bromwich West (Mr Bailey), and of two Westminster Hall debates that I led, on 16 September 2015 and 18 April last year.
When lending to Mr Shabir was no longer attractive to Lloyds after the financial crash, it reneged on its lending commitment, relying on an alleged breach of the loan to value covenant. That breach was then justified by a down-valuation of his property portfolio, which was worth in excess of £10 million. The valuation was provided by Alder King LLP, a firm of chartered surveyors whose employees were embedded in Lloyds bank and then rewarded with lucrative LPA—Law of Property Act 1925—work. The substantial evidence that I have considered over the past three years leads me to conclude that criminal acts have taken place, followed by a cover-up by the parties concerned.
The senior management of Lloyds, Alder King and the Royal Institution of Chartered Surveyors have all refused to meet me and Mr Shabir to discuss his case. None of them has the guts to sit in a room with me and my constituent to listen to his legitimate complaint. The approach taken—primarily by Lloyds, but also by Alder King—has been to use the gross power imbalance that exists between SMEs and the big banks to bully and belittle SME victims to the point at which at least one victim has taken his own life. The big banks hold all the power. They have an army of expensive lawyers. They obfuscate and delay, knowing that if they keep batting away their victims’ complaints and concerns, those individuals will eventually capitulate because they have no other choice.
Break in Debate
I listened very carefully to the right hon. Gentleman’s remarks and he is absolutely right. We need a change to the culture to enable wrongdoing to be exposed and dealt with, and I will look very carefully at this matter and the principles in his suggestions.
I am very aware of the allegations and the powerful testimony made against RB. I have taken on board the discussions we have had today, and later I will refer to some of the other substantive points raised across the House, but I want to be clear with Members: I saw the front page of City A.M. today, whose headline is “Go Hang”, and I do not condone the language in the GRG letter that RBS itself chose to release yesterday. I assure the House that the Government take these issues and any allegations of malpractice very seriously.