Points of Order

Andrew Griffith Excerpts

Tuesday 11th July 2023 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

I thank the hon. Gentleman for his point of order. From what he has said, I can understand his concern. Miraculously, he has managed to raise his point of order when he has a Treasury Minister right in front of him, and I have a feeling that Ministers may well take back his comments.

[The Economic Secretary to the Treasury (Andrew Griffith)]

indicated assent.

[Madam Deputy Speaker]

The Minister is nodding in agreement, so I think the hon. Gentleman has succeeded in raising his case effectively. We will leave it at that.

Financial Services Reforms

Andrew Griffith Excerpts

Tuesday 11th July 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

With permission, Mr Speaker, I will update the House on the Government’s latest efforts to make the UK the most open, innovative and competitive financial centre in the world.

We know how important financial and related professional services are to this country. They employ more than 2.5 million people and generate more than £100 billion in tax revenue. Two thirds of those jobs lie outside the south-east and London. As we lay the foundations for long-term growth, it is vital that these sectors continue to succeed.

Last night, at Mansion House, the Chancellor made clear some of the policies that this Government will pursue, building on last year’s Edinburgh reforms. The full package of policies was published this morning, and I am pleased to share some of them with the House at this first opportunity. They fall under three themes: first, through a series of measures, improving outcomes for long-term savers and increasing investment in high-growth companies by reforming the UK’s pension market; secondly, incentivising companies to start and stay in the UK by strengthening our position as a listings destination; and thirdly, reforming and simplifying our financial services rulebook to ensure that we have the most growth-friendly markets possible, without compromising our commitment to high-quality regulation.

I begin with our pensions market, which is the largest in Europe and worth more than £2.5 trillion. The market is meant to provide safe retirement income for later life. In many cases, it does a very good job of that, but it can do so much more. I pay huge tribute to the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Sevenoaks (Laura Trott), for her crucial work on this.

In laying out our plan, the Chancellor has set three golden rules: first, that in everything we do, we will seek to secure the best possible outcomes for pension savers, with their needs first and foremost; secondly, that we will always prioritise a strong and diversified gilt market as we seek to deliver evolutionary change in our pensions market; and thirdly, that the decisions we take must always strengthen the UK’s competitive position as a leading financial centre.

Today, however, UK institutional investors invest less in UK high-growth companies than their international counterparts. While many defined-benefit funds are in surplus, their returns are lower than some international peers, and some may still be underfunded. At the same time, on their current trajectory, some defined-contribution schemes may not provide the returns that their pension fund holders expect.

Critically, DC schemes also invest less than 1% in unlisted equity. Australian schemes, for example, invest around 5%. To bridge that gap, the Chancellor joined the Lord Mayor and chief executives of many of our largest DC schemes to sign the Mansion House compact. Its signatories, who represent around two thirds of the entire market, are committed to the objective of allocating at least 5% of their default funds to unlisted equities by 2030, unlocking up to £50 billion of investment in high-growth companies by that time—helping companies to grow while improving rates of return for investors.

To further boost returns, we will facilitate a programme of DC consolidation. As the Department for Work and Pensions, Pensions Regulator and Financial Conduct Authority response to the value for money framework consultation makes clear, investment decisions should be made based on long-term returns and not simply on cost. Pension schemes that are not achieving the best outcome for their members will face being wound up by the Pensions Regulator, and we will set out a road map to encourage new collective DC funds.

To help schemes access a wider range of investment opportunities, we have launched the LIFTS—long-term investment for technology and science—competition, which enables them to invest quickly and effectively in unlisted high-growth companies. Bids have already started to come in for up to £250 million of Government support, and we are considering them closely. We will also explore the case for Government to play a greater role in establishing investment vehicles, building on the skills and expertise of the British Business Bank’s commercial arm.

Meanwhile, on defined-benefit schemes, we recognise that the regulatory landscape is too fragmented and believe that there is scope for consolidation. We have launched a call for evidence on the role of the Pension Protection Fund and the part that defined-benefit schemes play in productive investment.

Taken together, our pensions announcement will have a real and significant impact. For an average earner who starts saving at the age of 18, these measures could increase the size of their pension pot by 12% over their career. That is more than £1,000 a year in retirement. That is a real upgrade to the power and the outcomes of our pension schemes.

We already have the largest stock market in Europe, and, in 2021, we attracted the most IPOs—initial public offerings—outside the US, but we want the world’s fastest growing companies to grow here and to list here. We have now published our near-final draft legislation on prospectus reforms, which will create a more effective regime than its EU predecessor, giving companies more flexibility to raise even larger sums from investors more quickly. We welcome Rachel Kent’s excellent Investment Research Review, which was published this morning, and the Government are accepting all the recommendations made to us.

As we continue to free ourselves from outdated retained EU laws, we have abolished protectionist rules, such as the share trading obligation and double volume cap, so that UK businesses can access the best and most liquid markets anywhere in the world.

Finally, we are ensuring that our financial services sector has the regulatory freedom to innovate at a speed that matches our modern world. To that end, the House recently passed the Financial Services and Markets Act 2023, which requires our regulators to facilitate growth and international competitiveness alongside their other objectives. With it, we have published today legislation to repeal almost 100 pieces of retained EU law for financial services that are irrelevant to our markets, such as payment account regulations and long-term investment funds, and we say farewell to the unloved packaged retail and insurance-based investment products. This is not divergence for divergence’s sake, but sensible reforms working with the sector.

This is a significant body of work. This Government’s vision for the UK is one of long-term growth, fuelled by strong British finance, providing returns for savers, funding for businesses, and investments for our economy. That is what we are focused on, and that is what these reforms deliver.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

I thank the Minister for an advance copy of his statement. However, after 13 years of a low growth, low investment economy, these promises are too little, too late. On this Government’s watch, far too many high growth firms, particularly in the tech sector, have been bought by foreign competitors or have chosen to list in the US, in order to scale-up and grow.

Arm holdings, a UK tech success story, is now set to float in New York rather than in London. The Chancellor has been completely silent on this. When alarm bells were ringing, the Ministers shrugged their shoulders. Capital held in pension funds is vital for the growth of our most innovative companies. In the US, approximately 70% of venture capital funding comes from pension funds, while in the UK the figure is below 20%. That is just not good enough. This Government’s failure to mobilise pension money into productive assets comes at a cost. British pension savers have not been getting the returns that they should expect. It seems that a person is more likely to own a share in UK infrastructure today if they are a Canadian teacher rather than a British citizen.

Time and again, the Conservative party has promised action to unlock the patient capital that British firms need to thrive and grow, but has failed to deliver. There would surely be greater confidence given to savers, growing firms and financial services if the Government had provided more detail yesterday on how to turn this around. The Chancellor’s compact for DC pension funds lacks any plan to ensure that this will increase investment in UK assets rather than simply going overseas. What guarantee can the Government provide that British high growth firms will be able to access the capital they need to thrive and create good jobs in every part of the UK? With no clear roadmap, how will that be achieved?

I turn to what the Chancellor said last night about wanting to make London a listings destination. It is as though his party had not been in government for 13 years now. I remind the Chancellor that he was sitting around the Cabinet table for the best part of a decade during that time. Labour has been calling for action on listing for months and the Government have refused to listen. In the first quarter of this year there were just four London listings, raising only £81 million, the sixth-worst quarter for IPOs in London since 1995. That is pitiful.

I acknowledge and indeed welcome the fact that in some areas the Government are rather belatedly starting to follow Labour’s lead, but what has taken them so long? Where was the urgency, the ambition and the drive? Can the Minister explain why there was nothing at all in the Chancellor’s speech on green finance? That complacency puts our status as a net zero financial centre at risk.

Labour is committed to ensuring that the City retains its competitiveness outside the EU, whether through creating a positive environment for fintech or reform of Solvency II, and doing so without compromising on stability. Yet the Government have promised Solvency II reform 10 times in recent years with nothing to show for it.

We, and the country, will not take any lessons on financial stability from a Government that set fire to the economy last autumn with their mini Budget. That resulted in a Tory mortgage bombshell, with families facing £240 per month in higher mortgage costs when remortgaging, through no fault of their own. The truth is that the Chancellor’s Mansion House speech was not a big bang at all—it was a small splutter. There was none of the detail required to build confidence, no responsibility taken for the last 13 years of economic failure, and no strategy to end the doom loop of Tory economic failure.

The Labour party has a plan to unlock the full potential of the private sector to get the British economy growing again in the national interest. Through our active partnership with the City, reforms to the British Business Bank and a modern industrial strategy, we will grow the economy and help Britain to become the best place to start and grow a business. This tired Tory Government are out of time. It is time for them to step aside so that we can have a Government who will favour the national British interest—[Interruption.] There is no point Conservative Members laughing. The truth is that we need a Labour Government to provide the energy, the ideas and the leadership that our country and our constituents desperately need.

[Andrew Griffith]

It is always a pleasure to listen to the hon. Lady. In general, what I learn is that the Opposition have no plan. It is all critique and no counter-proposal. She talked about this being too little, too late, but this Government are moving at pace, in what the sector acknowledges as one of the fastest rates of implementation of financial services reform for a generation, taking advantage of our Brexit freedoms and the regained control of our rulebook, which she and her party seek to oppose again and again.

The hon. Lady talked about the lack of growth, but under Labour I am told that the percentage of the workforce with a private pension declined by 20%. She also talked about patient capital, which should not be a point of disagreement between us. This Government have done an enormous amount to support British patient capital, with £2.3 billion of investment, and we have recently increased the length of the British patient capital scheme for a further period.

The hon. Lady also talked about capital going overseas, but that is nothing to the degree to which capital would be flooding overseas were her party ever to return to power, accelerating us to the point where once again the Chief Secretary to the Treasury is writing notes to remind us there is no money left. I potentially discern a point of difference between us, which perhaps in due course she will clarify, in the approach to the compact. It is not the position of this Government to mandate where people’s pensions should be invested. Indeed, the last time a Labour Chancellor decided what was good for our pension schemes, it did not end well.

Finally, the hon. Lady talked about green finance. This Government are doing a copious amount on green finance; only yesterday my right hon. Friend the Secretary of State for Energy Security and Net Zero met some of the world leaders in green finance, and earlier this year we published an ambitious green finance strategy, continuing the UK’s progression to being one of the world’s first net zero-aligned financial centres.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Treasury Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

I should probably note in this context that I am a trustee of the Parliamentary Contributory Pension Fund.

I warmly welcome the work that the Economic Secretary and the pensions Minister have done in this important area, and strongly endorse what the Economic Secretary says about its meaning that future pensioners will be able to retire with higher pension incomes. However, he will know that I have put another piece of urgent work in his inbox, about helping the 93% of our constituents who are unable to afford access to financial advice and have to rely on bog-standard generic guidance. Can he update the House on how his review of the advice-guidance boundary is going and how he will help the majority of people who save in defined-contribution schemes to get access to some sort of personalised coaching or guidance?

[Andrew Griffith]

It is always a pleasure to respond to my hon. Friend and to the work of her tremendous Treasury Committee, which rages across this broad financial sector. She is right to raise the question of access to financial advice; I am afraid the world of financial services regulation is fraught with unintended consequences, and one unintended consequence of financial regulation and a growing compensation culture is to move financial advice beyond the financial ability of so many people who would benefit from receiving it. That is called the advice gap. I and my officials continue to work on that and I look forward to sharing proposals with the House and with my hon. Friend and her Committee in the autumn.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Economic Secretary for his statement. I agree with him on regulation, where he said that regulators would be required to facilitate growth and competitiveness alongside their other objectives. However, as he knows, unless the central bank is obliged to do the same, we might end up in the rather odd and undesirable position of regulators and the central bank taking contradictory actions. I want to ask mainly about pension reform: under the Mansion House compact, potentially 5% of the DC funds are to go towards unlisted equities. There is huge potential in that for growth, for innovation, for jobs, for global competitiveness and for scaling up to compete, but that comes with a commensurate risk, which is presumably up to 5% of the value of the DC fund, should the value of that unlisted equity be wiped out.

While I hope the scheme succeeds, what liability would fall on the Pension Protection Fund should it fail? What liability might there be on the taxpayer? If the scheme works and the value of the funds increases, what guarantee is there that the pension holder will receive the entire value of that increase and it will not be gobbled up by unnecessary and excessive fees?

[Andrew Griffith]

I thank the right hon. Gentleman for his support for growth and competitiveness. We have talked regularly about the need for regulators to improve their performance and deliver better outcomes for those whom they regulate. He talked about the 5%, and I emphasise that, ultimately, it is a voluntary pact; it is for the individual trustees to make those decisions, and the Government continue to have in place a strong programme of regulation. However, I hope he respects the fact that there is risk in inaction as well—the risk that our pension beneficiaries do not receive the pensions that they deserve or the sort of performance from their pension that other international long-term savers benefit from. He raises the issue of defined contribution and the liability for the taxpayer. Of course, that does not attach to defined-contribution schemes, which is why it is so important that they continue to benefit from the highest-quality regulation. I and my colleague the pensions Minister remain very committed to that and will continue to work with TPR and the FCA to ensure that that remains the case.

[Stephen Hammond (Wimbledon) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests. Like my hon. Friend the Member for West Worcestershire (Harriett Baldwin), I warmly welcome the work that my hon. Friends on the Front Bench have done. The Mansion House compact is a huge step forward, but does my hon. Friend the Minister agree that getting the Kent investment review reforms right, particularly on unbundling, will also help us to have high-quality research, enabling better decisions and more investment into high-quality firms?

[Andrew Griffith]

My hon. Friend, who knows so much about this topic and has engaged so lucidly on it, is absolutely right about the importance of investment research. It provides access to markets, makes our UK stock exchanges an attractive international venue, narrows spreads and drives fair valuations for investors and companies seeking investment. This is one example of where we inherited a European fact pattern that was not quite right for the UK. I look forward to pensioners, investors, savers and companies benefiting from our research review.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Work and Pensions Committee.

--- Later in debate ---

[Andrew Griffith]

I thank the right hon. Gentleman for his contributions on how we can deliver the best pensions for long-term savers. There are no estimates for the share of the UK. We are mobilising an additional £50 billion of assets over time. That is evolution, not revolution. We would expect—and it is the job of this Government—to present that investment capital with a wave of attractive options across some of the fastest-growing sectors, as the Prime Minister and Chancellor have laid out, and to remove frictions and obstacles as people seek to invest in the UK, creating a conducive environment for that investment but falling short of mandating it, in the knowledge that the allocation to international investments for some of our actively managed schemes already exceeds that of other comparable companies. On the charge cap, we are this morning publishing a consultation on the new value for money framework. Clearly, we want to continue ensuring that pensioners benefit from fair charges, but also that that does not come at the expense of the underlying performance that they receive.

[Mr John Baron (Basildon and Billericay) (Con)]

I welcome this set of measures, particularly the ending of the packaged retail and insurance-based investment products regime and the introduction of the Mansion House compact, on which some of us have lobbied the Government. I will share two key concerns with the Minister. On fintech and early-stage businesses, we have a problem in this country because the pension fund industry has divested itself of UK equities, to the detriment of the London stock exchange and, ultimately, of financial services generally. It troubles me that that 5% is not focused on early-stage start-ups in the UK, unlike many other domestic pension funds, which do support their own. More generally, a bigger piece of the jigsaw is missing in my view. Pension funds have generally divested themselves of UK equities to such a great extent—some estimates suggest a 90% reduction since 2000—that we need to see more encouragement by Government to get the pension funds to use their wealth by putting it into UK equities for the betterment of the UK economy. After all, they do benefit from tax breaks.

[Andrew Griffith]

I thank my hon. Friend for his, as ever, apposite points. That encouragement is exactly what the proposals are all about: working voluntarily with the sector and encouraging it to lean in. I want people to see 5% as a potential floor, not a ceiling. Many will seek to go much further forward. The broad objective of the Government is to provide good access to capital at every stage of a Government’s life, whether it is our support for the seed enterprise investment scheme, the enterprise investment scheme or the venture capital trust; the expansion of the pool of individual investors who are able to invest directly in the stock market; and some of the opportunities that he talked about, all the way through to ensuring that our listed and private capital markets work extremely well. That is the objective of the reforms.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Public Accounts Committee.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I draw the House’s attention to the fact that I am a trustee of the parliamentary contributory pension fund. Forgive me if I am a little sceptical about Government involvement in pension funds. We have seen how the annual and lifetime allowances, announced at the Dispatch Box by a former Chancellor, have played out. It was also this Government who took us through McCloud in the public sector. The Minister said that the average earner who starts saving at 18 could increase the size of their pension pot by 12% over their career. Can he give the House examples of the assumptions behind that figure, and will he publish the modelling behind it?

[Andrew Griffith]

The Government Actuary’s Department is the source of those figures, which we published this morning—I draw the hon. Lady’s attention to that fact. Clearly, there are a number of assumptions within that. I do not think it is right to be sceptical. These are reforms that have been formed with wide consultation, including from across the House. I hope that we can form a growing consensus so that the industry receives a signal from this place that it is ultimately time to stop talking and to get on with investing. That is the outcome that we seek.

[Robbie Moore (Keighley) (Con)]

I welcome the statement, particularly the aim to unlock assets in the local government pension scheme through an acceleration of pooling with the aim of doubling existing investments in private equity to 10%, which could unlock £25 billion by 2030. Does the Economic Secretary agree that the reforms are a welcome step to improve our growth prospects and boost investments?

[Andrew Griffith]

I absolutely agree with my hon. Friend. The local government pension scheme is a huge opportunity for this country. In many cases, it is already very progressive. It is investing in local opportunities and allocating its capital to the sort of private growth assets that we wish to seek. With £365 billion under management, an increased rate of progress towards asset pooling, which, as the Government have made clear, should attract at least £50 billion, will provide the scale to invest well on behalf of beneficiaries. That is a great opportunity for us all.

[Sarah Olney (Richmond Park) (LD)]

The number of companies listed on the London stock exchange has plummeted to such an extent that the market value of Apple is now greater than the entire FTSE 100. Recently, Cambridge-based chip giant Arm decided to list in New York rather than in London. Does the Minister think that the Mansion House compact will reverse the trend of British-based companies deciding to list elsewhere?

[Andrew Griffith]

Yes.

[Sir Desmond Swayne (New Forest West) (Con)]

This is an excellent package, but one way to ensure that investment flows to productive enterprise is to prevent it from being crowded out by growing Government debt, isn’t it?

[Andrew Griffith]

Our objectives are threefold in that respect: to bear down on inflation; to reduce Government debt, with the benefits that my right hon. Friend seeks; and to grow the economy. These are long-term plans and ambitious programmes, and ultimately, the acid test will be how we can grow our economy.

[Nick Smith (Blaenau Gwent) (Lab)]

The Minister says that he wants the “best possible outcomes” for pension savers. The pensions dashboard, which is designed to help pensioners understand their pension’s performance, was promised by Chancellor George Osborne, but it is still delayed. When will the pensions dashboard be delivered to support UK pensioners?

[Andrew Griffith]

My hon. Friend the Minister for pensions is proceeding at pace to deliver that important element in people’s ability to access the most information. It is just one component. We want people to have good pension choices and to understand the ways that investments are being made. The hon. Gentleman will understand, because we have engaged in the past about pensioners not necessarily having had the best information available to them in a regulated way, that it is better to be right in this case than to be fast.

[Nickie Aiken (Cities of London and Westminster) (Con)]

I was delighted to attend the Mansion House dinner last night as the Member of Parliament representing the City of London and to listen to excellent speeches by the Lord Mayor and the Chancellor of the Exchequer. Does the Minister agree that the Mansion House compact will do much to secure the City of London’s position as a global powerhouse in the financial services sector and will also create more jobs across the country?

[Andrew Griffith]

My hon. Friend, who knows so much and speaks so lucidly for Cities of London and Westminster, is absolutely right. These are a bold and ambitious set of reforms. They will not just help communities across the whole of the United Kingdom—I never fail to remind the House that financial services touch almost every constituency—but continue to underwrite the strong and leading position of the City of London, which she so ably represents.

[Bill Esterson (Sefton Central) (Lab)]

It is always fascinating to hear Ministers justifying their failure over the last 13 years. The Minister would do well to recognise that business investment is at a record low in this country. One way to address the record low in business investment is to listen to the professional services sector, which says that a mutual recognition agreement with the EU would increase that performance and contribution. Why have the Government made no progress on that mutual recognition agreement?

[Andrew Griffith]

I am enormously proud of the fact that we have recently reached agreement with all the member nations of the European Union on the memorandum of understanding in respect of financial services. That joins a number of such agreements, all of which have the objective of seeking access to as many of the growing markets in the world as possible for our financial and professional services. Only last week I met my opposite number, the German deputy Finance Minister, and next week I will be meeting the Luxembourg Finance Minister.

[Sir Christopher Chope (Christchurch) (Con)]

By how much will today’s announcement reduce the burden of regulation on UK business? I ask that because the Government promised that there would be no net increase in the burden of regulation on business during this Parliament, but so far we are £14.3 billion in the wrong direction.

--- Later in debate ---

[Andrew Griffith]

My hon. Friend may wish to ask that question in due course. With respect to the Secretary of State for Business and Trade, I can only speak for the financial services sector. Today we are publishing documents to repeal 100 elements of retained EU law. That builds on reforms we already had in train, such as the prospectus directive. I can certainly give him my confidence and assurance that we are significantly lightening the burden of regulation, but more importantly, making it appropriate for the unique fact pattern of the UK as an open, innovative global market.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

The Minister will be aware that the Bank of England had to intervene in the gilt market after the disastrous mini-Budget last September to restore market functioning, when sharp and rapid rises in gilt yields led to widespread selling of gilts by pension schemes’ liability-driven investment arrangements. We all recognise that we need to do more to ensure that our pensions—especially our defined-contribution schemes—are better. My question is about the risk. What risk assessment has been made of this proposed reform, particularly in terms of where the burden of risk falls?

[Andrew Griffith]

We have published today a consultation, and I hope the hon. Lady will feel that she can raise points during that. My hon. Friend the Minister responsible for pensions will always be happy to undertake engagement with the sector. Needless to say, we believe that we have the right balance of risk. The hon. Lady talks about volatility in the gilt market. That is one of the reasons we are so focused on not making unfunded spending commitments. The last thing that pensioners or the wider economy need is Labour’s £28 billion unfunded spending plans.

[Richard Fuller (North East Bedfordshire) (Con)]

I welcome the announcement of these reforms, but will the Chancellor and the Minister look further at two consequential areas? First, to make the most of the newly available capital, this country needs to attract the world’s best innovators, insurgents and entrepreneurs. The Labour party has already said that it does not want them here and will change tax policy to make sure they look to other countries. This Government need to come forward with measures that say, “We want the best and the brightest to come to the UK.”

Secondly, to make the most of these reforms, we need to ensure that our businesses can work speedily and with clarity. That means that regulators need to focus on what our companies are doing with these reforms, as well as protecting customers and consumers. Will my hon. Friend look at what further measures we can take on regulatory reform?

[Andrew Griffith]

The work of regulatory reform to make this country globally competitive and an attractive place to invest is never done, as my hon. Friend knows. He will also know that we are seeing right now the fruits of the Prime Minister’s vision and strategy, with firms such as OpenAI and Andreessen Horowitz—two of the leading technology firms changing our world—both choosing in recent weeks the United Kingdom out of the entire rest of the world as the place to do business.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

Further to the question from the hon. Member for Blaenau Gwent (Nick Smith), what assurances can the Minister give that when the pensions dashboard is launched, it will be mandatory for all providers to participate in it and will not be done on a voluntary basis, to avoid it being what one analyst described as “half-baked”?

[Andrew Griffith]

The hon. Member is quite right: it will be mandatory for all providers. That will be underwritten by legislation. The focus is to ensure that it is a usable, well regulated and well understood user experience for members.

[Mr Philip Hollobone (Kettering) (Con)]

Over the last decade, thanks to automatic pension enrolment, an extra 10 million people have been able to save more for their retirement, but until now, due to investment restrictions, those returns have been limited. What my constituents want to know is, would the reforms announced today have been possible without Brexit, and how much better off will they be when it comes to retirement?

[Andrew Griffith]

I hope that my hon. Friend can reassure the constituents he so diligently represents that on average, as supported by the Government Actuary’s Department, if they started their working life now under the new assumptions about the compact, they could be up to £1,000 a year better off in retirement. That is a meaningful difference. At the end of the day, this is about making people’s money work better for them and harder for them and delivering them better outcomes. He is also right to observe that our ambitious programme of regulatory reforms, although it will never be divergence for divergence’s sake, could not have been achieved if it were not for the ability of this place to set the corpus of regulations under which financial services operate.

[Nigel Mills (Amber Valley) (Con)]

I welcome the Mansion House compact and the focus on auto-enrolment pensions delivering a better pension for their scheme members, but if the Minister looks at the websites of the firms that have signed up to his compact, he will see that they are all still marketing themselves as being cheap and simple for employers, rather than the best quality and best return for savers. What more can we do to give individual members a choice of which scheme they are auto-enrolled in? Will he look at a clearing house scheme, under which it would be individual employees who choose where their pension savings go, not their employer a few years ago based on what was easy and cheap?

[Andrew Griffith]

My hon. Friend is absolutely right to talk about the need for that culture to change, moving away from an excess focus on cost to the detriment of performance—that is what these reforms will achieve over time. He is also right to talk about giving agency to individual long-term savers over time. Making sure that we have that usable journey for pensioners that delivers across the whole of their life is something that my colleague, the pensions Minister, is passionate about.

Business Banking Resolution Service

Andrew Griffith Excerpts

Tuesday 11th July 2023 Westminster Hall

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve with you in the Chair, Mr Pritchard. I congratulate my hon. Friend the Member for Hazel Grove (Mr Wragg) on securing the debate on his behalf and that of the all-party parliamentary group on fair business banking. In my short time in this role, I have seen that the APPG does a significant job and gives a voice to our all-important small businesses.

We are a nation of small businesses. They employ a vast number of people in the economy and make a huge contribution and, as other speakers have said, it is vital that they secure access to the finance and capital that they need to grow, expand and do the wonderful things they do to help the UK economy. As part of that, it is critical when things go wrong—regrettably, they sometimes do—and businesses face issues with their bank, they can access efficient and unbiased dispute resolution. We all aspire to a quick, efficient and affordable process in that regard, which allows for unbiased outcomes for those businesses. Those are the higher-order objectives that we seek.

For context, it is not my role today to defend the BBRS. It is an independent body and is not a part of Government or the Treasury. I will share the same context about it being set up following a number of interventions by Parliament. We will not truthfully know whether the deficiency was in the overestimate of the number of cases or the effectiveness of the BBRS system. Given that we know that the BBRS is effectively headed for the exit in all circumstances, that is moot, although the question of how individuals and businesses get redress is not. That, I absolutely accept, is a responsibility of the Treasury; it is how we can ensure good order on this.

The more generous in spirit among us might accept that the BBRS was set up with good intentions, but as we have heard from Members here today, that has not perhaps been the experience. I understand that and have listened very closely to today’s debate, and perhaps my hon. Friend the Member for Hazel Grove would care to meet me to share his own particular constituent experience. I understand that is a long-standing piece of casework, and sometimes such specific examples illustrate the more general point that we have heard from Members today given that there are clearly a number of cases.

[Kirsten Oswald]

The Minister has offered to meet the hon. Member for Hazel Grove (Mr Wragg), who secured the debate, which I am sure is very welcome, but might he feel able to extend that offer to others of us who have long-standing cases in this field that are difficult to resolve?

[Andrew Griffith]

I want to be a listening Minister and am of course very happy to do that, but in so doing I do not want to hold out a false expectation. These matters are not directly the subject of ministerial interventions, so while I am very happy to meet the hon. Lady, and, again, use those examples to inform the wider policy area, in fairness it is important for people in the Public Gallery or who might be following the debate that I do not raise false expectations, because some of these matters have involved great trauma to individuals and have been going on for a long period of time. I would be grateful if the hon. Lady could frame things in that important context, but of course I would be happy to meet her and, lest I receive more interventions, that is a general point for Members of this House. It is right that I approach my responsibility diligently as we try to formulate policy.

As we go forward, whatever past decisions have been made in this respect, I am very keen to understand—the hon. Member for Hampstead and Kilburn (Tulip Siddiq) talked about this—the role of the Financial Ombudsman Service, which successfully deals with tens of thousands of complaints each year now, including SMEs up to the threshold of £6.5 million. The Financial Conduct Authority—whose decision it must be, but with the support of Ministers—has looked to extend that upper threshold, and it is consulting; perhaps Members have responded, like the APPG has.

I spoke to the chief executive of the FCA and gave him great encouragement that, the consultation having been closed in April of this year, we will shortly hear the response. I hope the House will await that, because it is my belief that one should look again at the merits of this versus a statutory tribunal, which I believe still has some of the disadvantages that the hon. Member for Hampstead and Kilburn outlined, particularly in terms of the need for primary legislation but also the non-material differences between an ombudsman service which exists, is seen to work generally in practice—although I am always open to representations—versus yet another novel intervention in the form of a new statutory tribunal.

[Stewart Hosie]

Can I just get a guarantee that there will be no gap between the removal of the BBRS and the decision taken on the thresholds that can be reached and potentially another body, statutory or voluntary—that there will be no gaps or black hole that businesses might fall into at some point in the near future, whether in months or years?

--- Later in debate ---

[Andrew Griffith]

The right hon. Member makes a fair point. The cracks that exist in the compensation regime are a challenging feature. That is one reason why I am attracted to using as much of the existing architecture as possible precisely to avoid that point about cracks.

[George Eustice (Camborne and Redruth) (Con)]

I apologise that I missed the opening speech because I had another meeting. If a lender were to try to enforce security in respect of a residential mortgage on a home, they would first need to go to a court to get a possession order. When it comes to business lending, a bank can enforce their security without any recourse to the courts at all. Does the Minister think that that is something we should look at?

[Andrew Griffith]

My right hon. Friend raises an important point. It would not be right to say that we should not look at it, but he raises this in the closing minutes of the debate and he knows that these areas can be fraught. One of the most challenging things about the regulation of financial services in general is the unintended consequences. The hon. Member for Hampstead and Kilburn talked about that, and we do not want to see any diminution in access to capital that could prevent our small businesses from growing. I would be happy to meet my right hon. Friend to understand the issue he raises in more detail, but I do not want to go any further from the Dispatch Box on that.

We have heard the importance of this matter to constituents of hon. and right hon. Members. We are united in this House on the importance of the provision of that lifeblood of business growth capital for our small businesses, which lack some of the sophistication and have been predated on by the banking sector in the past. That is not acceptable, and it remains the position of the Government to do everything we can to deliver redress where we can and to ensure the financial regulatory regime protects those who need our protection.

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2023

Andrew Griffith Excerpts

Monday 10th July 2023 General Committees

[The Economic Secretary to the Treasury (Andrew Griffith)]

I beg to move,

That the Committee has considered the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2023 (S.I. 2023, No. 704).

It is a pleasure to serve under your chairmanship, Sir Graham. The Government recognise the threat that economic crime poses to the UK and our international partners, and we are committed to combating money laundering and terrorist financing. Illicit finance causes significant social and economic costs through its links to serious and organised crime. It also undermines the integrity and stability of our financial sector, and can reduce opportunities for economic growth and legitimate business in the UK.

That is why we have taken significant action to combat economic crime, including legislating for the economic crime and anti-money laundering levy and passing the Economic Crime (Transparency and Enforcement) Act 2022.

[John Spellar (Warley) (Lab)]

The Minister will be aware that there is support from both sides of the House for regulations against money laundering. However, can he assure us that the Government will move rapidly to deal with the issue of the politically exposed persons regime? It is affecting Members of the British Parliament for whom it was never designed, but the Bank of England and the Treasury seem singularly incapable of getting a grip on it.

[Andrew Griffith]

Members on both sides of the House feel strongly about that issue. During the passage of the Financial Services and Markets Act 2023, the Government brought forward amendments in the other place that will place duties on the Financial Conduct Authority to look into the issue rapidly, make specific proposals and implement a lower-risk regime for domestic persons.

The right hon. Gentleman should be assured of my personal diligence, and desire as a Member of this House, to ensure that Members are not obstructed in their democratic duties by the inability to obtain a bank account, or the sheer bureaucracy involved in doing so. That extends to our fellow citizens. The Government, the Chancellor and I have made it clear if we come across any evidence of Members having their bank facilities removed due to freedom of expression, no matter where on the political spectrum they sit, that is simply unacceptable.

--- Later in debate ---

[The Chair]

Order.

[Andrew Griffith]

My right hon. Friend for Rossendale and Darwen makes an important point about the breadth of the impact of the regulations. I will not detain the Committee any further; he has the assurance that he seeks that we will continue to prosecute these cases with drive and in the broadest way we can. This is potentially a discussion for a Backbench Business debate or an Adjournment debate, and I would be happy to support hon. and right hon. Members in that.

The money laundering regulations support our overall efforts. As the UK’s core legislative framework for tackling money laundering and terrorist financing, they set out various measures that businesses must take to protect the UK from illicit financial flows. Under the regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries, and that brings us to the point of today’s measure. These are countries identified as having strategic deficiencies in their own anti-money laundering and counter-terrorist financing regimes. The statutory instrument amends the money laundering regulations to update the UK’s list of high-risk third countries, and removes Cambodia and Morocco from that list to reflect the significant progress made by these countries in addressing their anti-money laundering deficiencies and to reflect similar changes to its list agreed by the global anti-money laundering standard setter that the UK is part of, that is, the Financial Action Task Force.

In due course, the Government will pass further changes to add to the UK’s list those countries that FATF added to its list earlier this year, in February and June. Those changes are not being enacted at the same time as these ones so as to give time, as required by the Cabinet Office guidelines, to complete a full impact assessment for the additions.

This is the seventh SI to amend the UK’s list of high-risk third countries, to respond to the evolving risks. Such SIs are one of many mechanisms the Government have to clamp down on illicit financial flows from overseas threats, and we will continue to use other mechanisms available to respond to wider threats from other jurisdictions—Members often think of Russia in that perspective—including applying financial sanctions, as necessary.

--- Later in debate ---

[Amy Callaghan (East Dunbartonshire) (SNP)]

We on the SNP Benches support this necessary update to the money laundering and terrorist financing regulations to remove Cambodia and Morocco from the list of high-risk third countries in the context of the enhanced due diligence requirements. It is also worth flagging up, given that the Minister raised the Economic Crime and Corporate Transparency Bill, that it is unfortunate that the Government have failed to grasp the opportunity to make that Bill as strong as it could have been, and I ask the Minister why he chose not to accept the SNP amendment upholding the integrity of the Companies House register.

4.39 pm

[Andrew Griffith]

It is always a pleasure to follow the hon. Members for Hampstead and Kilburn and for East Dunbartonshire. It is important, as the hon. Member for Hampstead and Kilburn said, that we continue to work with the overseas territories—Gibraltar and the Cayman Islands. It is a sign of our rigorous commitment to FATF that they are on the list in this jurisdiction; some other countries would have fudged the list for their own overseas territories. We have always adhered to the highest standards of FATF. The hon. Lady is quite right that that is not the most comfortable position for us as we seek the highest reputation for our own financial services. We continue to work with the territories and I do not have any specific update, but I will ask the question and if there is anything more material to say I will write to her. Otherwise, I hope that she will accept that we continue to work together on the issue and her points are well made in that regard.

On the SNP amendment, I am advised that the simple reason for not bringing it to the Committee today is that it was not relevant to the debate. I imagine that that decision was made by the House authorities or the Table Office. That does not diminish the point made by the hon. Member for East Dunbartonshire and a number of Bills before the House, including the Economic Crime and Corporate Transparency Bill, seek to address her concern about the transparency of beneficial ownership. I hope that she will be content with that answer as it is the best I can do today.

Question put and agreed to.

Financial Markets and Monetary Policy

Andrew Griffith Excerpts

Wednesday 5th July 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

I congratulate my hon. Friend the Member for Poole (Sir Robert Syms) on securing this debate. Notwithstanding the fact that he may have accurately predicted my reticence in some areas, this is an important matter. It was the House that originally decided on the current monetary arrangements, and it is a matter for the House to continue to scrutinise how they are conducted. I also thank the hon. Member for Strangford (Jim Shannon) for his contribution.

As my hon. Friend the Member for Poole knows, the Monetary Policy Committee has operational independence. That covers all monetary policy, including both the Bank rate and the relatively novel feature of quantitative tightening, which we have seen for the first time in recent months. It is not entirely an independent actor; the Chancellor annually writes to the Governor and the Monetary Policy Committee with a remit letter, which has remained unchanged in its most substantive term, which is the inflation target of 2%. I think everyone in the House understands the clear position of the Government, the Chancellor and the Prime Minister on the desirability of bearing down on inflation to try to remove what is a hidden tax on everybody in society and get us as quickly as possible to the point where not just inflation is falling, but interest rates are falling on the back of that.

My hon. Friend knows that financial markets are determined by a wide range of factors. It is of note that many of those factors are international: across most western economies, we are seeing some combination of them. He talked about the gilt market, which I reassure him remains deep and liquid. It has traded throughout the past 12 months; it has a good track record and is one of the deepest markets in the world. Underlying demand for the UK’s debt remains strong, and we have a well-diversified investor base.

The Debt Management Office co-ordinates closely with the Bank on the new phenomenon of quantitative tightening, whereby the Bank itself is selling gilts. Clearly it is not desirable for anybody that both the Bank and the Government are in the market at the same time. There is a high degree of operational co-ordination between the Bank of England and the Debt Management Office. In the Treasury, we pay close attention to the operation of markets and—as we did in the autumn of last year and in the case of Silicon Valley Bank UK Ltd —will take whatever action is necessary.

I want to state the Government’s position very clearly for my hon. Friend and for the House. I listened very carefully to his points and comments about each of the money supply measures that are published, and I will take them back to Treasury colleagues and the Chancellor. I spent some time yesterday with the House of Lords Economic Affairs Committee, and I conceded to it that my view is that money does matter. We should not be indifferent: it is a factor. The level of money supply, which my hon. Friend raised, is a feature.

We have been through an unprecedented period. None of us forecasted the global covid pandemic and none of us foresaw Russia’s illegal invasion of Ukraine. Nevertheless, my hon. Friend raises an important point that I will take back to colleagues. I am reassured that he is paying close attention to it, as I know are other colleagues in the House.

My hon. Friend will also know that the MPC, in deciding to pursue quantitative tightening, has set out its ambitions for the 12 months ahead, so there is a clear road map. It voted in September 2022 to reduce the stock of asset purchases by £80 billion over the following 12 months through redemptions and active sales, and that is coming through. Just as the Treasury receives the benefit, it is also picking up some of the cost of those sales as the transaction concludes.

The Government will ensure that in fiscal policy—that for which we are responsible—we continue to make tough choices to bear down on inflation, and that it is aligned with monetary policy. My hon. Friend was kind enough to acknowledge the level of interaction and dialogue that happens at multiple levels between the Bank and the Treasury. Each has its respective role, but he can be reassured that policy is co-ordinated.

On that note, I thank my hon. Friend again for his thoughtful contribution this evening. I also thank the hon. Member for Strangford for joining this important debate. I suspect it will not be the last time this House debates the matter and, given the magnitude and significance of the impact of monetary policy, that is probably appropriate, but it is for the House to decide. I look forward to continuing to engage with my hon. Friend and other hon. Members on this and other important issues relating to financial policy.

Question put and agreed to.

Mortgage Prisoners

Andrew Griffith Excerpts

Wednesday 28th June 2023 Westminster Hall

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to see you in the Chair, Mr Robertson. I congratulate the hon. Member for West Dunbartonshire (Martin Docherty-Hughes) on securing the debate. I thank all Members for their contributions, including my hon. Friends the Members for North Norfolk (Duncan Baker) and for Kettering (Mr Hollobone) and the hon. Member for Feltham and Heston (Seema Malhotra), whose chairwomanship of the all-party parliamentary group on mortgage prisoners does so much to increase the standing of Parliament.

Our primary role, as we represent our constituents, is to use our voice to ensure that nobody feels that they are being forgotten. Today’s debate is proof of that. There are no easy answers, but this is Parliament at its finest, as it uses its powers to compel Ministers to come and account for themselves. I am grateful for the work of Rachel Neale and others in the Public Gallery who are continuing with this campaign.

I am humble about the potential failings of Government and regulators. It is not my role to sit here and mouth platitudes. I am not going to say that everyone always gets it right, and I cannot offer false hope. There is a lesson for us all in what we saw with the Horizon scandal, involving postmasters: every human process is fallible. As Minister, I will continue to keep an open and inquiring mind on such issues.

[Martin Docherty-Hughes]

I will make the same points that I made to the shadow Minister. In the interests of openness, will the Minister consider at some point a moratorium on evictions and a cap on the standard variable rate? Will he pledge to support the creation of a cross-party vehicle to enable closed books to pivot back into the mainstream market?

[Andrew Griffith]

I was just starting, but I will try to address the points that Members have made in the debate, including those made by the hon. Gentleman.

The Government and I recognise the anxiety that people in general have about mortgages, and we will use the tools at our disposal to limit the rise in rates. I will leave the general points and address the specifics about what we are debating today. We spent a lot of parliamentary time yesterday debating the new mortgage charter, but this is clearly a different debate—about those who have been in this situation for a long time, such as the hon. Gentleman’s constituent Chris and the constituents in Feltham and Heston and North Norfolk.

[Seema Malhotra]

Before the Minister moves on to the specifics, I want to make a general point. I thank him for his words about the work of the all-party parliamentary group and the UK Mortgage Prisoners group. We want to ensure that we get a solution—this is all about getting a solution to a challenge that has been intractable. Our strong belief is that more can be done, and it will take the Government to step forward and be bold about getting a solution, working with the regulator, which also needs to step up to the plate.

--- Later in debate ---

[Andrew Griffith]

I thank the hon. Lady for her intervention. I have met her and campaigners previously, and I am happy to undertake to continue to do so. The best way to find solutions is by working together. I would caution that everything I have seen so far tells me that there is no one-size-fits-all solution. There are a very large number of categories. There is a temptation to aggregate to the largest possible number, but the FCA’s analysis slices it down into more detail and recognises that there are varied circumstances in terms of why people have reached the position they have. I would love to hear more from the hon. Member for West Dunbartonshire about his constituent Chris’s circumstances. He told us that the mortgage was taken out in 2003, which was well before the change in Northern Rock post-2008. By 2007, it had already moved into an interest-only mortgage.

I am a data-led Minister, and as we unpick the data we often find co-mingled in these issues, understandably, the human stories of people who are vulnerable, have fallen on hard times and have been affected by the personal tragedies that all of us as Members hear in our constituency surgeries every week. But those are, to some degree, disconnected from their particular choice of mortgage and are circumstances that affect the wider taxpayer population.

[Martin Docherty-Hughes]

I need to come back on that point. The only tragedy here is that my constituent and his wife will lose their home in 2029 if this Government and any future Government do not get their finger out.

[Andrew Griffith]

I hear the hon. Gentleman. As I say, one of the ways to explore solutions is, I would counsel, to look at the individual circumstances and see what remedies, if any, there are, based on particular cohorts.

[Seema Malhotra]

Will the Minister give way?

[Andrew Griffith]

I will, and then I should make some progress.

[Seema Malhotra]

I thank the Minister for giving way again. I want to make two points. First, it is important to recognise, as the APPG has, that there will need to be longer-term solutions, but there also need to be short-term measures to deal with the situation specifically for mortgage prisoners among other mortgage holders.

Secondly, it is important not to characterise mortgage prisoners as people who have fallen on hard times. These are nurses, teachers and people in all professions. It is the circumstances of the mortgages and how they have been sold on that has been the issue. They have done nothing wrong, and they have not fallen on hard times. This is about the lack of support and protection of the terms on which they bought those mortgages, which were then taken away when the mortgages were sold on.

[Andrew Griffith]

That is fully understood. This is not about any attribution of fault. It is about looking at what the FCA found and the LSE report, which I have read and studied, did not disagree with: that there are a number of different cohorts within this broader category. As we seek solutions, sometimes we might find more illustration by looking at individual fact patterns. The hon. Lady mentioned the modified affordability assessment, which was one attempt to move forward. She observed, rightly, that it helped a relatively limited number of people, and we should try to learn from that. There was an inertia among some, and many mortgage prisoners were contacted, but many fewer engaged in that process.

The Government have consistently committed ourselves, and I am committed, to looking for practical and proportionate options where we can deliver genuine benefits for groups of borrowers, and we are committed to looking at where such interventions would be fair. It is the role of Government to try to ensure fairness and parity across different groups in society, although—while I hear what has been said about the circumstances people are in—we cannot simply solve the problem if somebody is, for example, on an interest-only mortgage but there is no plan in place to repay the principal. That is not confined simply to borrowers on inactive mortgage books, as, sadly, it happens across the market, but we want to ensure that there is the maximum number of options to switch and that all those who might want to switch are aware of the options. There is an awareness issue, as well as the specific problems that people face in the switching process.

Let me address the points raised by the hon. Member for West Dunbartonshire. We heard about the idea of a cap on the standard variable rate for mortgage prisoners. I do not want to repeat all the arguments at length, but that would be a one-size-fits-all solution. It is not, in the view of the Government, appropriate to do that, and I do not want to create a false expectation.

On a moratorium on evictions, there are already well developed pre-action protocols. The remit of the Financial Ombudsman Service does apply, with other remedies behind that. The fact that inactive lenders are not regulated in the same way as active lenders by the FCA does not in any way mean that the remedies available through the FOS are not available. I am happy to work with the FOS to ensure that that point is understood, and to learn from it the data that it has, such as the number of people who have petitioned and sought its support on the issue. Perhaps in some cases that might offer a potential remedy.

Even the LSE’s earlier report of November 2022 argued against the introduction of a standard variable cap, for some of the reasons that we have talked about. The Government have to be evidence-based. The LSE report of March 2023 did talk about free, comprehensive financial advice. Again, that reflects the bespoke nature of some of the problems, and potentially some of the routes forward for individuals. The Government provide significant independent financial advice that is free at the point of use through the Money and Pensions Service. The overall budget for that is £93 million.

I am interested in hearing, perhaps through the all-party parliamentary group, mortgage prisoners’ experience of accessing that financial advice. That was the No. 1 recommendation of the LSE, and that experience could shed more light and data on the subject. I am happy to explore that with hon. Members and, if necessary, convene a meeting with the Money and Pensions Service, or with individualised debt advice charities, to see how we could try to scale that solution.

[Seema Malhotra]

rose—

--- Later in debate ---

[Andrew Griffith]

The hon. Lady is trying to intervene.

[Seema Malhotra]

Very briefly. We would be happy to share that experience and to have the voice of the mortgage prisoners group heard. There is a slight concern that this is seen as the problem of the mortgage prisoners. They are very aware of their situation, and they had sought all sorts of advice. It would be helpful to share that experience and the work we have done with the FOS, which might be constructive with respect to how we move forward.

[Andrew Griffith]

I thank the hon. Lady for that constructive intervention. Again, I am committed to working with all comers as we try to find solutions that will help to move the situation forward. I understand the distress that people find themselves in. Whatever the situation was before, I understand that in an environment of rising rates people will feel the effects much more acutely, so I commit to work on that.

I want to fully address all the questions asked by the hon. Member for West Dunbartonshire. We have talked about the moratorium on evictions, and the existing legal framework applies in that space. A global cap on the standard variable rate is not the right or appropriate answer. In terms of working on a specific vehicle for those in closed books, again, I would rather work with the data and look at individual cohorts. As hon. Members have observed, a significant number of the so-called mortgage prisoners are now approaching the end, the maturity—the point at which the question is not necessarily about switching but about how to redeem or repay the capital or look at alternatives at the end of the process. That is one example of why a simple, single-point vehicle would not be the right answer.

We will continue to work with everybody who has expertise in this space, including those who have done work as part of the LSE report. We have to reconcile that duty with others who face similar circumstances, but perhaps are not in this particular category.

I have not responded to some of the more party political points, but I want to make sure that people feel the debate has been constructive and that they are being listened to. We will continue the dialogue and engagement to try to bring forward solutions where we can. We need to work with industry and the Financial Conduct Authority, which is the regulator. I have mentioned the potential role for the Money and Pensions Service. We will continue to try to find solutions that would defuse some of the deleterious impact on people and get more people the ability to switch. No one has ever been explicitly prohibited from switching, but I understand that one of the unintended consequences of regulation has been that in some cases people have been prevented from shopping around in the market, as other constituents can.

Finally, from a broader economy perspective, we will continue to do everything we can to bear down on inflation and interest rates, and we hope to get as quickly as possible back to an environment where rates are not rising. I thank the hon. Member for West Dunbartonshire for securing this debate today.

Mortgage and Rental Costs

Andrew Griffith Excerpts

Tuesday 27th June 2023 Commons Chamber

[Marsha De Cordova (Battersea) (Lab)]

It is an absolute pleasure to follow my hon. Friend the Member for Birmingham, Hall Green (Tahir Ali), who made an outstanding speech.

We are living in through a Tory economic crisis made in Downing Street and paid for by the British people—Members on the Treasury Bench would do well to listen. After 13 years of this Government, this country is left with the biggest fall in living standards since records began. We have weak growth, low pay and the highest inflation in the G7, and Brexit is continuing to cause harm to our economy through reduced productivity, trade and investment. If that was not enough, people are now being hit by the Tory mortgage bombshell, which is having a devastating impact on households across the country.

Many people have told me that they are at breaking point, especially as this bombshell comes after the pandemic and the cost of living and energy crises. The Prime Minister’s patronising advice at the weekend that people should just hold their nerve shows how out of touch he is with the mortgage struggles of people across the country, including my constituents. Battersea is one of the 25 worst-affected constituencies in the country, with 9,300 households facing an annual mortgage payment increase of £8,400. Average house prices in Battersea are already 15 times the average salary, and the increase in mortgage costs will put owning a home even further out of reach for many.

Under the Tories’ watch, housing affordability has got worse and worse, with the ratio of house prices to earnings reaching record levels in England. It is not just homeowners who are suffering; almost 2 million private renters will be hit by rent increases as landlords pass on those higher costs to them. That is even more worrying for low-income renters, who cannot rely on housing benefit to help meet that wage shortfall. As we already know, local housing allowance is not sufficient and currently does not cover much of the rent. We can wonder why the Government are not doing more to lift up LHA payments.

The Government are not offering any support for renters. The Chancellor failed to mention them once in his statement yesterday, and the Chief Secretary to the Treasury also failed to mention renters in his speech.

[The Economic Secretary to the Treasury (Andrew Griffith)]

No, he didn’t.

[Marsha De Cordova]

Well, he did not mention a renters charter and ending no-fault evictions—that is what he should have talked about.

The Government need to follow Labour’s lead by bringing in a renters charter to end no-fault evictions and introduce four-month notice periods for landlords. Why would they not? They will try to blame global factors for their mortgage crisis, but the cost of borrowing is higher here than in any other developed economy. Homeowners are paying thousands of pounds more than Europeans for new mortgages, as interest rates soar. Research shows that even before the latest hike, a new mortgage cost a typical household over £2,000 more a year than in France.

There is no question about who is to blame: the Tories. Why? Their disastrous kamikaze Budget last autumn crashed the economy, the pound and our global reputation, and continues to haunt millions of homeowners, who are shelling out extra on their mortgage payments. The Government have failed to act quickly and decisively against the mortgage cost rises. The Prime Minister was warned that they should take action, but they were missing in action and failing to do anything. Labour has a five-point plan, but the Government have only managed to come up with sticking-plaster solutions in the form of a voluntary agreement, when Labour suggested a mandatory one. The Chancellor’s plans do not go far enough. The Government could have applied much more pressure on the banks. Why will the Prime Minister and the Chancellor not apologise for their Government’s failure to control inflation, which led to the Tory mortgage penalty?

This country is buckling after 13 years of this Tory Government. Labour will bring back credibility and financial security to our economy and to households, to ensure that the people of this country can have better. We are done with 13 years of this Tory Government. We need a general election now.

--- Later in debate ---

[The Economic Secretary to the Treasury (Andrew Griffith)]

I am afraid that, with the exception of my colleagues, that was an unedifying parade of clone speeches that would wear out an average plagiarism detector. When I look at Opposition Members and hear their contributions today, I find it personally dispiriting. As the Minister responsible for financial literacy, I clearly have a great deal more to do.

As my hon. Friends have rightly observed, we are not alone in our fight against inflation. Countries across western Europe and, indeed, the rest of the world are seeing the same trends, driven largely by Putin’s illegal war in Ukraine and the aftermath of the covid pandemic.

[Several hon. Members rose—]

--- Later in debate ---

[Andrew Griffith]

I will give way in a moment. Let me say this in all seriousness: the only bombshells that we should be talking about are those that are falling on the Ukrainian people, and it cheapens the Opposition that we hear again and again the slogan of the week, and what we do not hear about is the broader geopolitical and macro environment in which this country finds itself. The British people have a much greater awareness of these matters than those on the Opposition Benches.

[Alex Cunningham]

The Minister mentions global factors, but last week the Bank of England noted that since its last decision, the swap rate—the key rate that influences mortgage interest rates—had increased almost twice as much in the UK than in the US and more than three times as much in the UK as in the euro area. Does the Minister agree with the Bank of England?

[Andrew Griffith]

I am grateful that we have belatedly found some international comparisons. The hon. Gentleman will therefore understand that we are seeing exactly the same rises—sometimes a little more, sometimes a little less—across most of the developed western economies. That is why this Conservative Government are taking action. We have helped people through these difficult times by giving the average household—[Interruption.] Do Members know how much? We are giving the average household £3,300 at a cost of £94 billion to the Exchequer. That is one of the largest support packages anywhere else in Europe. I will happily give way if any Labour Member wishes to challenge that.

When it comes to our generosity, this Government have increased the national living wage and pensions by record amounts, because this is a Government who will always put the vulnerable first. In addition to the explanations given by the Chancellor in this place yesterday, the Chief Secretary to the Treasury, in his fantastic remarks earlier today, set out in some detail our support for those struggling with their mortgage payments in these difficult times. The Chancellor’s new mortgage charter provides peace of mind about extending an existing mortgage or moving on to interest-only payments for six months, giving those who are worried about mortgage repayments some valuable respite. Vitally, it also gives genuine security to those who are at risk of losing their homes because they fall behind on mortgage payments.

[Mike Amesbury (Weaver Vale) (Lab)]

But the charter is not mandatory, is it? How will that help the 10,100 constituents of Weaver Vale faced with that mortgage Tory tax bombshell? How will it help them if it is not mandatory?

[Andrew Griffith]

I will happily respond to the hon. Member. Not only did Opposition Members oppose the very powers in the Financial Services and Markets Bill that we passed last night that would give the Treasury the ability to direct the regulators—an ability they now somehow seem to want to reinvent—but the exercise of those powers would inevitably take time. What we are hearing from the Opposition is not just a package that in many respects is deficient compared with what the Chancellor and this Government have brought forward, but a path to implementing that package that—rather than taking days, hours and weeks as our mortgage charter will—would take a much more significant period of time. They offer more delay, less help for people and fewer paths to deliver.

[Catherine West]

The topic of the debate is mortgage and rental costs, but the Minister has not covered the rental side. The last time he came to the Chamber he was asked how many renters are going to be in distress due to this situation. He was unable to answer, because he had not done the assessment. Will he promise to go back to the office and do an assessment on how many renters are affected?

[Andrew Griffith]

All households are impacted by the higher cost of money that we face. That is why we are focused on supporting all households, supporting those who are the most vulnerable and bringing forward at pace our measures to support the mortgage market. That is also why, since taking power, this Government have restored the overall health of our financial system. It is important that the House understands that mortgage arrears and defaults are today at historically low levels. Less than 1% of residential mortgages are in arrears, a level below that which we saw during the pandemic and significantly lower than under the last Labour Government.

[Stewart Hosie]

In the last hour it has been reported that two-year UK gilts are at 5.24%, a 15-year high, above the post-mini Budget peak, and markets now see a 70% chance of those rates going over 6% by the end of the year. If it is all going so well, why do the markets not believe the Tories?

[Andrew Griffith]

I always make a point of not commenting on the markets, in whichever direction they move. The responsibility of Government is to act and the responsibility of this Government is to deliver. We will control what we can control and the markets will do what they do.

The mortgage charter lays out that there will be a minimum 12-month period—I believe that is double the Opposition proposal, but I am happy to take an intervention on that—from any first missed payments before any repossession action is taken. It is important that our constituents understand that these measures offer comfort to those who are understandably anxious about the impact of higher rates on their mortgages and provide support for those who would get into financial difficulties. More broadly, the mortgage market itself remains robust and, because of the actions the Government have taken over the past 13 years, the average homeowner remortgaging in the past year had close to 50% loan to value, indicating that most have considerable equity in their homes.

Help for mortgage holders, but help for savers too: this Government are committed to ensuring that people are supported to save and can access a wide range of competitive savings products. The current range of options available to savers includes some of the highest rates that we have seen in recent years on both instant access accounts and the more relevant fixed-term products, which represent a better apples-to-apples comparison with fixed-term mortgage rates. The top instant access savings rates currently on the market offer around 4.2% and the top one-year fixed rate is much closer to the mortgage rate at about 5.8% annual equivalent rate.

Tackling inflation remains the Prime Minister’s and this Government’s No. 1 priority, and it will remain so until it is tamed. Allowing inflation to go on at the current rate or to grow higher would be the biggest threat to our collective economic security. While we continue on our fight to fight inflation, we will also do what British public expect; we will look at how we can grow the economy over the long term, improve productivity and ensure that no communities are left behind. We continue to take forward supply-side policies to increase the productive capacity of this economy and encourage workers back into work, including rolling out the largest ever expansion of free childcare. All that will set us up for greater productivity.

Let us contrast that with the Lib Dem plan to pile on to inflationary pressures an unfunded £3 billion a year. That is eclipsed only by Labour’s £28 billion a year—Interruption.] Labour Members do not want to hear it; they are talking among themselves. The IFS said that Labour’s £28 billion plan would cause interest rates and inflation to rise. Paul Johnson said that

“additional borrowing both pumps more money into the economy, potentially increasing inflation, and also drives up interest rates.”

That really would be a Labour mortgage bombshell.

In this barmy weather, those thinking of taking a summer holiday should remember that Labour’s economic policy has more flip-flops than the average surf shop: national insurance, corporation tax, the pensions cap, North sea gas, and, yesterday, shelving reform of high street business rates. The fact is that no Labour Government have ever left office with unemployment lower than when they came to power. As my hon. Friend the Member for Stourbridge (Suzanne Webb) reminded us, the note left by Labour’s Chief Secretary to the Treasury in 2010 said, correctly: “I’m afraid to tell you there is no money left.”

This Government are taking action on the economy. We are taking the tough decisions to bear down on inflation, we are supporting the vulnerable, we are helping the economy to grow, and, as the amendment states, we are helping mortgage holders with our new mortgage charter.

[Mr Deputy Speaker (Mr Nigel Evans)]

To inform the House, I shall put the main Question first. Should it be negatived, I will then put the Question on the amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Financial Services and Markets Bill

Andrew Griffith Excerpts

Consideration of Lords message
Monday 26th June 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

I beg to move, That this House disagrees with Lords amendment 7.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss:

Government amendments (a) to (c) in lieu of Lords amendment 7.

Lords amendment 10, and Government motion to disagree.

Lords amendment 36, Government motion to disagree, and Government amendment (a) in lieu of Lords amendment 36.

Lords amendments 1 to 6, 8, 9, 11 to 35 and 37 to 86.

[Andrew Griffith]

I am delighted to speak again to the Bill, following its passage through the other place. I thank my colleagues, Baroness Penn and Lord Harlech, for their expert stewardship of the Bill, as well as the Opposition spokespeople for their generally constructive tone.

Hon. and right hon. Members will be aware that the Bill is a crucial next step in delivering the Government’s vision of an open, sustainable and technologically advanced financial services sector. Members will also recall that this sector is one of the crown jewels of our economy, generating 12% of the UK’s economic activity and employing 2.5 million people in financial and related professional services. Few constituencies will be untouched by those jobs and economic benefits. For example, Scotland benefits from £13.9 billion of gross value added and an estimated 136,000 jobs.

The Bill seizes the opportunities of Brexit, tailoring financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre and deliver better outcomes for consumers and businesses.

The Bill repeals hundreds of pieces of retained EU law relating to financial services and gives the regulators significant new rule-making responsibilities. These increased responsibilities must be balanced with clear accountability, appropriate democratic input, and transparent oversight. There has been much debate in this House and in the other place about how to get that balance right. As a result of the considered scrutiny, the Government introduced a number of amendments in the Lords that improved the Bill in this regard.

Lords amendments 32 to 34 require the regulators to set out how they have considered representations from Parliament when publishing their final rules. Lords amendments introduced by the Government require the regulators to report annually on their recruitment to the statutory panels, including the new cost-benefit analysis panels created by the Bill. The amendments also require the Financial Conduct Authority and the Prudential Regulation Authority to appoint at least two members of authorised firms to their CBA panels. This will ensure that their work is informed by practical experience of how regulatory requirements impact on firms. My hon. Friends the Members for North East Bedfordshire (Richard Fuller), for North Warwickshire (Craig Tracey) and for Wimbledon (Stephen Hammond) may recognise that amendment and I thank them for their efforts to ensure that the Bill delivers proper accountability.

Amendments from the Government also provide a power from the Treasury to require statutory panels to produce annual reports. The Treasury intends to use this power in the first instance to direct the publication of annual reports by the CBA panels and the FCA consumer panel. I hope the hon. Member for Blaenau Gwent (Nick Smith) will welcome this as he tabled a similar amendment on Report.

Lords amendment 37 will enhance the role of the Financial Regulators Complaints Commission, which is an important mechanism for raising concerns about how the FCA, the PRA and the Bank of England carry out their functions. The amendment requires the Treasury, rather than the regulators themselves, to appoint the complaints commissioner, significantly strengthening the independence of the role.

In response to a debate in this House, the Government amended the Bill to introduce a power in clause 37 for the Treasury to direct the regulators to report on various performance metrics. On 9 May, I published a call for proposals, seeking views on what additional metrics the regulators should publish to support scrutiny of their work, focused on embedding their new secondary growth and competitiveness objectives. We have already had a number of helpful responses and we will come forward with proposals at pace following the expiry of the deadline next week. To further support that, Lords amendment 6 requires the FCA and the PRA to publish two reports on how they have embedded those new objectives within 12 and 24 months of the objectives coming into force. Taken together, these are a significant package of improvements to hold the regulators to account.

I know that access to cash is an issue of huge importance to many Members on both sides of the House. Representing the rural constituency of Arundel and South Downs, where the constituents are older than the UK average, this has always been at the forefront of my mind during the passage of the Bill. I also pay tribute to the campaigning work done by the Daily Mail and the Daily Telegraph on behalf of their readers as well as by groups such as Age UK and the Royal National Institute of Blind People.

Let me be clear: the Government’s position is that cash is here to stay for the long term. It provides a reliable back-up to digital payments, can be more convenient in some circumstances, and many, particularly the vulnerable, rely on cash as a means to manage their finances. The Bill already takes significant steps forward in protecting the ability of people and businesses across the UK to access cash deposit and withdrawal facilities for the first time in UK law. I am pleased to report that we have gone even further and introduced Lords amendments 72 to 77, which will protect people’s ability to withdraw and deposit cash for free. The amendments will require the FCA to seek to ensure reasonable provision of free cash access services for current accounts of personal customers. This will be informed by regard to a Government policy statement, which I expect to publish no later than the end of September.

Many Members are concerned about the separate issue of face-to-face banking. The FCA already has guidance to firms around the closure of bank branches and I hope that they and the industry will listen to the concerns of Members on behalf of their constituents on that issue.

Many Members across the House will have experienced the disproportionate application of rules requiring enhanced due diligence for politically exposed persons— PEPs. They and their families should not face some of the challenges and behaviours by banks that I have heard about. The Government are taking action to ensure that PEPs are treated in a proportionate manner. Lords amendment 38 requires the Treasury to amend the money laundering regulations to explicitly distinguish between domestic and foreign PEPs in law.

[Peter Grant (Glenrothes) (SNP)]

Will the Minister be more explicit as to what the close associates of domestic PEPs might include? Will it include, for example, somebody who has been elevated to the Lords by a former Prime Minister against the advice of the security services?

[Andrew Griffith]

In the interests of making progress on this substantial Bill, I shall not be tempted to comment on this further other than to say that I undertake, as I have to many other Members, to look very closely at that issue. For example, if by “associates” we mean either the adult children of people who have no real connection to the business that happens in this House, or family businesses that, again, are not directly connected to those who have put themselves forward for public service, I shall look closely at that. That is why we have tabled the amendments.

Lords amendment 39 requires the FCA to conduct a review into whether financial institutions are adhering to its guidance on the treatment of PEPs, and to assess the appropriateness of its guidance in light of its findings. Together, the amendments will lead to a change in how parliamentarians and their families experience the regime, and I am confident that they will be welcomed by all.

I will now set out the Government’s response to the non-Government amendments made in the Lords. The Bill introduces a new regulatory principle requiring the regulators to have regard to the Government’s net zero emissions target. Lords amendment 7 seeks to add conservation and the enhancement of the natural environment and other targets to this regulatory principle. The Government cannot accept the amendment as drafted, which is very broad and open to interpretation. The regulators must balance their objectives carefully, and they have a very important job to do. At a time when the Bank of England is rightly occupied by getting a grip on inflation, and the FCA is dealing with a range of challenges including working with lenders to ensure that there is support in place for those experiencing increases in mortgage interest rates, we must not overburden them with other considerations, particularly when they are vague or of uncertain relevance.

[Philip Dunne (Ludlow) (Con)]

My hon. Friend is making a very clear exposition of the Government’s position on the Lords amendments. On replacing Lords amendment 7 with a Government amendment, will he make it clear, for the benefit of the House and the other place, that his proposal is both effective in law and will give effect to the substance of what their lordships were seeking, which is that nature should be a key responsibility under the Bill?

[Andrew Griffith]

I give my right hon. Friend that assurance. This is not about a different destination; the Government have a proud record of action on net zero, on nature and, as we will come on to talk about, on deforestation. This is simply the best mechanism by which we can get from here to there. It builds upon the well-defined targets set in the groundbreaking Environment Act 2021, and in so doing produces something that we think regulators can advance while giving the right clarity to those objectives.

Lords amendment 36 seeks, laudably, to require financial services firms to introduce a due diligence regime to ensure that they do not support illegal deforestation in their activities. I see no fundamental conflict between having a vibrant, competitive, world-leading financial services sector and taking the very toughest approach on deforestation. The House considered a similar amendment from my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) on Report. As I set out then, the Government fully support the intention behind the amendment, but further work is needed to ensure that a practical regulatory framework can adequately address this important topic.

I am grateful for the work of the Global Resource Initiative and in particular for its May 2022 finance report, which directly addresses these issues. The GRI talked about the need to take a staged approach and said that further work would be needed to come forward with a set of detailed standards and due diligence requirements to prevent the financing of forest risk commodities. Any intervention must therefore be scoped in detail and ensure that the UK moves in lockstep with international partners to ensure the true effectiveness of the regime in tackling the scourge of financing illegal deforestation.

The GRI report acknowledged that the well-developed work of the task force for nature-related financial disclosures, TNFD, will be increasingly important, especially as it has now included recommendations on deforestation in its draft standards. That is an organisation that the UK Government support and have provided finance to, and it is supported by the finance leaders of both the G7 and G20.

[Philip Dunne]

My hon. Friend is being very generous with his time. Without wanting to pre-empt the work of the Environmental Audit Committee, which is doing an inquiry into the whole subject of financing deforestation and what this country can do, I congratulate him on the amendment he has tabled in lieu of the Lords amendment. I think his amendment will do precisely what our Committee is likely to call for when we report in a few weeks’ time.

[Andrew Griffith]

I thank my right hon. Friend for his work and the work of his Committee, and for being so kind as to suggest that we may be anticipating his conclusions—not that I had prior knowledge of them. The important thing, a point made well by my right hon. Friend the Member for Epsom and Ewell, is that we get on and do this from a practical perspective. We have committed to convening a series of roundtables during the remainder of 2023, which will form the basis of a taskforce to drive forward the work of that important review and support the development of clear due diligence standards.

[Chris Grayling (Epsom and Ewell) (Con)]

I am grateful for how my hon. Friend the Minister has picked up the agenda and moved forward, following pressure both in this House and in the other place. The key to the taskforce that he is establishing is that it delivers not just a direction of travel but tangible recommendations on monitoring a system of due diligence, in a form that is actionable by the Government and by Parliament. Will he give that mandate to those he puts in to the taskforce for the job that he expects them to do?

[Andrew Griffith]

I would love if it “Action” were my middle name. Certainly, my right hon. Friend has that commitment from me and from Baroness Penn, who leads on green finance. The whole purpose of the taskforce is to drive forward action and support the development of clear due diligence standards. That is the important unlocking that we seek. We commit to doing that against a genuinely ambitious timeframe of just nine months following the first relevant regulations under the Environment Act 2021 being made. Those are important, as they are the starting point, but we will not sit idly by; once the Bill receives Royal Assent, that work can happen quickly. I pay tribute to him for his consistent work in this area and for raising the matter throughout these debates, and I hope he recognises the Government’s dedication to tackling illegal deforestation through our amendment.

--- Later in debate ---

The cash system is an essential piece of infrastructure, like utilities such as the post and broadband. These Lords amendments will help not only millions of citizens of all ages who risk otherwise being excluded if cash is allowed to die, but businesses, charities and many residents in Southend West.

[Andrew Griffith]

I am grateful to all hon. and right hon. Members who have contributed to this debate. I welcome my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who together with my right hon. Friend the Member for Salisbury (John Glen) started this Bill’s progress through the House. I spoke at length and tried to cover as many topics as possible in my opening remarks, so I will be brief.

I extend my thoughts to the hon. Member for Mitcham and Morden (Siobhain McDonagh). I have never actually made it to the cash machine promised in her constituency, but her words echo whenever we talk about access to cash. I did make it to the constituency of the hon. Member for Ealing Central and Acton (Dr Huq), one of the lucky constituencies to have one of the six hubs, of which we seek to see many more.

I welcome hon. Members’ acknowledgement of the substantial steps that the Government have taken to further enhance regulatory accountability through the passage of the Bill. The hon. Members for Blaenau Gwent (Nick Smith) and for Glenrothes (Peter Grant), my hon. Friend the Member for Wimbledon (Stephen Hammond) and my right hon. Friends the Members for South Northamptonshire (Dame Andrea Leadsom) and for Vale of Glamorgan (Alun Cairns) all talked about that.

The largest part of the debate was about the importance of access to cash, and the Government have introduced Lords amendments for precisely that. I wish my hon. Friend the Member for Hyndburn (Sara Britcliffe) good luck with procuring a hub for Great Harwood. My hon. Friend the Member for Aberconwy (Robin Millar) spoke about access to cash, as did the Member with the most formidable knowledge of the important role played by the Post Office, my hon. Friend the Member for North Norfolk (Duncan Baker), and my hon. Friend the Member for Southend West (Anna Firth). I and, I hope, the banks have heard the debate. It is important that they have been listening to the strong points made about not just access to cash but access to face-to-face branch facilities.

We heard from the hon. Member for Glenrothes about why Lords amendment 7 does not cover the devolved Administrations. I understand that this is not necessarily his desired outcome, but financial services legislation is a reserved matter. As an outcome, I hope to deliver a Brexit dividend—he may not particularly welcome that—for citizens in all parts of the country to protect those 140,000 jobs that, as we heard, Scotland relies on.

[Peter Grant]

Just to be clear, the Minister is saying that if the Scottish Government set a higher target for something than the UK Government do on behalf of England, the regulators will go with the UK Government’s low target, and if the UK Government set a higher target than the Scottish Government feel comfortable with, the regulator will go with the UK Government’s higher target, even in areas where an activity is devolved.

[Andrew Griffith]

We are always happy to listen to the hon. Member, but we are in danger of repeating ourselves.

Let me briefly give my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) the assurance he seeks that we will not just have another review. We seek action. We will be looking for a framework for due diligence and for how we can hold the financial sector to account. Both he and my right hon. Friend the Member for South Northamptonshire talked about how we can make the UK financial sector an exemplar on deforestation and support for nature. That is my aspiration, and I believe that it is shared across the House. The Government’s amendment in lieu of Lords amendment 36 will do that.

Government amendments made throughout the passage of the Bill reflect the comprehensive scrutiny and engagement of both sides of the House, just as we have heard tonight, and the Bill is the better for it as a result. I hope that their lordships will listen to the voice of this House. It is now time to pass the Bill and begin the really important work of tailoring our financial services regulation to serve the interests of the UK, bolster our competitiveness as a global financial centre, power growth in every part of the country and every part of the economy and, above all else, deliver better outcomes for the consumers and residents we represent.

Question put, That this House disagrees with Lords amendment 7.

Oral Answers to Questions

Andrew Griffith Excerpts

Tuesday 20th June 2023 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

1. Whether he has held discussions with banks on the costs of implementation of Financial Ombudsman Service decisions.

[The Economic Secretary to the Treasury (Andrew Griffith)]

The Financial Ombudsman Service offers a proportionate and informal resolution of disputes that is cost-free for consumers. Where it upholds a complaint against a firm, it can award redress for that concern to that consumer. I work very closely with my officials and with the Financial Ombudsman Service to make sure consumers have the justice they require.

[Jim Shannon]

I thank the Minister for that that response. This has been an ongoing issue in the House for some time, and I spoke to some of the Minister’s colleagues beforehand. The Chancellor and the Minister will know that the parliamentary ombudsman found that 1 million Equitable Life savers lost money as a direct result of Government decisions. Why, then, are the Government holding themselves to a different standard and ignoring the wishes of the parliamentary ombudsman, having paid victims of the Equitable Life scandal only 22% of the money they lost from their pension funds? I say that with great respect, but I do think we need an answer.

[Andrew Griffith]

I respect the hon. Member for raising this issue. It has however, been raised many times before in this House, and answered from this Dispatch Box as well.

[Ian Byrne (Liverpool, West Derby) (Lab)]

2. What fiscal steps he plans to take to help reduce the impact of recent increases in the cost of living on households.

--- Later in debate ---

[Christine Jardine (Edinburgh West) (LD)]

10. If he will make an assessment of the implications for his Department’s policies of the cost of mortgage products.

[The Economic Secretary to the Treasury (Andrew Griffith)]

We recognise that this is a concerning time for homeowners and mortgage holders, but we cannot ignore the fact, much as some may wish to, that interest rates have risen across western economies as a result of the covid pandemic and the impact of the war in Ukraine. The Bank of England sets the base rate, which can have an effect on mortgage pricing, and the Bank has been independent since the decision of the then Labour Government in 1997. We remain committed to responsible management to bring inflation under control, which is the only sustainable way to lower interest rates and lower mortgage rates.

[Gerald Jones]

The former Prime Minister has apologised for the mistakes in her so-called growth plan and the damage it caused. Families across the UK will soon start paying thousands more in mortgage interest payments. Given the Prime Minister’s comments yesterday, it appears that there is little or no further support coming. Will the Minister join the former Prime Minister and apologise to the nation for the impact of the Conservative party’s misguided economic experiment?

[Andrew Griffith]

Much as the Opposition would prefer this not to be the case, it is a fact that this is impacting across western economies. Although market-to-market comparisons are not always easy, in the United States of America the average 30-year mortgage has now increased to above 6%. As I have said, this Government will do what we can sustainably to lower interest rates, and thereby ease the burden on mortgage holders.

[Janet Daby]

This is the second time I am putting it to the Government that the Conservatives are no longer the party of home ownership, and I do not think it will be the last time either. I say this because the average interest rate on a new two-year fixed mortgage is now above 6%. The Chancellor has already said that they will do everything they can, but what does that actually mean, because the public would like to know?

[Andrew Griffith]

I thank the hon. Lady for her question. Not only are we taking action and taking the tough decisions to sustainably improve the nation’s finances, but we are working with lenders—the Chancellor and I regularly meet the mortgage industry—on the support they can provide to mortgage holders if they do get into financial difficulties. There is a range of measures, which includes term extensions and switches to interest-only payment holidays. The Financial Conduct Authority guidance is very clear that any repossessions—and they are currently running at a historical low—should be an absolute last resort.

[Christine Jardine]

As a result of the 6% rate that we have heard about, more than 1 million households on flexible-rate mortgages have already faced increases this year, and 1.8 million more will see their fixed-rate deals come to an end and face increases in this year. It is not just homeowners. The knock-on effect has meant that in my constituency in Edinburgh, we have had the highest rental inflation anywhere in the country at 13.7% in the last financial year, because landlords are facing increases in their mortgages. The Government have said that they are willing to support people, so would they be willing to consider the Liberal Democrat idea of a mortgage protection fund to protect those on the lowest incomes, and support those who are struggling?

[Andrew Griffith]

I thank the hon. Member for her question, but regrettably the proposal that she and her party put forward would not only delay the point at which we are able to bear down on inflation and deliver the nation’s mortgage holders the lower interest they need but, as I understand, it would do nothing for the plight of private renters.

[Mr Speaker]

I call the Chair of the Treasury Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

The growth plan in September obviously had an impact on the mortgage market, but is the Economic Secretary to the Treasury aware that by November, the Governor of the Bank of England said, when he gave evidence to our Committee, that the increases in mortgages henceforth were down to the Bank of England’s own increases, because that temporary effect from the growth plan had dissipated? Increases since then have been largely due to the fact that inflation has been worse than the Bank was forecasting. Did the Economic Secretary note that this week I received a letter from the Chair of the Court of the Bank of England, saying that they are going to undertake the request that I sent for them to look at their inflation modelling and at why it has been incorrect?

[Andrew Griffith]

Not for the first time, the Chair of the Treasury Committee is on the money in her understanding of what is driving the markets, and in her advocacy and championing of the fact that our lending banks need to do a good job not just for mortgage holders, but also for savers. I am happy to meet her to talk about how we can ensure that they do the best job they can.

[Richard Fuller (North East Bedfordshire) (Con)]

In his earlier reply the Minister talked about mortgages in the United States. He will know that in the United States it is common to fix a mortgage for 15 or 30 years, which gives certainty about monthly repayments and can of course be refinanced if mortgage rates go down over the term of the mortgage. I understand that the UK Treasury looked at the UK mortgage markets and at introducing long-term fixed rates, and found that at that time there was not much potential. Will he consider looking at that again?

[Andrew Griffith]

As ever, my hon. Friend’s question is apposite when it comes to Treasury matters. There are indeed long-term fixed-rate mortgages on the market, and I have taken advice from officials on that. The constraining factor is consumer demand, and that is not a pattern of behaviour we have seen. Clearly for some mortgage holders such mortgages do offer long-term certainty, and it is certainly my objective for us to see the broadest range of choices for householders and for their own individual patterns in the market.

[Jonathan Gullis (Stoke-on-Trent North) (Con)]

Mortgage payers in Stoke-on-Trent North, Kidsgrove and Talke are rightly worried at this moment in time, with the impending re-brokering that they are facing. To support what my right hon. Friend the Member for Rossendale and Darwen (Sir Jake Berry) said earlier, is it time to return to a Conservative principle of introducing a mortgage interest relief at source-type scheme, which allows borrowers tax relief for interest payments on their mortgages?

[Andrew Griffith]

I always listen enormously carefully to my hon. Friend’s powerful advocacy for Stoke-on-Trent, and his constituents put their trust in this Government. One thing they put their trust in, is that this Government would not come forward with the sort of unfunded spending commitments that we see on the Labour Benches. That would be disastrous for my hon. Friend’s constituents because it would see inflation remain higher for longer.

[Mr Speaker]

I call the shadow Minister.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

The only thing that grew as a result of what the Government did last September was people’s mortgage payments. Two-year fixed rates are now more than 6%, and payments for householders are up £2,900 over the next year. Have the Government learned the lesson from the previous Prime Minister’s decision—I stress that word; it is nothing to do with international events—to use the country as a giant economic experiment that hurt homeowners, pushed up interest rates and shook international confidence in the United Kingdom? If they have, will the Minister now apologise to the householders who are paying the price for that mistake?

[Andrew Griffith]

As ever, I listened carefully to the right hon. Gentleman’s rhetoric. I ask him whether he has learned the lesson from what we saw with the last Labour Government, who spent their way through the nation’s finances and whose most lasting contribution to the economy was a note that we inherited from the then Chief Secretary to the Treasury saying there was no money left.

[Mr McFadden]

Back to 2023. This is a real crisis, affecting real people as a result of the real decisions of the Minister’s Government. Figures out today show that the average UK tenant is spending more than 28% of their income on rent, and rents have gone up by more than 10% in the past year. Rents are being forced up because the landlords who people rent from are seeing their mortgages go up, too, and sometimes even faster than mortgages in general. The Chancellor and the Prime Minister were supposed to be the team that would come in and sort everything out. Can the Minister tell us what went wrong?

[Andrew Griffith]

What went right is the fact that we on the Government Benches not only always focus on the stability of the nation’s finances to get inflation and interest rates falling further and faster than the Opposition would, but even within that envelope, we found £3,300 on average to support households over last winter and the upcoming winter. That will have a significant impact on the difficulties that mortgage holders and renters are facing because of the higher interest rates that are a feature across the western world.

[Rachel Hopkins (Luton South) (Lab)]

4. What recent assessment he has made of the effectiveness of the financial sanctions regime.

--- Later in debate ---

[The Economic Secretary to the Treasury (Andrew Griffith)]

My hon. Friend is a strong champion of consumers who have suffered financial loss, particularly through his chairmanship of the all-party parliamentary group on personal banking and fairer financial services. He understands that the UK does not operate a zero-loss regime where consumers of financial services are automatically compensated, but it is important that regulators make very clear where the scope of protection lies and who is eligible for compensation.

[Bob Blackman]

I thank my hon. Friend for that answer. It is clearly important that where the ombudsman recommends that compensation be paid, banks pay it. Equally, the Government should pay compensation, such as when the parliamentary ombudsman found against them on Equitable Life policyholders, as was mentioned by the hon. Member for Strangford (Jim Shannon). I understand that the budget to pay compensation to those policyholders has been underspent by some £300 million, so rather than return the money to the Treasury, will my hon. Friend use it to compensate the Equitable Life policyholders who have suffered in the long term?

[Andrew Griffith]

We set out the terms of that settlement in 2010 and there is nothing to update the House on today.

[Nick Smith (Blaenau Gwent) (Lab)]

For over five years, I have campaigned on behalf of steelworkers who were part of the British Steel pension scheme. Many were ripped off by sharks posing as financial advisers. While a redress scheme is now in place, legal advisers for steelworkers report claim processing delays of six months at the Financial Conduct Authority, 12 months at the Financial Services Compensation Scheme and two years at the Financial Ombudsman Service, which suggests that all is not right. Delays to cases can have a big impact on possible payouts, so will the Minister please look into the performance of those organisations? Steelworkers and other financial consumers deserve much better than this.

[Andrew Griffith]

Yes, I will. I have had conversations with the hon. Member about that, and I will take up the case of any unwarranted delays.

[Alexander Stafford (Rother Valley) (Con)]

8. What fiscal steps he is taking to support the technology sector.

--- Later in debate ---

[Craig Tracey (North Warwickshire) (Con)]

T3. As the Minister knows, having a strong insurance and financial services sector is vital to the growth of our economy, which is one of the Prime Minister’s pledges. So will the Minister confirm that he is doing everything in his power to make that happen, particularly with a view to our international competitiveness in those key sectors?

[The Economic Secretary to the Treasury (Andrew Griffith)]

I can give my hon. Friend the assurance he seeks. He will know from his significant contribution to the Financial Services and Markets Bill as it has gone through this House that it introduces a new duty on our financial regulators to promote the growth and international competitiveness of the United Kingdom. Thanks to him, the Bill also contains specific reporting measures as to how they are going to achieve that important objective.

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[Anna Firth (Southend West) (Con)]

In-person banking facilities are vital to everyone in Southend West, yet in recent years we have lost all but one of our bank branches. A new community-based post office banking hub model is being rolled out, so will the Minister support my efforts to get one of those into Leigh-on-Sea?

[Andrew Griffith]

I thank my hon. Friend for her question. She will be aware of what is in our Financial Services and Markets Bill, and I can update the House by saying that the Government have tabled an amendment to protect free access to cash withdrawal and deposit facilities. I would be happy to meet her to discuss her constituency’s needs.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

T8. I remind the House of my entry in the Register of Members’ Financial Interests. Recent Government pronouncements relating to food security have been welcome, but if they are to be meaningful then farmers and crofters need certainty about the future of Government support and, critically, the amount of money that will be available to fund that. Will the Chancellor tell us when he will engage with the Department for Environment, Food and Rural Affairs and the devolved Administrations about the size of the budget that will be available? In the meantime, will he meet with me and the National Farmers Union Scotland?

[Mary Robinson (Cheadle) (Con)]

The last bank in the entire constituency of Cheadle is about to close, so I was delighted when, following my interventions and direct conversations with LINK and appeals from the community, Bramhall was chosen to be LINK’s 100th banking hub recommendation. It will be invaluable for residents, but they will be left without banking services until it is open. Will the Minister look into bridging options in the interim, between the bank closing and the hub opening, or consider imposing requirements on banks to remain open until a hub is implemented?

[Andrew Griffith]

I would be happy to meet my hon. Friend to talk about the range of options. I am delighted about the solution proposed for Bramhall, in her constituency. Last week, I visited the new banking hub in the constituency of the hon. Member for Ealing Central and Acton (Dr Huq). I hope the whole House will wish the operator, Vip Varsani, well in that new endeavour.

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[Alun Cairns (Vale of Glamorgan) (Con)]

Clear policy direction and a strong regulatory framework have led to the UK being the world’s leading centre in financial technology. Does my hon. Friend agree that the crypto industry offers the same opportunity for the UK to exploit?

[Andrew Griffith]

My right hon. Friend is absolutely right. I was pleased to join him in a Westminster Hall debate about the regulation of the cryptoassets sector. I commend the work done in this House by the crypto and digital assets all-party parliamentary group. He might join me in welcoming the decision by Andreessen Horowitz, one of the world’s largest technology companies, to locate its only international office outside of San Francisco here in the UK and to run its 2024 cryptoassets school here.

[Clive Efford (Eltham) (Lab)]

In 2016, Exercise Cygnus tested the country’s preparedness for a pandemic. Was the Government’s response at that time adequate, and what can the Chancellor do in his current role to make sure that we are properly prepared in the future?

Co-operatives and Friendly Societies: Law Commission Review

Andrew Griffith Excerpts

Monday 19th June 2023 Written Statements

[The Economic Secretary to the Treasury (Andrew Griffith)]

The Government recognise that co-operatives and friendly societies make an important contribution to the growth and diversity of the economy, supporting competition across all sectors of the economy and providing products in the interests of consumers and businesses across the UK.

HM Treasury will therefore be commissioning the Law Commission—an arm’s length body of the Ministry of Justice—to conduct reviews of the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992. These two pieces of legislation underpin the co-operative movement and the friendly society sector in the UK, respectively.

These reviews will aim to identify necessary updates to the legislation that will set co-operatives and friendly societies up for future growth and success. This will include a comprehensive consultation with interested stakeholders, in line with the terms of reference that will be agreed between HM Treasury and the Law Commission. At the end of the review, the Law Commission will produce a set of recommendations for reform for the Government to consider. Work is expected to start in the autumn.

[HCWS862]