Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) Order 2023

Andrew Griffith Excerpts

Monday 27th March 2023 General Committees

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

I beg to move,

That the Committee has considered the Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) Order 2023 (S.I. 2023, No. 319).

It is a pleasure to serve with you in the Chair, Mr Hollobone.

As right hon. and hon. Members will be aware, Silicon Valley Bank UK Ltd was sold on Monday 13 March to HSBC. Customers of SVB UK are now able to access their deposits and banking services as normal. The transaction was facilitated by the Bank of England, in consultation with the Treasury, using powers granted to it by Parliament through the Banking Act 2009. In doing so, we limited risk to our tech and life sciences sector and safeguarded some of the UK’s most promising companies, protecting customers, financial stability and the taxpayer. The solution was a win for taxpayers, customers and the banking system.

SVB UK has become a subsidiary of HSBC’s ringfenced bank. Ringfencing requires banking groups that hold over £25 billion of retail deposits to separate their retail banking from their investment banking activities. The regime provides for a four-year transition period for an entity acquired as part of the resolution process before it becomes subject to ringfencing requirements. As a result of that existing legislation, SVB UK is not currently subject to ringfencing requirements. However, HSBC UK, the parent company of SVB UK, remains subject to the ringfencing regime.

To facilitate the transaction, we laid in both Houses of Parliament on Monday 13 March a statutory instrument, using powers under the Banking Act 2009, to broaden an existing exemption in ringfencing legislation with regard to HSBC’s purchase of SVB UK. The exemption allows HSBC’s ringfenced bank to provide below market rate intra-group funding to SVB UK. That was crucial for the success of HSBC’s takeover of SVB UK, because it ensured that HSBC was able to provide the necessary funds to its newly acquired subsidiary.

HSBC has since stated publicly that it has provided approximately £2 billion of liquidity to SVB UK—money that it required to continue to meet the needs of its customers, and which this instrument facilitated. The Bank of England and the Prudential Regulation Authority are fully supportive of this modification to the ringfencing regime as a necessary step to facilitate the sale.

In view of the urgency, and given that this statutory instrument was crucial in enabling the sale, the Treasury determined that it was necessary to lay the instrument using the made affirmative procedure, under its powers in the Banking Act 2009. Parliament provided the Treasury with those powers for exactly such situations, recognising that exceptional circumstances can arise when the Government must take emergency action in the interests of financial stability, depositors and taxpayers.

The statutory instrument also makes a number of modifications to the Financial Services and Markets Act 2000 in relation to the rule-making powers of the PRA and the Financial Conduct Authority. Specifically, the rule-making powers are modified to ensure that regulators can exercise them effectively when they relate to the Bank of England’s transfer of SVB UK to HSBC, and the write-down of SVB’s UK shareholders and certain bondholders. The statutory instrument also waives the requirement for the regulators to consult on certain rule changes related to the sale.

In addition to today’s measure, the Government will in due course lay another statutory instrument to make further changes to the ringfencing regime with regard to HSBC’s purchase of SVB UK.

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

It is a privilege to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Minister and the Treasury for the way in which they moved swiftly to facilitate the acquisition of SVB UK by HSBC.

My hon. Friend will be aware of the questionable confidence in some banks around the world. Has he made an assessment of whether he will need to come before Parliament again to propose similar adjustments to regulations for other banks that might find themselves in the same situation as SVB UK, or should we be confident that the UK banking sector in the UK is sufficiently robust?

[Andrew Griffith]

I thank my right hon. Friend for his question. Primacy for financial stability sits within the Bank of England and the Financial Policy Committee. All I can say is that the Governor of the Bank of England has confirmed that, in his view, the UK banking system remains

“safe, sound and well capitalised”.

I hope that my right hon. Friend understands that it would not be right for me to step outside those words.

[Hilary Benn (Leeds Central) (Lab)]

The Minister said a moment ago that HSBC has to date provided some £2 billion to SVB to enable it to service its customers. Are such sums reported regularly to the Bank of England and regulators? Does he anticipate that HSBC will need to transfer further sums to continue to support depositors?

[Andrew Griffith]

Colleagues should know that I have nearly concluded my initial comments, if they want to intervene.

The truth is that I do not know whether such sums are reported regularly. Within the financial regulation system, the PRA has strong oversight, often with quite intrusive reporting requirements. I will write to the right hon. Gentleman about the ongoing nature of reporting. It is public knowledge that the bank had suffered withdrawals in the days immediately running up to the action we took, so clearly the money’s purpose was, in effect, to replenish it so that the money was in funds for all the bank’s clients.

The second statutory instrument that we will lay in due course will allow SVB UK to remain exempt from the ringfencing rules beyond the four-year transition period, subject to certain conditions—in effect, to make that permanent. That second exemption is not required immediately, and it will not be subject to the made affirmative procedure, but the House will have an opportunity to debate it after it has been introduced. The exemption was deemed critical to the success of the sale as it ensured that SVB UK could remain a commercially viable, stand-alone business, serving its clients within the HSBC group.

There was a clear determination that the measures were crucial to facilitating the purchase of SVB UK by HSBC—not just by the Government, but by the Bank of England. The UK has a world-leading tech sector, with a dynamic start-up and scale-up ecosystem, and the Government were pleased that a private sector purchaser was found. I therefore hope that right hon. and hon. Members will join me in supporting the legislation.

--- Later in debate ---

[Andrew Griffith]

It is always a pleasure to follow the hon. Member for Hampstead and Kilburn and the right hon. Member for Dundee East as I master my brief.

The hon. Member for Hampstead and Kilburn talked about the wider issue of interest rates in the current environment. The Bank of England has processes in place to monitor their impact. Each year it carries out a stress test that involves plausible economic scenarios. The 2022 stress test included a rapid rise in interest rates—the UK bank rate was assumed to rise to 6% in early 2023—and higher global interest rates. The hon. Lady will be as keen as I am to see the results of that test, which will be published in the summer. This year, the Bank will also run, for the first time, an exploratory scenario exercise based on non-bank financial institution risks, which I imagine are also of concern to the hon. Lady.

The hon. Member for Hampstead and Kilburn and the right hon. Member for Dundee East talked about the background to and justification for the exemption. To put it simply, it was a prerequisite for the deal in order for SVB to continue to service its existing range of clients. In the circumstances, the view of the Treasury and the Bank of England was that it was expedient. While I do not think that hon. Members have misunderstood the situation, I was clear that the exemption is absolutely not one for HSBC itself. Its ringfenced activities and balance sheet remain within the ringfence, with all the protections that involves. Whether or not I agree with the characterisation of the right hon. Member for Dundee East, all of those protections remain as is. The simple fact is that SVB UK, a much smaller bank, accounts for roughly fewer than 1% of clients. I can be bolder: I think fewer than 10% of 1% of the company’s clients will sit within SVB UK, and there will, of course, be provisions to prevent the migration of one to the other. Effectively, the objective of what we are doing will maintain the status quo.

The hon. Member for Hampstead and Kilburn asked whether there would be any further “tinkering” with the ringfencing regime. I assure her there will not be any tinkering, but there might well be appropriate reforms. They will draw on the work of Sir Keith Skeoch, with whom she is probably familiar, and also the expressions of interest that are out in the field. She might wish to engage with that process and make sure her views are well represented. The purpose of doing so is always to mobilise productive capital in the right way. While there are many positive aspects to the ringfence, if it is implemented wrongly, it can suppress the availability of capital for start-ups, scale-ups and SMEs, which none of us would intend.

After the hon. Lady suggested that we might tinker with the ringfence, she spoke about what we are doing to help the sector in question, which is a core focus for the Government. The Chancellor said in the Budget that we will come forward with a full package of measures by the autumn statement. Work is going on right now to ensure that our most cutting-edge companies can access capital at every part of the curve—from scale-up from the first round, all the way through to the listed environment. That includes the £250 million LIFTS—long-term investment for technology and science—scheme, which we launched in the Budget. We are also progressing the Department for Work and Pensions consultation on the value-for-money framework relating to capital trapped in pensions, as well as the potential for pension scheme consolidation and lifting the charge cap on pensions. We also extended the British patient capital programme by a further 10 years until 2033-34, with an increased focus on the most R&D-intensive industries. That will put another £3 billion behind opportunities for the most productive capital.

The hon. Member for Hampstead and Kilburn asked for reassurance that, under HSBC’s ownership, the sector would continue to be supported. I have had that assurance from the bank’s executives. It is not for the Government to commit to how the bank will run that business, but it is putting capital behind it and has talked about a growth strategy. As I understand it, it has retained the existing management, who were well regarded in the sector. Although no one should be naive, and we will keep a close eye on the situation, everything that I have seen to date gives me the reassurance that the hon. Lady wants.

Question put and agreed to.

UK Infrastructure Bank Bill [Lords]

Andrew Griffith Excerpts

Consideration of Lords message
Wednesday 22nd March 2023 Commons Chamber

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

I beg to move, That this House agrees with Lords amendment 3B.

The Lords proposed amendment 3B in lieu of Commons amendment 3. As the UK Infrastructure Bank Bill reaches the final stage of its passage, I am pleased that it will also include nature-based solutions explicitly.

Members will recall that in previous debates I noted that nature-based solutions were already included in the inclusive definition of infrastructure, and as such we did not think it necessary to add them explicitly to the Bill. The Government have, however, reflected on that position and we recognise the strength of feeling on the matter across both Houses. I am therefore pleased to say that we support the Lords amendment in lieu, and I hope that colleagues across this House will do so, too. We think that the amendment strikes a careful balance, making it clear that nature-based solutions are within the bank’s remit without being overly prescriptive and limiting the bank’s opportunity to invest.

I thank hon. Members for their contributions to this Bill. I am pleased that, on such an important Bill, we have reached consensus. UKIB has transformative potential, which I know is recognised and supported on all sides of the House, and the changes made to the Bill show how effective Parliament is in scrutinising legislation. This Bill is the final stage in establishing the bank as a long-lasting institution, establishing in statute its key objectives of tackling climate change and supporting regional and local economic growth.

[Madam Deputy Speaker (Dame Eleanor Laing)]

The question is that this House agrees with the Lords in their amendment 3B. I am going very slowly in case anybody appears on the Opposition Front Bench—or, indeed, in case anybody currently on the Opposition Front Bench wishes to address the matter. No? Then we will move to the SNP spokesman.

--- Later in debate ---

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

On behalf of the Opposition, I would like to say that we support this amendment. As other speakers have said, it improves on the text of the Bill, so we are happy to support it.

[Andrew Griffith]

I thank the hon. Member for Brentford and Isleworth (Ruth Cadbury) for the Opposition’s support. Indeed, the Bill has been characterised by support from across the House for this important institution, which, I remind the House, is already up and running. Today, I am pleased to say, we are putting it on a statutory footing.

I have heard the comments made by the right hon. Member for Dundee East (Stewart Hosie), as well as by my good and hon. Friend the Member for North East Bedfordshire (Richard Fuller), who helped to pilot the Bill through its early stages. I will make the point that my hon. Friend expected me to make: the language in the Bill is inclusive rather than exclusive. His point is well made and understood.

On behalf of this House, we wish the institution well as we put it on a statutory footing. We in this House all look forward to hearing how it fulfils its objectives of levelling up and adding to the transition to net zero.

Lords amendment 3B agreed to.

Draft Economic Crime (Anti-Money Laundering) Levy (Amendment) Regulations 2023

Andrew Griffith Excerpts

Tuesday 21st March 2023 General Committees

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

I beg to move,

That the Committee has considered the draft Economic Crime (Anti-money Laundering) Levy (Amendment) Regulations 2023.

It is a pleasure to serve under your chairmanship, Ms Elliott.

The risk posed by economic crime is severe, and threatens the UK’s security, prosperity and resilience. Our openness and our status as a global financial centre is vital to our nation’s success. However, that great strength also exposes us to a range of economic crimes and to those who wish to harm UK businesses and individuals. In that context, there can be few objectives more critical than delivering a comprehensive response to economic crime.

That is especially important as we bear down on the Russian war machine in the wake of Putin’s illegal invasion of our ally, Ukraine. That is why the Government expedited the Economic Crime (Transparency and Enforcement) Act 2022, which introduced key reforms to crack down on dirty money and hostile actors. We have gone further still by introducing the Economic Crime (Transparency and Enforcement) Act 2022, which built on the earlier Act to bear down further on kleptocrats, criminals and terrorists.

The instrument we are considering today is the final step in implementing the economic crime (anti-money laundering) levy, which is a core component of the Government’s comprehensive and continuing response to economic crime. Announced at Budget 2020, the new levy aims to raise approximately £100 million a year to help ensure a sustainable funding model for action to tackle money laundering. The levy supplements approximately £200 million of additional Government investment to tackle economic crime over the 2021 spending review period. The funding will help to ensure a step change in our response by supporting the delivery of critical economic crime reforms, including commitments set out in the economic crime plan.

It is right that those sectors that give rise to money-laundering risk help contribute to countering that risk. That is why the levy will be paid by firms subject to the money laundering regulations only. I take this opportunity to thank the sector for their engagement throughout the levy-design process. The Government have worked closely with the industry and the levy collectors, including through policy and technical consultations. In doing so, we have ensured that the levy meets its objectives while aligning as far as possible with the core levy-design principles set out at consultation, including proportionality, predictability, simplicity and cost-effectiveness. The Government have delivered on those principles by ensuring proportionate levy fees, with no business expected to contribute more than a tenth of a per cent. of their UK revenue; by implementing a carve-out for businesses whose annual revenue falls below £10.2 million so that smaller businesses, who make up the vast majority of all those otherwise in scope, are exempt; and by aligning levy policy across the three collectors as far as possible, while adhering to existing collector processes in places for the sake of simplicity.

This instrument makes provisions for assessments and calculations of levy due, levy enforcement through financial penalties, information provision and record preservation obligations, overpayments, reviews and appeals. It has been designed with close regard to the core levy-design principles, including proportionality. It is my hope that stakeholders will welcome the clarity this instrument provides on remaining areas of levy policy and implementation. I assure the Committee that each levy collector will shortly publish information that outlines how in-scope entities should engage with these processes and pay the levy.

[Peter Grant (Glenrothes) (SNP)]

Could the Minister explain why all these amendments are being made now? Why were they not made when the original regulations were made last year?

[Andrew Griffith]

Last year’s Act was the primary legislation that enabled the levy. Subsequently, there has been extensive consultation with stakeholders about the way in which we should proceed with that levy. We are considering the detail of those procedures today.

In the consultation, stakeholders emphasised the importance of clarity and transparency throughout the development and implementation of the levy. The Government share that view, and that is one of the reasons why we are dealing with this in stages. We are committed to delivering annual reports on the operation of the levy, including a breakdown of how the levy is being spent, and a comprehensive review by the end of 2027.

The new levy represents an integral part of the Government’s comprehensive programme of work to ensure that economic crime finds no home in the United Kingdom, preserving this country’s security, resilience and prosperity. I commend the regulations to the Committee.

--- Later in debate ---

[Andrew Griffith]

I do not want to detain the Committee any longer than necessary, but I ought to respond to one or two of the points raised by the hon. Member for Glenrothes. I am slightly at a loss: are we moving too fast or too slowly? One person’s revised SI is another person’s reflection of consultation that results from listening to the industry and a desire to get things right. I accept that this was not his intent, but there was some implied criticism of the hard-working officials who are doing their best to reconcile the needs of transparency with this House and the desires of the sector.

[Peter Grant]

For clarification, the people drafting the legislation are having to do it at pace because they have been lumbered with 4,500 bits of legislation that they would not have had to revise were it not for the Government’s political dogma.

[Andrew Griffith]

We will let that matter rest. On one level, I share the hon. Gentleman’s desire for a smaller state and less legislation, but defending our country from money launderers is perhaps not the best place to start that deregulatory zeal. We can come back to that.

From his work on the Financial Services and Markets Bill, the hon. Gentleman is aware that the Government are introducing measures to protect customers and the victims of push payment fraud, which is very concerning. The quicker that Bill completes its journey in the upper House, the quicker we can get it on the statute book. The £1 billion that he referred to concerns all of us on both sides of the House.

I am not aware of the Gambling Commission having expressed concern. It has been consulted throughout, and collecting levies is within its core purpose. I will of course be open to advisement on that. That is one of the reasons why a review is baked into the regulations. It is a piece of good, proportionate best practice that in 2027 there will be a formal review. I undertake today that the outcome of that review will be brought to the attention of the House.

It is always a pleasure to respond to the hon. Member for Hampstead and Kilburn. She raised the important work of Transparency International. Although this is the final piece of this particular set of economic crime legislation, it is of course not the whole of our anti-fraud strategy. My hon. Friend the Security Minister has told the House that that will come to this place very shortly. I ask all parties to look at that and consider the strategy in the round, together with the Government’s anti-fraud strategy.

The hon. Lady asked me to publish how the levy will be used. Of course, the point of the levy is to build a fund to enhance the overall level of resources available to crime fighters. That could be for a range of purposes, including more intelligence, better reporting infrastructure and more personnel devoted to this area. It will only be in due course that we are able to see where that money is spent. I undertake to the Committee that we will publish an annual report on how the levy is spent. The hon. Lady is right that it should attract proper scrutiny. As she understands, it is only one part of the resources available to our police, anti-fraud initiatives and crime fighters.

Question put and agreed to.

Oral Answers to Questions

Andrew Griffith Excerpts

Tuesday 21st March 2023 Commons Chamber

[Andrew Western (Stretford and Urmston) (Lab)]

16. Whether he is taking steps with Cabinet colleagues to support homeowners with increases in mortgage rates.

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

Mortgage lenders are required to offer a range of tailored support to borrowers in financial difficulty. The Chancellor and I have made clear our expectation that they live up to those responsibilities.

[Mike Amesbury]

A typical family are now paying up to £2,000 more for their mortgage, partially as a result of the former Prime Minister. First, will the Chancellor apologise to those people, who number about 20,000 in my constituency? Secondly, will he seriously do something about it?

[Andrew Griffith]

The Government are supporting households with a £94 billion package of support. We have kept the energy price guarantee for an additional three months and we are bearing down—I hope the hon. Gentleman joins us in doing this—on the biggest cost of living challenge faced by families, which is inflation.

[Andrew Western]

Thirteen years of failed Tory economic policies, alongside last year’s disastrous mini-Budget, have, as my hon. Friend the Member for Weaver Vale (Mike Amesbury) says, left thousands and thousands of mortgage holders subject to high interest rates and sky-high inflation. So I repeat his call: will any member of the Treasury team have the decency to apologise to the very many hard-pressed families who are currently subject to the Tory mortgage penalty?

[Andrew Griffith]

Interest rates are not only falling but are still below the level at which they peaked under the last Labour Government, despite the fact that we have had a covid pandemic and war in Ukraine. I welcome the news last week from the Office for Budget Responsibility that the country is on track to avoid a recession, and we must never forget the words of the right hon. Member for Birmingham, Hodge Hill (Liam Byrne): there is no money left.

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

A competitive and viable banking sector is essential to offer competitive mortgages to constituents right across the country. What assessment has my hon. Friend made of the treatment of additional tier 1 bonds in relation to the Credit Suisse takeover, which could well undermine the sector elsewhere, and what assessment has he made of the value of those bonds here in the UK?

[Andrew Griffith]

I thank my right hon. Friend for his comments. The Government join the Bank of England in welcoming the comprehensive set of actions taken yesterday by the Swiss authorities to ensure financial stability. It would not be for me to talk from the Dispatch Box about the treatment of creditors, but the UK’s bank resolution framework has a clear statutory order in which shareholders and creditors would bear losses in a resolution or insolvency scenario.

[Mr Speaker]

I call the shadow Minister.

[Andrew Griffith]

The hon. Member—[Interruption.] Forgive me, the right hon. Member will be aware that interest rates have been increasing globally. Interest rates in the UK are now lower than the equivalent in the US and are lower than they were last autumn. The Government have a range of measures to help hard-pressed mortgage payers, but above all else, our strong stewardship of the economy is bringing down interest rates and means that we are on track to halve inflation this year.

[Mr Speaker]

I call Mr McFadden.

[Andrew Griffith]

The OBR has confirmed that the UK economy will avoid a technical recession and was the fastest growing economy in the G7 for the past two years.

[Mr Speaker]

Minister, when I am moving on, I want you to move with me.

[Mr McFadden]

The Minister either does not know or will not say what the total cost was. Is it not interesting that it is always someone else’s fault? One of the first things that the Prime Minister did when he took office was to give in to his Back Benchers on house building targets. The Home Builders Federation now says that the supply of new housing is likely to fall to its lowest level since the second world war—less than half the Government’s target. How will building fewer homes as a result of a back-stairs deal inside the Conservative party help young people in our constituencies who dream of owning their own home and getting on the property ladder?

[Andrew Griffith]

We share the aspiration of young people to own their own home, but the best way to help them do that is to have a vibrant, growing economy. We are on the side of doing that. We are taking actions that will restore the economy to growth. Every Labour Government who have ever taken office have left unemployment at a higher rate than when they came in.

[Mr Speaker]

I call the Scottish National party spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

Last August, there were 75,000 mortgage approvals. That number halved by December. We are all aware of the reports from late last year of the number of mortgage products that were removed and the troubling reports of mortgage offers being withdrawn. Before we even get to the issue of support for mortgage holders, what is the Treasury doing to ensure the availability of mortgages, a good range of mortgage products and an end to offers being withdrawn unless there is a very, very good reason to do so?

[Andrew Griffith]

We have recently renewed the mortgage guarantee scheme, which helps the availability of high loan to value ratio mortgages. We are looking very clearly at the mortgage market and at things that we can do to help first-time buyers. The right hon. Member should also know that mortgage arrears, which we monitor very closely, remain low. In fact, they are lower now than they were prior to the pandemic.

[Stewart Hosie]

Of course, 18 months ago a two-year fixed-rate mortgage with a 5% deposit was under 3%. It is now north of 6%. A two-year fixed-interest mortgage with a 25% deposit, which was 1.25%, is now also north of 6%. How can it possibly be fair that somebody buying an average-priced house in Scotland worth around £190,000, putting down a £50,000 deposit, could face an interest rate that has gone up by 500% in that time?

[Andrew Griffith]

Interest rates are now falling, something the right hon. Gentleman declined to mention. The best thing we can do to help with those interest rates is to deliver on the Prime Minister’s objective of halving inflation, and I am encouraged that we are on track to do so.

[Catherine West (Hornsey and Wood Green) (Lab)]

11. What fiscal steps he is taking with Cabinet colleagues to support the economy in reaching net-zero carbon emissions.

--- Later in debate ---

[Gary Sambrook (Birmingham, Northfield) (Con)]

T7. For quite some time, GPs and consultants in Birmingham tab="yes" have expressed their frustration and concern with the pension lifetime allowance cap. I welcome the measures in the Budget last week to abolish it altogether, which will mean that we will see more GPs and consultants practising. Does my hon. Friend agree that it will also mean we will see more teachers and headteachers in the classroom and more police officers on the beat?

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

My hon. Friend is absolutely right. The measure will help public servants, hospital consultants, prison governors, headteachers and senior police leaders, which is why I agree with the hon. Member for Ilford North (Wes Streeting) when he said that removing the cap would save lives and that he himself would scrap the “crazy” cap.

[Steven Bonnar (Coatbridge, Chryston and Bellshill) (SNP)]

T2. The Resolution Foundation recently found that if wage growth had continued on the same trajectory as pre-2008, the average UK worker would be £11,000 a year better off. Does the Minister accept that hard-working households can no longer afford to lose £11,000 a year as a result of this Government’s perpetual mismanagement of the economy?

[Andrew Griffith]

I welcome the universal credit reforms we have made, and also the fact that under this Government, by raising the basic income tax threshold, we have taken up to 3 million workers out of income tax altogether.

[Mr Robin Walker (Worcester) (Con)]

T8.   I warmly welcome the Chancellor’s big decision to invest in childcare and the early years in this Budget. One witness to the Education Committee—a long-standing campaigner on these issues—said they were elated to see the commitment the Chancellor made. Going forward, may I encourage him to continue to listen to the concerns of the independent and voluntary sector, which is crucial to the success of reforms in this space? I know he is a fan of workforce plans, so may I encourage him to consider the case for an early years workforce plan?

--- Later in debate ---

[Priti Patel (Witham) (Con)]

In the light of the current pressures on the international banking system, can the Chancellor give an assurance about and an update on the actions he will be taking to ensure that credit flows to small and medium-sized enterprises, our rural businesses and, indeed, start-ups, because at the end of the day they should never be penalised for the misdemeanours of large banks?

[Andrew Griffith]

Yes, I can give my right hon. Friend that assurance. This Government are very keen to make sure that there is a strong flow of credit to the very smallest businesses in society.

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

T9.   OBR analysis of last week’s Budget has shown that there will be no real-terms growth in public services in 2023-24 and just 1% in 2024-25. Given the recent Patriotic Millionaires UK survey showing that more than seven in 10 millionaires want to have a fair tax on their wealth—by wealth, we are talking about £10 million of investable assets—will the Chancellor look at this?

Cash Acceptance

Andrew Griffith Excerpts

Monday 20th March 2023 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Ms Bardell, and it is always a pleasure to follow the hon. Member for Hampstead and Kilburn (Tulip Siddiq). I commend the hon. Member for Linlithgow and East Falkirk (Martyn Day) on securing this debate. I also commend the many members of the public who signed the e-petitions to rightly raise this important issue here, in the home of democracy, where it falls to us to resolve these matters. I know that the hon. Member for Linlithgow and East Falkirk has a long-standing issue with cash access and acceptance. We have had a wide-ranging debate, and I will try to address as many of the points raised by colleagues as possible. As the hon. Member said right at the beginning, this is a complex issue.

It falls to me to inject some balance into the debate. Cash has many virtues, and I assure Members that the Government recognise the role played by cash when other technologies fail and the real concerns regarding privacy and the potential, in a cashless society, for states to control freedom of speech. One of the first issues that I dealt with as Minister was the withdrawal of certain account facilities from the Free Speech Union. However, we should also recognise that despite its many virtues, cash is expensive to handle, can be subject to theft and can make businesses—particularly small businesses in the rural areas we have heard a lot from today—feel vulnerable and potentially targeted by criminals. The physicality of cash means that it has a higher carbon footprint, and it can be less convenient when someone is fumbling around and does not quite have the right change.

[Drew Hendry]

I am grateful to the Minister for giving way. He makes a fair point about vulnerability, with people feeling perhaps a bit unsafe with cash, but does he not agree that part of the reason why businesses are now feeling a bit more vulnerable with cash is because of the bank closures that have been allowed to go ahead? Now, they have to travel greater distances to deposit cash. Is the Minister willing to come up with a solution for businesses so that they can continue to have cash and use it safely?

[Andrew Griffith]

The hon. Member makes a good point. He talked a lot about his rural constituency, which is a little larger than mine but also very rural, and brought that to life by talking about the Grantown-on-Spey annual show. He is quite right, but if he will bear with me, I will talk about the solution to precisely the problem he raises. This is not just an issue of access to cash, or the use of cash, but, as my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) said, about how we can ensure that businesses and retailers have access to facilities to deposit cash. I will come on to discuss the legislative action that I assure the House we are taking on precisely that point.

I have followed this debate extremely closely so, to be clear, let me say for the Government that there is no plan, no drive and no conspiracy to eliminate cash. This Government continue to support the ability of citizens to use cash as an alternative to digital payments, and I am proud that the Government are taking legislative steps to support the use of cash well into the foreseeable future. It is this Government, for the first time, who are taking those legislative steps.

A number of Members have talked about the fact that the way people make payments is changing. We have seen that over time. Analogies have been drawn with the transition from analogue to digital television and with decimalisation—I do not remember that, but the Father of the House was not shy about his recall of going through that transition. Digital payments play an important role in people’s lives. We see that from our own experience in the Tea Room of this House and also from the data. The industry body UK Finance found that in 2021 non-cash transactions accounted for 85% of UK payments, up from 45% a decade earlier and 60% in 2016. That is a really fast rate of change. I do not say that to unsettle anybody in respect of the continued attachment to cash, but it does mean that we in this place have to contemplate very rapid changes in society and technology.

Cash remains important for millions of people across the UK. We are an ageing society, and many Members have talked about the vulnerable groups—my hon. Friend the Member for North Norfolk (Duncan Baker) thought it was about 10 million people—who make up a significant part of society. We should rightly have great recourse to work out how we can protect them, whether that is through support with the convenience of managing their finances or with other vulnerabilities. Members made some great points about the importance of managing finances through the use of cash.

This is about striking a balance in society, which we have sought to do through the Financial Services and Markets Bill. I want to offer reassurance and protection for those who seek it. I am conscious that not everyone will be as familiar with the clause-by-clause detail of the Bill as the hon. Member for Hampstead and Kilburn and I am. That Bill, which has made its passage through the House, will mean that for the first time, not just since the hon. Member for Tiverton and Honiton (Richard Foord) scrabbled for coins himself but since ancient Celts first manufactured coins on this great isle of ours, there will be statutory protection of access to cash and the ability to deposit cash. It is important that we get that Bill on the statute book in this time of rapid change. It will cover access to deposit facilities on a similar basis as access to cash withdrawal.

My hon. Friend the Member for North Norfolk reminded us that this is the domain not just of the banks and ATMs, but also the extensive post office network. I know that postmasters—notwithstanding the loss to the profession of my hon. Friend—do a fantastic job in our rural communities. We should support them, and we do want to see that support. The provision of cash and banking services can be one way in which we underwrite their continued service to the community.

[Patricia Gibson]

Will the Minister explain what my constituents in Kilwinning will do when the town centre has lost its bank? It will be a population of 16,000 with no bank and no post office. What advice would he give to the businesses and residents of Kilwinning?

[Andrew Griffith]

I advise the hon. Lady to explore with Link the provision of potential alternative cash machines and to explore with the Access to Cash Action Group the potential for a banking hub. A number of Members have procured banking hubs for their constituencies. The hon. Member for Tiverton and Honiton has a banking hub and has spoken up about that issue.

[Richard Foord]

On banking hubs, the Axminster chamber of commerce has been trying to get through to the Access to Cash Action Group to find out when it will get its community banking hub, but has been unable to get through, so will the Minister comment a little further on Access to Cash Action Group communications?

[Andrew Griffith]

I will happily entertain treatises from the hon. Gentleman if he would like me to follow that up. There are 70 cash hubs on their way. Members throughout the House, including a number of his colleagues in Devon, have procured them. It sometimes takes a little while for them to appear because of planning issues or the need to get the right power arrangements and safe access in place for constituents. If the hon. Gentleman will bear with the banking hubs and work with them, he will find that there are solutions out there.

My hon. Friend the Member for Blackpool North and Cleveleys talked about the no-purchase cashback facility, which turns every single convenience store and retailer in the country into a potential cash-dispensing hub.

[Patricia Gibson]

Will the Minister give way?

[Andrew Griffith]

I will give way one final time before the hon. Lady combusts.

[Patricia Gibson]

I gently say to the Minister that local corner shops do not want to be cash dispensers. There are all sorts of security issues relating to no-purchase cashback.

[Andrew Griffith]

The hon. Lady makes an important point, although perhaps not the one she intended, about some of the challenges of cash in a rural location.

[Paul Maynard]

Will the Minister give way?

[Andrew Griffith]

I will because my hon. Friend made some strong points earlier.

[Paul Maynard]

Does the Minister think it is important to recognise that cashback without purchase is a voluntary decision by the retailer? Retailers are not obliged to embark upon it if they do not wish to; it is a commercial enterprise.

[Andrew Griffith]

My hon. Friend is absolutely right. That is one of the principles in how we have approached the issue. Although we are taking powers in the Financial Services and Markets Bill to mandate access to cash and cash machines, we must remember that 95% of the population are within 2 km of a free cash machine.

[Drew Hendry]

Will the Minister give way?

[Andrew Griffith]

I will make some progress, because I have been relatively generous in taking interventions.

Cash acceptance is an emerging issue that we contemplate for the future, but it is not a prevalent issue today, other than when people conflate it with the loss of bank branches. That is understandable, but we are seeing very rapid changes in society. I am clear that it is not the Government’s position—I think this is also true of the Labour party and, probably, the Scottish Executive—that we will mandate cash acceptance on retailers or public services. If anyone has done battle with a local authority parking machine, or the Mayor of London’s cashless transport system, they will know that it is often public services that do not take cash, while 98% of retailers are happy to continue to take cash indefinitely, particularly if the facilities can be made available. Public services are often the first to migrate to a cashless economy.

[Drew Hendry]

I am grateful to the Minister for giving way one final time. I would love him to come to the highlands and take a 2 km walk around parts of my constituency and point out where the cash machines are. We always try to find things to agree on in Westminster Hall, so I agree with the Minister’s earlier comment that his Government have “no plan and no drive”. If the 70 hubs are to be spread across the UK, will the Minister tell us when my constituents in villages and towns will see hubs arrive near them?

[Andrew Griffith]

It would not be for me to promise any Member a hub; it is for them to make the case. I observe that many other Members have been able to make that case successfully, and the hon. Gentleman has proven very persuasive today, so I wish him well in procuring a hub for his constituency. I will now make some progress, in the interests of time.

It is important to have the flexibility to respond to changes in the market. What we are doing in the Financial Services and Markets Bill should not be underestimated. As I said, for the first time in law we are protecting the ability of people and businesses—businesses are in scope as well—to deposit as well as accept banknotes and coins. The Government’s position is that it is much better that we will the means to enable businesses to continue to take cash, rather than simply will the ends without addressing any of the means, as some would do.

Apart from the Bill, the Government work with the financial services regulators to monitor and access trends related to cash. The hon. Member for Hampstead and Kilburn asked if the work to track the accessibility of cash will be done; it will. As part of that, the Financial Conduct Authority has surveyed retailers and found that even of small businesses—this is not an issue for big businesses, by and large—98% would never turn away a customer if they needed to pay by cash. I extend an invitation to any Member to share with me, the Treasury and the FCA any specific examples of retailers declining cash. I am conscious of a number of examples in the public sector—local authority car parks, and even municipal transport run by executive bodies—but I am not aware of a high level of prevalence among retailers.

We must also recognise that technology is providing solutions. Big Issue salespeople are now equipped with tap readers, and report 30% higher donations being given when people tap rather than use cash. That was my experience when I joined the Royal British Legion to collect for poppy sales. There are a number of other examples of how technology can try to solve the gap, notwithstanding the fact that we will continue to ensure that we protect access to cash. We have talked about the good work of the cash access group and of Link, and it should be incumbent on any Government to continue to ensure that we put those important solutions in place.

Once we have passed the Financial Services and Markets Bill, we will provide the policy statement about the importance of access to cash, the prevalence of that across the UK and what thresholds will be appropriate for Government to take different decisions or possibly to look at mandating things. My hon. Friend the Member for Blackpool North and Cleveleys talked about wholesale cash distribution, and the back end is important if we are to continue to ensure that businesses have the access to cash that they need. It is important that the wholesale cash infrastructure in the UK works and, in the Bill, again for the first time, we will take powers to regulate that, mindful that over time we expect to see the volume of cash decrease.

I have set out what the Government will do: the important step of taking powers in legislation that will soon be on the statute book, giving the FCA the ability for the first time to regulate access to cash. I have given our commitment to continue to monitor the situation, accepting that we all have constituents we are concerned about and that we are seeing fast-moving changes in society. I also give Members the reassurance that the Government’s desire or policy is not to eliminate cash. We have no such objective, but quite the opposite: the Government recognise the importance of the utility of cash in the system and will do whatever we can to ensure, practically, that our constituents continue to have the ability to use cash, as has always been their historical right.

Silicon Valley Bank

Andrew Griffith Excerpts

Monday 13th March 2023 Commons Chamber

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

With your permission, Mr Speaker, I will make a statement on the steps His Majesty’s Government have taken to limit risks to our tech and life sciences sector.

Following the rapid deterioration of Silicon Valley Bank, and working in concert with the Bank of England, early this morning we facilitated the purchase of the UK subsidiary of Silicon Valley Bank by HSBC. Serving 39 million customers globally, and headquartered and listed here in the UK, HSBC is Europe’s largest bank. Those affected are now secure in the knowledge that their deposits are protected and that they can bank as normal. Customers should not notice any changes, while the wider UK banking system remains safe, sound and well capitalised.

Using stabilisation powers granted by the Banking Act 2009, which afforded us the ability to safely manage the failure of banks, we have forestalled disruption in the tech sector and supported confidence in the UK financial system. The resolution action was taken by the Bank of England in consultation with HM Treasury, using its powers to transfer the UK business of SVB to a private sector purchaser. As required by the Act, the Bank of England consulted the Treasury, the Prudential Regulation Authority and the Financial Conduct Authority on its assessment that all required conditions for that transaction had been met.

We have been able to achieve this outcome—the best possible outcome—in short order without any taxpayer money or Government guarantees. There has been no bail-out, and the actions taken are a win for customers, taxpayers and the banking system. The transfer of SVB UK to a buyer has allowed the Treasury to limit the risk to public funds by ensuring that shareholders and creditors, rather than depositors, bear losses. To help achieve that result, the Bank of England has made a related instrument bringing about a mandatory reduction of capital instruments in SVB UK, restoring it to viability. It is my view that in this situation, the system worked as we would hope.

In order to ensure that the sale could proceed, the Government are using their powers under the Banking Act to provide HSBC with an exception to certain ringfencing requirements. That was crucial to ensuring that a successful transaction could be executed, that the bank has the liquidity it needs, and that deposits and public funds are protected.

The outcome will provide security for some of the UK’s most innovative, fast-growing firms. The UK’s tech and life sciences sectors are world leading, hundreds of thousands of people are employed in them, and they make a very substantial contribution to the economy as a whole. My right hon. Friends the Prime Minister and the Chancellor have been clear throughout that we will look after our high-tech sectors, and that is what we have done. The Bank of England has confirmed that, as a result of the swift, decisive action we have taken, depositors will be able to access their accounts. It is worth reiterating that, as the Governor has said, the wider UK banking system remains safe, sound and well capitalised.

In concluding, I place on record my sincere thanks to my fellow Ministers across Whitehall, to officials at the Treasury and to regulators. They worked tirelessly through the weekend to grip the situation, to deliver this solution and to prevent real jeopardy to hundreds of the UK’s most innovative companies.

[Mr Speaker]

I call the shadow Minister.

--- Later in debate ---

[Andrew Griffith]

I think concealed within that was grudging support, and I am sure that the hon. Lady would like to add her voice to those of so many in the sector who have welcomed this announcement today, which provides the important confidence and stability that are needed. She raised the point that SVB UK has a separate banking licence, and it is precisely because of that mechanism that our regulators and the Treasury have been able to take the action we have taken over the weekend.

I think the hon. Lady understands the disruption and volatility in the sector, but she should be reassured that the Governor of the Bank of England has confirmed that this is not indicative of systemic risk. I can confirm that, in order that the Silicon Valley Bank, now within HSBC, can provide the broad range of services that our life sciences and tech sector value so much, the exemption from the ring-fencing requirements will be permanent.

The hon. Lady asked about a systemic review. Of course, these are always opportunities for us to learn and look again, but, as I said in my opening remarks, the system has worked as intended.

Finally, and with the greatest of respect, we on the Conservative side of the House need no lessons on patient capital. We are unlocking capital for our important tech and life sciences. Only last week, the Under-Secretary of State for Pensions, my hon. Friend the Member for Sevenoaks (Laura Trott), brought to this House regulations to remove the charge cap and to allow our pension funds to invest in some of the fastest-growing sectors of our economy.

[Mr Speaker]

I call the Chair of the Treasury Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

May I put on the record my gratitude to the Minister, his colleagues and officials, and to people at the Bank and in the City in general, who have obviously worked flat out all weekend to deliver what turns out to be the best possible outcome in these difficult circumstances?

On the importance of the sector to the UK economy, did the Minister and the Bank treat this situation any differently because of the sector in which SVB was operating, or would they have tried for the same sort of solution for a bank in any sector? Was the Minister as concerned as I was about reports that investors required the firms that they were funding to put money into the bank as a condition for investment? Finally, given that other banks have collapsed in the US—other small banks, including one that specialised in crypto—does he think that crypto is in any way contributing to financial instability?

[Andrew Griffith]

I thank my hon. Friend, one of my predecessors and the Chair of the Select Committee, for her support and comments. The degree of concentration in a particular sector is unusual—it was an unusual feature. The business model of Silicon Valley Bank in the UK was different from that in the US, partly because of the tight regulations that we have here. For that reason, I have not seen any evidence that the banking of crypto-asset companies was something that contributed. Rather, once the Fed had taken its action, we saw the impact on the bank here. That is why it was right for the Bank to act to give us the space to protect that bank and to achieve the outcome that we announced this morning.

--- Later in debate ---

[Stewart Hosie (Dundee East) (SNP)]

One of the key lessons of the 2008-09 financial crash was that the conduct of business and liquidity issues could very quickly morph into systemic risk with contagion across a variety of transmission channels, so I very much welcome the speedy way in which the SVB UK issue was resolved over the weekend. However, that bank’s business model—and it is not alone—involved it holding a large number of low-interest-bearing bonds at a time of rising bond yields. It was required to sell those at a loss, which exacerbated the liquidity problems that it had. Would it not be prudent now to ensure that our regulators have another look at UK banks to ensure that comparable low-interest-bearing assets are stringently priced and marked to market to ensure that tier 1 capital is just that, and of sufficient quantity and quality that any liquidity problem does not morph into an insolvency and system risk problem?

[Andrew Griffith]

I thank the right hon. Gentleman for his recognition of the speed and decisiveness with which the whole Government have come together, worked together and acted to deliver this outcome—that is kind of him and it is appreciated. If I may, we should not conflate some of what we read about the balance sheet in the US with the regulated balance sheet in the UK, which was a separately regulated balance sheet. Again, on the business model in the UK and the backing, and the bonds and collateral that were being held, I am not aware that their forced sale, and the losses on it, were a contributory factor. The reality is that we saw a withdrawal of deposits. The Bank had the ability, because of the relatively ringfenced balance sheet, to protect the bank and take the necessary action. Had the Bank not done so, we could have been in a very different situation, so we were right to act as we did.

[Mr Speaker]

I call the Chair of the Science and Technology Committee.

[Greg Clark (Tunbridge Wells) (Con)]

I strongly welcome the decisive intervention that has been described, which has saved many UK tech businesses and jobs. Will my hon. Friend consider how the responsiveness of UK regulation, which was demonstrated overnight, combined with the strength of the City of London and our tech sector, provides an opportunity to attract more businesses to do their financing in the UK and means that they do not need to go overseas to get the financing that they require to start up and grow?

[Andrew Griffith]

My right hon. Friend, who does such good work for the science and technology community through his Committee, is absolutely right. The technology and life sciences sectors want our Government to be joined up and decisive, and to remove unnecessary regulations, while still operating in a high-quality regulated environment. We now have the opportunity to go a lot further—to deliver the Edinburgh reforms and to combine our aspirations to be a science superpower with the ferocious financing strength that we have here in the United Kingdom.

[Dame Angela Eagle (Wallasey) (Lab)]

I commend the quick and effective action. However, although the collapse of SVB in America was partly due to liquidity issues, there is also the issue of the changes that were made to the threshold at which banks are considered systemically risky, which increased from $50 billion to $250 billion. That meant that SVB could continue in America without the very focused regulation that might have spotted this problem earlier. Does the Minister think that the Edinburgh reforms present any similar risks, and will he say a little about the exemption from ringfencing that he announced today for HSBC? Is he content that that does not present any risks either?

[Andrew Griffith]

I must be very careful not to comment on matters as they relate to the United States. SVB UK was a separate bank. It was regulated here, and it was as a result of that regulation, and the fact that we have taken back control of our financial regulatory rulebook, that we were able to act so decisively. The hon. Lady will forgive me if I do not talk about matters in the United States.

In respect of ringfencing, it was the view of the Bank of England and the Treasury, in the circumstances and to protect public funds, that to provide a permanent exemption for what is a very small part of the much larger HSBC—I think less than 1% of its pro forma clients on an enlarged basis will be former Silicon Valley Bank clients—was appropriate. I do not think it puts inappropriate levels of risk in the system. By streamlining the rulebook, and by bringing back control and dispensing it to UK regulators, with accountability to Parliament—she will know about that through her membership of the Treasury Committee—I think we can have better regulation and deliver better outcomes for the sector.

[Dame Andrea Leadsom (South Northamptonshire) (Con)]

I congratulate my hon. Friend and all who were involved in the rescue. It was vital that we acted urgently to prevent the fear and the risk of contagion that were apparent over the weekend. Does he feel that the fact that SVB UK was a separately ringfenced bank and that ringfencing is a UK-specific regulation brought to bear any protection for SVB UK? He will recall only too well, as I do, that Lehman sucked capital out of the UK when it was in dire straits, which to a large extent caused the ultimate contagion. Will ringfencing continue to protect the UK banking sector as we go forward, even through the Edinburgh reforms?

[Andrew Griffith]

My right hon. Friend speaks with great authority on these matters, and I can give her that assurance. It was constituted as a subsidiary in the UK, it had its own separate balance sheet and it was regulated as such. Because of that fact, the Bank was able to make the decisive intervention it did. There were assets within the subsidiary to which we were ultimately able to restore viability by successfully finding, over the weekend, a very large bank—Europe’s largest bank—to step in and buy, and to put its balance sheet behind, this entity.

[Alison McGovern (Wirral South) (Lab)]

While we are all full of admiration, particularly for all our officials who worked through the weekend to make this happen, I am afraid I find the statement a bit long on self-congratulation and a bit short on explanation. What questions has the Minister asked about why this happened? Why were all these companies banking with this particular bank and what cultural aspects were there to the case? What do we need to uncover that will be important for the sustainability of both banking and technological firms in the future?

[Andrew Griffith]

It is not uncommon for banks to have a particular specialism. Labour Members have worked to bring forward regulations that will help us have more credit unions, which tend to have a geographical concentration, and there are agricultural banks and other wholesale banks, so it is not of itself an unusual feature. In this case, we were able to take action precisely because of the UK regulatory structures and the interventions we can make. We will learn any lessons, but this is a Government who are on the side of technology companies and the life sciences, and we have been proud to deliver this outcome—this important certainty—and to remove the jeopardy they otherwise faced at the opening of business this morning.

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

What estimate had the Bank of England made of the health of SVB before the events of the weekend?

[Andrew Griffith]

It would not be right for me to answer on behalf of the Bank of England, if my right hon. Friend will forgive me. We have an independent regulator that looks at these matters. The Treasury Committee regularly takes evidence from the Bank of England, and I am sure it will do so in future.

[Sammy Wilson (East Antrim) (DUP)]

I am sure that many firms across the United Kingdom will welcome, and breathe a sigh of relief at, the decision that was made over the weekend. However, this was done in haste. I ask the Minister: what kind of due diligence was done by HSBC when arranging this takeover, and is he sure that we are not walking into a situation similar to what we had with Lloyds and HBOS in 2008, when a quick decision led to a domino effect in the banking system and resulted in bail-outs by the taxpayer?

[Andrew Griffith]

I cannot speak for the due diligence that was done for HSBC, but it has got itself comfortable with it. We should also understand the relative scale of HSBC, which is an extraordinarily well-regulated, global and diverse bank. My understanding is that if we add all of the important clients of Silicon Valley Bank UK, which we had in the front of our mind as we sought to act over the weekend—if I may say so, we make no apology for acting in haste, because haste was absolutely the required procedure in this particular case—they would in their entirety be less than 1% of the overall client base of HSBC. With respect, I do not think that was the case in the examples to which the right hon. Member referred.

[Anthony Browne (South Cambridgeshire) (Con)]

The sighs of relief across South Cambridgeshire this morning were so loud that they were almost deafening. Dozens of my technology companies, which had been in contact with me over the weekend, thought they were going to be wiped out this morning, but they can now operate as normal because of the decisive action by the Government. I very much congratulate the Minister, the Bank of England and the Treasury on that action.

I have also had questions about whether this is a sign that all the reforms of the financial system in the wake of the global financial crisis have failed or are failing. Does my hon. Friend the Minister agree that this is not a sign of the reforms failing, but a sign that they are working, and that without the reforms we would not be able to do a rescue in this way? Can he also confirm that the reforms that are coming through—the Edinburgh reforms—will not make future collapses more likely, or future rescues more difficult?

[Andrew Griffith]

My hon. Friend knows a great deal about the sector, and it is due to past reforms that we were able to take this decisive action. Parliament has given—in extremis, and with the agreement of the Bank of England, the PRA, the FCA and the Treasury—sweeping powers to enable this sort of transaction to happen at great pace. Let me be clear that it is the shareholders and creditors of the bank, not depositors or the taxpayer, who have lost. In the system that we have, that is the right outcome, and I am pleased we were able to achieve it.

The Edinburgh reforms are designed to give this country the ability to continue to grow and to be internationally competitive with other markets, while adhering to the highest quality regulatory standards, and with the UK at the absolute cornerstone of organisations such as the Financial Stability Board. They will not put any more jeopardy into the financial system. Indeed, having good healthy businesses that grow and are profitable is the best way to avoid jeopardy.

[Paula Barker (Liverpool, Wavertree) (Lab)]

First pension funds and liability driven investments, now the collapse of SVB UK. Is it not time for a systematic review of the risks that sharply rising interest rates pose to the UK financial sector?

[Andrew Griffith]

With the greatest of respect to the hon. Lady, the issue here was a subsidiary of a US bank, and I will not be commenting on US policy, interest rates or anything else from this Dispatch Box. The important fact is that we were able to restore the bank to viability and, over a small number of hours and days, to find a successful buyer. We did that because of the strength of the UK regulatory system, and because of the conviction of this Prime Minister and this Chancellor that this is a critical sector, and one of the ways that we will continue to grow the UK economy.

[Danny Kruger (Devizes) (Con)]

I pay tribute to the exemplary orchestration of all the different stakeholders and decision makers that the Minister led over the weekend. It is helpful to distinguish between decisions taken by the American Government and by ours in respect of this bank. The American taxpayer is guaranteeing the deposits of SVB account holders there; in our case, another bank has bought them and the taxpayer is safe. I pay tribute to the Government for that. I appreciate that the Minister cannot comment on American policy, but in the hypothetical instance of another bank in the UK failing, or another sector getting into trouble, will he give an indication of his thinking on whether the taxpayer would ever need to step in? Will he guarantee that that will not happen?

[Andrew Griffith]

I am not going to offer my hon. Friend that guarantee, as that would not be prudent or the right thing to do. I can guarantee that this Government will do everything possible to reconcile the needs of protecting customers, protecting financial stability and protecting the taxpayer. It is of great note that we were able to do that in this transaction, and if such an issue were ever unfortunately to reoccur, all our energy would be devoted to precisely the same ends.

[Sarah Olney (Richmond Park) (LD)]

I very much welcome the purchase of Silicon Valley Bank UK by HSBC this morning, not least because I am a former employee of a company that had exposure to the bank on both sides of the Atlantic and whose chief executive officer was one of the signatories to the letter sent to the Chancellor on Saturday. Statements were made by the UK bank on Thursday and Friday, and if depositors had relied on the assertions made in those statements, and if the purchase had not gone through this morning, those depositors would have incurred losses. Will the Minister confirm whether that constitutes a breach of the regulations? If it does, will there be any sanctions for people identified as having committed those breaches?

[Andrew Griffith]

I am delighted that the hon. Lady’s constituents benefit from the certainty. It was a terrible weekend for everybody who was a depositor or who was in some way dependent on SVB UK. That is why it was so important that we not just achieved this outcome and that the regulatory structure and laws laid down by Parliament allowed us to do so, but that we were able to act decisively. I welcome the fact that another great British bank, HSBC, has stepped in, and I wish it and all the employees well.

It would be inappropriate for me to comment on particular things that were said. Fortunately, we are in the position that every depositor has been made whole, and therefore that issue does not arise.

[Vicky Ford (Chelmsford) (Con)]

I massively congratulate my hon. Friend and His Majesty’s Government on this news. I spent three years of my life pushing the post-crash banking recovery and resolution frameworks through Europe, so I can absolutely confirm that the fact that there are now powers in so many countries to rapidly resolve failing banks without the need for taxpayers’ money is in very large part due to the outstanding global leadership of the post-crash Conservative UK Government and the actions of the now Governor of the Bank of England. Can my hon. Friend confirm that going forward, the Government will ensure that our financial services regulators not only work to reduce systemic risk, but back our financial services sector in its efforts to invest in our country and help our economy grow?

[Andrew Griffith]

I can absolutely give my right hon. Friend that assurance. In doing so, let me also pay tribute to her work as a Member of the European Parliament between 2009 and 2017, when she led on banking reform.

[Stephen Kinnock (Aberavon) (Lab)]

The Minister said that SVB UK was a subsidiary of the American bank, but in this country a separate banking licence was given to SVB UK. May I therefore push him on the risk assessment around liquidity? When the banking licence was given, what risk assessment was conducted, particularly given the concentration of a small number of corporates in the deposits to SVB UK?

--- Later in debate ---

[Andrew Griffith]

That is, with respect, the whole point: it was a separate subsidiary. It did have a separate banking licence here and it did participate in the regulators’ stress tests here. There is risk in any financial system. What this House and our diligent regulators are focused on is achieving the right balance of risk. From time to time there will—as there was with the failure of the bank in the US—be factors that lead to challenges in any risk-based system, notwithstanding the good work by the regulators and the stress tests having been applied.

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

I draw the attention of the House to my historical entries in the Register of Members’ Financial Interests as an adviser to a technology venture fund and as a board member of a number of portfolio companies, many of which will have had financing arrangements with Silicon Valley Bank, HSBC and other financial institutions.

On behalf of the technology businesses in Bedfordshire, I add my thanks to the Minister and his team for their swift response over the weekend. He will be aware, however, of general concerns about global liquidity for the technology sector. What is his assessment of how the SVB experience at home and abroad may exacerbate those and test the resilience of the UK tech sector? Although HSBC is a great bank—indeed, I am a customer of HSBC—Silicon Valley Bank succeeded over many years precisely because it was so closely attenuated to the needs of early stage and growth stage businesses. Will my hon. Friend consider what steps he can take to encourage the emergence of new challenger banks to repeat the successes and avoid the failures of SVB in the UK?

[Andrew Griffith]

As my hon. Friend knows, the Government are seeking to support challenger banks to make sure we have a vibrant and competitive sector. That includes looking at issues such as the level of MREL—minimum requirement for own funds and eligible liabilities—and making sure that we have proportionate banking regulation that is relevant to the risk involved. He makes important points about the culture and capabilities of SVB UK, which is why it was so important that we had to very swiftly find it a home. I have spoken today to the chief executive of HSBC, as well as to the former chief executive of SVB UK. They are both enormously excited about the future. They see this as a platform for mutual growth, taking our brilliant life sciences and technology businesses international and to a new scale. The Government will not rest until we have mobilised capital to turn us into that science superpower.

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

The Minister said, “The system worked.” Certainly, it was a huge relief that the estimated 50% of the UK tech sector that banked with SVB UK could today pay their suppliers and staff. However, surely that highlights the lack of diversity of capital available to the UK tech sector, and our dependence on the US. In the last two years, Silicon Valley Bank’s deposits tripled, but its exposure to Treasuries, and therefore to interest rate rises, went up ninefold. Is the Minister seriously saying that no one on this side of the Atlantic should have noticed that, and that it had no impact on what happened?

[Andrew Griffith]

The hon. Member talks about dependence on the US, but if that is her concern she should welcome this deal wholeheartedly, because we have taken a former subsidiary of a US business and made it part of a thriving and successful UK business.

[Kit Malthouse (North West Hampshire) (Con)]

I draw attention to my entry in the Register of Members’ Financial Interests.

Bravo to the Minister and, in particular, the resolutions team at the Bank of England, who have been honing their skills for many years and finally got the chance to put them to use. Further to the question from my constituency neighbour, my hon. Friend the Member for Devizes (Danny Kruger), does the Minister understand the relief felt by many that the taxpayer, once again, has not been asked to step in and, in effect, nationalise private sector losses? Does he agree that for a capitalist economy to function, even in the most painful of circumstances, it has to be allowed to do what it does best—recycle distressed assets?

[Andrew Griffith]

My right hon. Friend is quite right to talk about risk and capital systems’ proficiency at recycling capital to productive uses. That is also an enormous focus of this Government and is why our No. 1 priority was to seek to make a private sector transfer of the bank if we could, to protect the taxpayer while also protecting customers and the solvency of the financial system. I am glad that we were able to achieve this outcome. We will continue to do so by having fit-for-purpose regulations in this space.

[Ms Anum Qaisar (Airdrie and Shotts) (SNP)]

Does the Minister agree that the collapse of Silicon Valley Bank highlights the dangers associated with deregulation in the banking sector—something that the UK Government have continually touted as one of the benefits of Brexit?

[Andrew Griffith]

I do not accept that for one minute. We are only just bringing forward the deregulation. The Financial Services and Markets Bill is not even on the statute book. The regulations that affected this situation are precisely the same regulations that we have inherited from Brussels.

[Bim Afolami (Hitchin and Harpenden) (Con)]

It is when we act in haste that we need to think about the long-term consequences of the regulatory actions taken. I join others in the House in commending the Treasury, wider Government and the Bank of England. The Minister said that HSBC has been given a waiver on certain ringfencing rules. I ask this as someone who, before arriving at the House, worked at HSBC on ringfencing in detail and many other things: will the Minister explain that waiver in more detail? More importantly, will that waiver on ringfencing apply more widely to other banks caught by ringfencing regulations?

[Andrew Griffith]

As my hon. Friend well knows, the Government are undertaking a review of ringfencing. There is a call for evidence on how we could reform that, following the work of Sir Keith Skeoch into how we mesh the ringfencing arrangements put in place back in 2008 with the more modern resolution arrangements. We will learn the lessons that we can from this but, as I said at the beginning, in this case we have been able to achieve an outcome that has protected customers, the taxpayers and the financial system.

[Daniel Zeichner (Cambridge) (Lab)]

I, too, had many representations over the weekend from early stage tech companies in and around Cambridge, and they will be much relieved by the news today. To echo the point made by the hon. Member for North East Bedfordshire (Richard Fuller), the reason they banked with SVB was its close understanding of their particular needs. What guarantee can we have that HSBC will be able to replicate that?

[Andrew Griffith]

How this bank is run going forward is a matter for HSBC. However, HSBC is a prodigiously successful global institution that has bought SVB on the back of a desire to grow and support that sector, and it sees that this Government are firmly on the side of that sector. We see the aspiration and the opportunity now that we have taken back control from Brussels, and we are going to make an enormous success out of our tech and life sciences sectors; we are on their side.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I welcome the Minister’s statement, and I congratulate him and all those who have worked to resolve this matter so quickly. The collapse of Silicon Valley Bank will have left its customers worried about managing their cashflows; obviously, cashflow problems cause the majority of businesses to fail. In his statement, he mentioned that customers would continue to have access to their deposits. Will that be seamless and continue right away, so that business continuity is safeguarded?

[Andrew Griffith]

I thank my hon. Friend and I again pay tribute to the hardworking officials from the Treasury and the regulators, and to my colleagues across Government, who pulled together rapidly to deliver this solution. There may be teething issues as the integration takes place, but having spoken to HSBC and the management of SVB UK, they are open for business today and serving their clients. That is the outcome that the Prime Minister and Chancellor were absolutely right to seek in time for this morning’s opening of business.

[Daisy Cooper (St Albans) (LD)]

I would like to press the Minister on his answer to my hon. Friend the Member for Richmond Park (Sarah Olney). At least two tech companies in my constituency were almost affected; I am grateful to the Economic Secretary for acknowledging my urgent letters over the weekend. One of those companies, based in St Albans, moved £200,000 from its US account to its UK account based, in part, on the statements made about SVB being an independent entity, regulated in the UK—statements that bank made to try to give the reassurance that it would not be affected. However, it then did become affected. Will the Minister clarify whether SVB would or should have known that those statements were either incorrect or misleading? If he is not prepared to comment on that particular example, will he commit to a process to look into that issue? Does he believe that there should be consequences in future for banks that make incorrect and misleading statements that put companies at risk?

[Andrew Griffith]

As I said to the hon. Member for Richmond Park (Sarah Olney), I do not think it is appropriate that I make comments from the Dispatch Box about the veracity or otherwise of statements made by an individual; I hope the hon. Lady respects that. It is, of course, right that anyone in a position of leadership in business takes responsibility and acts in good faith. Although there may well be lessons to be learned in time, the important point is that her constituents and their companies are able to operate, have access to their deposits and continue to do their work of growing important sectors of the economy. I hope the whole House will welcome that.

[Richard Graham (Gloucester) (Con)]

Congratulations to the Chancellor, the Minister and all those involved in resolving this problem, which tech companies in Gloucester and Gloucestershire will greatly appreciate. Does the Minister agree that this shows the importance of having Europe’s largest bank, the Hongkong and Shanghai Banking Corporation, regulated and headquartered here in London, and that this also shows that this Government will always support business? Lastly, since the Chancellor extended start-up loans in September, will my hon. Friend confirm that this Government have effectively helped create and sustain 33,000 new businesses?

[Andrew Griffith]

My hon. Friend is absolutely right. Our actions demonstrate that we are on the side of business. We mean it when we say that we want to make the UK the best place to start, grow and run a business, and, I will add, to list a business, because he is quite right that HSBC is an enormously successful global business that is headquartered in the UK and proudly listed on the UK stock exchange.

[Dame Nia Griffith (Llanelli) (Lab)]

In the light of recent events and the risk of contagion, can the Minister spell out exactly what action he is taking to ensure that we do not see a contraction in the availability of credit to these specialist, fast-growing companies? What more will he do to facilitate access to appropriate credit to help our groundbreaking tech industries to develop?

[Andrew Griffith]

It is a core focus for the Government to ensure that our scaling-up businesses get access not just to credit, but to capital at every level through their life: the Prime Minister has made that a core priority. That is why we are bringing forward many reforms that will open up capital markets to growing businesses, and it is why we will continue to look at reforming packets of trapped capital, whether that be in respect of insurers, through the reform of solvency II, or through looking again at pension arrangements to make sure that savers and potential future pensioners can benefit from the wonderful opportunities from emerging businesses in the tech and life sciences sector.

[Matt Warman (Boston and Skegness) (Con)]

If SVB UK had not been bought, there would have been a huge impact on the most high-tech jobs in our economy, and indeed on the jobs of the future. I pay tribute to the Minister, the whole Government and the Bank of England for their work over the weekend. I also thank the Minister for engaging with me. Does he agree that because of the outsize impact that the failure of SVB might have had, it is all the more important that the Government look at what made SVB so appealing to these vital jobs and at how we do more of it where it is right and less if it is dangerous?

[Andrew Griffith]

I completely agree. My hon. Friend knows a great deal about the subject, which reflects his background; he is absolutely right.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for his statement. The Government are to be commended for the speed with which they have acted; it is indeed good news. I very much welcome the purchase of SVB by HSBC, which looks set to protect UK investors and start-ups alike, but what further assurances can the Minister give this House about what the 3,500 British customers will receive in terms of the long-term plan? How long is the Government’s commitment to steadying the ship?

[Andrew Griffith]

The Government are always committed to steadying the ship. That is why we take a prudent approach to running the economy and why the Prime Minister’s priorities are to reduce inflation, to pay down debt and to grow. To grow requires capital. That is why we have a long-term commitment to good regulation, which will minimise the prospect of events like this happening again. It is also why, with the expertise on the Government Benches, we are so focused on ensuring that we have the right ecosystem to allow our brilliant entrepreneurs, our scientists and our innovators the fertile capital with which to grow to their potential.

[Mr Louie French (Old Bexley and Sidcup) (Con)]

For transparency, I draw hon. Members’ attention to my former career in the City, as per my entry in the Register of Members’ Financial Interests. I welcome the swift and decisive action by His Majesty’s Government in solving this issue and in reducing the risk of potential contagion to the wider economy. Will my hon. Friend ensure that sufficient regulatory work is taking place to stress-test the liquidity of UK banks and the Government bond markets, given the clear risk highlighted by this case and by the leverage in recent liability-driven investment cases?

[Andrew Griffith]

Yes, I can give my hon. Friend and the House that commitment. We will learn lessons if there are lessons that need to be learned, but we should not look past the fact that today we have protected customers, protected the taxpayer and protected the security of the financial system. That is so important to our businesses. Many, many people will go home from work today much more confident, with the jeopardy of the weekend having been removed as a result of the decisive action that this Government have taken.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the Minister for his statement and for responding to questions for more than three quarters of an hour.

Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023:

Andrew Griffith Excerpts

Wednesday 1st March 2023 Written Statements

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

Many of the rules that govern the buying, selling and organised trading of commodity derivatives and emission allowances are set out in the Markets in Financial Instruments Regulation (MiFIR). MiFIR is one of two pieces of ELI derived legislation—the other being the second Markets in Financial Instruments Directive (MiFID II) —which together underpin what is referred to as the MiFID II framework. As part of the onshoring process, the MiFID II framework was amended to address deficiencies arising as a result of the UK’s withdrawal from the EU and the end of the transition period.

The UK played a significant role in designing the MiFID II framework, and the Government believe that the resilience and effectiveness of the UK’s capital markets have been significantly strengthened by the post-crisis reforms that they implemented. Although the regime is working well in many areas, the EU approach to regulation—where the same rules apply across member states to facilitate a single market in financial services—means that many of the MiFID II framework requirements were not designed specifically for UK markets. In other areas, it is clear that the framework has not delivered its intended benefits, has led to duplication and excessive administrative burdens for firms, or has stifled innovation.

Following the UK’s exit from the EU, in July 2021, the Government launched the wholesale markets review (WMR) consultation with the aim of creating a simpler and less prescriptive regime that meets the needs of UK markets while maintaining high regulatory standards. As part of this, the Government consulted on changes to streamline the process for determining when a firm trading commodity derivatives or emission allowances needs to be authorised as an investment firm. These were welcomed by industry and the Government committed to take them forward when they responded to the consultation in March 2022. The Chancellor also committed to streamline the process for determining when firms who trade commodities as an ancillary activity need to be authorised as an investment firm, as part of the Edinburgh reforms that were announced on 9 December 2022.

This order delivers on that commitment. It will simplify the process for firms while resulting in the same regulatory outcome. The FCA will put in place a simpler and therefore lower cost regime for determining when a firm that trades commodities or emission allowances as an ancillary activity does not need to be authorised as an investment firm.

As required under the enhanced scrutiny procedure set out in schedule 8 to the European Union (Withdrawal) Act 2018, the draft order and explanatory memorandum will be published online for a period of at least 28 days before the instrument is formally laid in Parliament for affirmative debate. This is required under paragraph 14 of schedule 8 to the European Union (Withdrawal) Act 2018 because the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 which are being amended were originally made under section 2(2) of the European Communities Act 1972. To read the full draft statutory instrument and explanatory memorandum, please visit:

www.gov.uk/government/publications/draft-si-for-firms-who-trade-commodities-or-emission-allowances-as-an-ancillary-activity

[HCWS591]

High Street Bank Closures

Andrew Griffith Excerpts

Tuesday 28th February 2023 Commons Chamber

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

Let me begin by thanking the hon. Member for Pontypridd (Alex Davies-Jones) for securing the debate and raising an important issue that I know is of concern to many Members’ constituents. She is clearly a vocal and passionate champion for her high street, which does her credit. May I also prematurely wish her a happy St David’s Day?

Our local high streets are of the utmost importance in towns throughout the country. They are the beating hearts of communities and form an intrinsic part of the social fabric of our cities, villages and communities. I know that, in joining this debate, all Members will be thinking of their own constituencies and the many conversations that they will have had with people there about—and often standing on—their local high street. I also know from speaking to my own constituents in rural West Sussex that there are legitimate concerns about the decline of our high streets, especially among vulnerable, elderly or isolated people who rely so heavily on what the high street provides. Let me therefore say at the outset that the Government recognise the vital role that the high streets play in society, and that we are implementing policies and directing resources toward protecting them, because that is the right thing to do.

I am proud to be part of a Government that are providing long-term, enduring support. How are we doing that? We are doing so through a combination of direct funding, tax cuts and legislation. The Government have provided a comprehensive package of around £400 billion of direct support. The towns fund and the levelling-up fund are together investing £8 billion in regenerating local communities and high streets. In May 2022 we introduced the Levelling-up and Regeneration Bill, bringing in new legislation to introduce high street rental auctions that will tackle decline by bringing vacant units back into use. We sometimes refer to them as the broken teeth of our high streets, and it is welcome that these measures are being put forward. Just months later, at the 2022 autumn statement, we announced a package of business rate support worth £13.6 billion, including an increased 75% relief for retail hospitality and leisure properties. If the hon. Lady’s constituency is anything like mine, that will have been a lifeline for so many small businesses on the high street. Under this policy, businesses can claim up to £110,000 each in 2023-24. It is a tax cut worth over £2 billion for more than 200,000 local businesses.

I am here as the City Minister to respond to the hon. Lady’s specific point about the closure of local bank branches and how this impacts the high street—I accept that it does. The difficult fact is that the way people are banking is changing. Innovation has led to more online banking, which for many—not all—is more convenient and quicker than banking in branch. It liberates people and allows them to work at different times of the day or night, or perhaps to juggle childcare responsibilities, because banks were never always open. We know that anecdotally, as well as from the data. The industry body UK Finance found in 2021—that is already some time ago—that 86% of UK adults made contactless payments, 72% banked online and 57% banked on their mobile phone. That is not just young people; the latest data shows that more than 70% of people aged over 65 use online banking. We should not be dismissive of the so-called silver surfers. None of that is to deny the fact that there are significant minorities that are excluded from those figures.

In that context, local bank branches are simply receiving fewer visitors than they once did, and I think it is incumbent on all Members to recognise, as the hon. Lady did, that banks and building societies have difficult decisions to make about how best to provide services to those who need them and to support communities. Members should also recognise—this is certainly the view on this side of the House, although I respect other views on the matter—that it is not the role of the Government to intervene in these decisions; nor do we have the powers to do so.

The hon. Lady gave the example of the Barclays branch closing in Talbot Green. According to Barclays—I am not here to defend its actions in any way, but we should look at the data—91% of the people who used that branch also banked using alternative means. Only 35 customers used that bank regularly as their only way to do banking. So although bank branches are an important part of the community, we need to be careful that we do not follow the behaviour of our constituents rather than leading it or maintaining it.

I will come on to the measures that the Government are taking in the Financial Services and Markets Bill—with, I think, the broad support of the House. I am very concerned about access to cash, and we are legislating on that. I took the liberty of looking at the hon. Lady’s constituency, and according to Link there are 97 cash machines there, more than three quarters of which are free to use. Those are probably the ones that we all care about most on behalf of our constituents. That is a substantial number, offering people at least the ability to access cash.

The hon. Member for Strangford (Jim Shannon) mentioned credit unions. The Government support the credit union sector in order to have a greater diversity of provision. The Smart Money Cymru and Dragonsavers credit union both serve the constituents of Pontypridd, and I salute them. This Government will do whatever we can to improve the viability of the credit union model and ensure that we have appropriate, proportionate regulation that promotes the growth of credit unions and the mutual sector more generally.

Some 99% of personal banking customers and 95% of business banking customers—this is measured by the relationship with the banks with which they do business—can do their banking, although not all of it, at one of the more than 11,500 post office branches across the country. While I understand that that will not always be the perfect answer, that is a substantial lifeline for banking services. It also puts a substantial amount of revenue into the Post Office business, and if we do not make a success of it, we might be sitting here on another evening having another debate about the loss of post offices in our communities.

[Matt Rodda]

The Minister may be interested to know that the issue in my constituency was with the Nationwide building society, with many of its members unable to use the post office, which affected thousands of people.

[Andrew Griffith]

I thank the hon. Member, as I thank all hon. Members for their contributions to the debate. The issue we are debating is why we have urged all banks seeking to close branches to examine the Financial Conduct Authority’s guidance to ensure that, when they do make closures, they carefully consider the impact. I hope that those procedures have been followed in the case of the hon. Member for Pontypridd, and I encourage her to contact the FCA if she is concerned. Where firms fall short of expectations, the FCA can and will ask for closures to be paused.

We are taking strong steps on access to cash. We must not impede innovation. People and businesses are embracing the benefits of new services. Some small micro-services are benefiting, and some female entrepreneurs are setting up businesses without the overhead of having to have access to cash. Many people do like to tap and go, so that flexibility is important. As I mentioned earlier—the hon. Lady was also kind enough to mention it—the Financial Services and Markets Bill will protect access to cash, both withdrawals and deposits, because that gives businesses the confidence to take cash safe in the knowledge that they can deposit it, hopefully not too far away. It will be the first time since the ancient Celts first started minting coins in this realm that there will be a statutory right to access to cash.

I must not digress, but I recently visited the Royal Mint in Wales—

[Alex Davies-Jones]

It is in my constituency.

--- Later in debate ---

[Andrew Griffith]

I congratulate the hon. Lady and pay tribute to all those who work so hard to deliver such fantastic products.

To conclude, this Government are alive to and care about the changes that are happening to our high street. We want a financial services sector that serves all. We understand the challenges that these changes can bring. We welcome innovation, we want to support our economy, and we want to support our local high streets.

Question put and agreed to.

Co-operatives, Mutuals and Friendly Societies Bill

Andrew Griffith Excerpts

3rd reading
Friday 24th February 2023 Commons Chamber

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

It is always a pleasure to follow the hon. Member for Ealing North (James Murray). Today of all days, our thoughts are with the Ukrainian people. To that end, I also extend my thanks to the financial sector, which, through the provision of basic bank accounts, has ensured that more than 70,000 people and families who have come and made their home here are able to receive income, send money and pay for goods.

I congratulate the hon. Member for Preston (Sir Mark Hendrick) as his Bill reaches this important milestone. Its aims are as laudable as his long-standing advocacy for the sector. I also thank my team of officials, on his and the House’s behalf, for their work on taking this important reform forward—Joshua Grey, Logan Cuthbert, Lucy Alawi-Yates, Emma Kavanagh, Alanna Barber and Harriet Hill.

We are all aware—this has frequently arisen in discussions about this Bill—of the UK’s special place in the history of the mutual movement. We heard that again this morning from many hon. Members of this House, including my hon. Friend the Member for Aylesbury (Rob Butler). My hon. Friend the Member for Stoke- on-Trent Central (Jo Gideon) raised the Burslem and District Industrial Co-operative Society. My hon. Friend the Member for Buckingham (Greg Smith) reminded us of the importance of the co-operative movement in the free market movement, and mentioned the Buckinghamshire Community Energy co-operative and the Brill village community herd. We cast new eyes on my hon. Friend the Member for Dewsbury (Mark Eastwood) as we look at him as the man from the Co-op, come to collect, not spend his penny.

We have heard of how communities came together over a century ago, pooling their resources to meet their shared needs and face their common challenges. The hon. Member for Preston, of course, appreciates the unique history and impact of mutuals, not least because of the constituency he represents. The north of England is widely recognised as one of the birthplaces of the modern co-operative movement. It was in 1844 that a group of 28 artisans working side by side in the Rochdale cotton mills first came together. Their objective was to consolidate their scant resources so that they could assure access to better quality food and goods that their community had been excluded from.

The Rochdale co-operative movement was based on principles of openness and democratic control—one member, one vote. In that way, the 28 Rochdale pioneers shared in the profits that their custom generated, and triumphed over the poverty that had been blighting skilled workers at the time.

This is part of our shared UK history, and there are even earlier examples of self-help co-operative organisations lifting communities above their common challenges. The Fenwick Weavers’ Society was the result of a collective decision by a group of weavers in Fenwick, Ayrshire, to form a society. The group’s 1761 foundation charter sits in the National Library of Scotland. Its formation was a response to a period of rapid flux for the textile industry in the mid-18th century, and its members came together to set a fair price for their work and guarantee a sustainable future for their trade.

Today the nation, communities and people face different challenges, having come through a global pandemic while a war in Europe rages on and inflation, although coming down, continues to make everyone poorer. That is why our Prime Minister has set this Government five clear challenges, the first of which is to halve inflation in order to give respite to businesses, ease the cost of living for households and give people financial security. The second is to grow the economy, and in doing so to create better-paid jobs and spread opportunities across the length and breadth of the country. That is doubtless at the heart of the co-operative movement. Fourth, fifth and sixth are to cut our national debt, to cut NHS waiting lists, and to pass new laws to stop small boats so that ordinary workers in this country get the fair deal that they deserve.

As Members will know, the first seed of the original mutual movement lives on in our modern mutuals sector, which consists of diverse, commonly owned and democratically controlled enterprises that exist to provide vital services to their members—a genuinely diverse part of our wonderful United Kingdom financial services sector. According to one recent analysis, the UK mutual insurance sector served 32.3 million policyholders and collectively employed 26,400 people in 2021. Another form of mutual organisation that continues to thrive and deliver value to society is the co- operative, which, as we have heard today, operates across all industries and in many constituencies including my own, in sectors from farming to retail to housing. Owned and controlled by members close to them—whether they are workers, shoppers, suppliers or co-residents—co-operatives give people a stake in how they are run. Analysis by the trade body Co-operatives UK found that this sector was worth nearly £40 million to the UK economy in 2021.

Because of their ownership model, mutuals are uniquely invested in doing right by their members rather than in gaining short-term profit at all costs. That makes them key partners in many of the Government’s policy priorities, such as the financial inclusion agenda that is so important to me. It is no coincidence that financial mutuals lead the way in many of the low-cost product offerings, such as affordable healthcare solutions or investment products at price points that—if not quite a penny a week—encourage the financial participation of a broader swathe of society.

Modern mutual banks, invested in the success of their local economies, are able to leverage locally based decision making to ensure that their services reflect the needs of the communities they serve. They are a real asset in our mission to level up and spread economic activity across the regions. I would like to see more mutual organisations of every type, and I am very open to proposals such as those in the Bill, which the Government are proud to support. I am very open to ways in which we can tailor our regulatory structure to promote the growth and, indeed, the new formation of mutuals across our financial sector. This is a real form of diversity.

Mutuals are a big deal in the here and now. In many cases they rest on the legacy left behind by others—the successive generations of memberships who paid into the pot, as the hon. Member for Preston reminded us. They did so on the presumption that that surplus would be held in common, without personal entitlement, to support their peers in times of need, for the betterment of society and for future generations. That is why I have always been receptive to the view expressed by Members on both sides of the House that these funds should remain in mutual hands for the purposes originally intended.

I support actions to secure our mutuals heritage, which is why the Government are pleased to support the hon. Member’s Bill. The Bill applies to co-operatives, friendly societies and bodies corporate that carry on the business of mutual insurance, and it aims to equip those mutual entities with a stronger option in law, an asset lock, to restrict the use of surplus funds for their chosen purposes. By permitting a stronger lock in law for those entities that wish to adopt it—and I am sure many will—the Government aim to provide the sector with an additional deterrence against demutualisation.

[Rob Butler]

Will my hon. Friend say a little more about the significance and importance of the opt-in, as opposed to compulsion?

[Andrew Griffith]

My hon. Friend, as well as being a doughty champion for the co-operative movement in general, is right to emphasise the voluntary element. It is right that those membership organisations that wish to use the lock have the architecture within the Bill to do so, but it is not the business of Government to interfere with the strategy, desire or, in some cases, need of those in the mutual sector to consolidate or raise capital through other means by taking all those options off the table with a mandatory asset lock.

That approach is typical of this Government. My hon. Friend will understand, as an experienced man of business, that our principle is to allow people to regulate and conduct their affairs in the way they feel best serves their needs. As he knows, we have heard very clearly that the mutual sector likes this architecture and will benefit from it. In that context, it is right for the Government to support the Bill.

[Jerome Mayhew (Broadland) (Con)]

As my hon. Friend says, it is important that the Government are in favour of the mutual movement, yet last year Liverpool Victoria was at risk of being taken over by private equity. Does he think we have the right balance between the free market being at liberty to appoint capital as it thinks best and the Government’s objective of supporting the mutual movement and allowing it to grow?

[Andrew Griffith]

My hon. Friend raises a point we have discussed a number of times during the Bill’s progress. It is a poster case for the need to provide some sort of protection. Without getting into the details of that case, Liverpool Victoria clearly continues as a mutual to this day, after deciding not to accept those offers. It is probably right that people were able to make those offers, but it is equally right that members were able to determine the outcome for themselves.

As I hope my hon. Friend recognises, the tapestry of the Government’s financial regulation role and the needs of a vibrant and competitive market occupies all my waking hours. It is a difficult task to calibrate, but we are greatly assisted by the presence on these Benches of so many colleagues with so much experience to offer. It is always a joy to receive representations on behalf of the myriad parts of the sector, all of which we are trying to help grow and deliver jobs across the economy. As I never fail to remind the House, two thirds of jobs in the financial services sector are outside London and the south-east. The sector touches communities across the country, as we have heard again today.

By permitting a stronger lock in law for those entities that wish to adopt it, the Government are aiming to provide the sector with an additional deterrent against demutualisation. It will empower mutuals to continue the legacy left by previous generations of members to deliver in service of their members and wider society. However, the Government are not seeking just to play defence on the mutual model; we want to advance the interests of the sector and to grow diversity so that we have a rich financial services sector that has all sorts of forms of ownership within it.

As the House will be aware, we are taking action to support credit unions, which are another type of member-owned, democratically controlled financial institution. This Bill does not apply to credit unions, but through the Financial Services and Markets Bill we are seeking to promote that sector. As the latest Prudential Regulation Authority data shows, there are 249 credit unions in Great Britain, representing more than 1.4 million adult and child members. There are exactly 650 constituencies; would it not be wonderful if every one of them had a thriving credit union? That is a vision for us to hold in mind.

As the Financial Services and Markets Bill makes its way through the other House, we are making a number of important amendments to the Credit Unions Act 1979 to allow credit unions to offer a wider range of products and services. Where they decide it is in their interests to do so, they will be able to offer hire purchase agreements and conditional sale agreements, and to distribute insurance products to their members. Those are all ways in which they can increase their utility to their members, and improve their own scale and financials, which is one of the challenges that they have had. We will also allow them the option to lend to and borrow from other credit unions on a short-term basis, which will sometimes allow them to manage their liquidity better. Again, that will improve the strength and resilience of the sector. That delivers on interests that were raised with the Government by the sector.

The Financial Services and Markets Bill also gives the Government a new power to allow credit unions to offer further products and services in the future through secondary legislation. The message is that the door is ajar. If we hear representations from the sector about more ways in which this Government can be on its side, it should keep pushing, because we will have the ability through secondary legislation to do that.

Additionally, the Government are taking forward a programme of work to ensure that building societies, mutual savings providers and mortgage lenders have a modern and fit-for-purpose legislative framework that promotes opportunities for growth. We have concluded our consultation on the Building Societies Act 1986. As was announced in the Edinburgh reforms package, the Government will in due course bring forward legislation to amend that Act. That will give building societies further flexibility in raising wholesale funds and help to modernise corporate governance requirements, enabling building societies to compete on a more level playing field with retail banks and, again, to promote competition and diversity of provision within the financial services sector.

We are not stopping there. The Government are committed to the health and prosperity of the mutuals sector, and we recognise the valuable contribution mutuals make. It is a matter of record that I believe we need to go further to cement a modern and supportive business environment in which mutuals can thrive. That is why we continue to have active discussions with the Law Commission on options to proceed with reviews of both the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992, with a view to launching those reviews in the next financial year. Work is ongoing to define the terms and scope of the reviews, which includes close engagement with the sector, and I expect to be in a position to provide an update with more detail very soon, particularly as I know that many Members here today have a keen interest in that work. Clearly, that is something we wish to see move forward and I am sure it will. As such, I can confirm that a core aim of the reviews will be to focus on dysfunctions in the law that result in those organisations being unnecessarily impeded or facing additional time, expenditure or opportunity cost.

In conclusion, the prospects for mutuals are bright. I am delighted that we have been able to make progress on this important Bill today. I commend the cross-party spirit in which the hon. Member for Preston and the Opposition have worked closely with the Government and officials. I am very happy to commend support for this Bill.

Accountability in Financial Regulation

Andrew Griffith Excerpts

Thursday 9th February 2023 Commons Chamber

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

I congratulate my hon. Friend the Member for Yeovil (Mr Fysh) on securing this important debate. He has a distinguished background in finance, and clearly knows of what he speaks. I note his reference to the thoughtful amendments tabled to the Financial Services and Markets Bill by the noble Lord Lilley. I imagine that they draw on the work that Politeia has published by Barnabas Reynolds on the rules for regulators. This is an important topic, and one the Government and I take enormously seriously. We are going through the process of rewriting financial services legislation for a generation. My colleagues and I—the Chancellor and everyone in the Treasury—are very concerned that we get that right. The accountability of our financial services regulations, a sector that comprises over 10% of the entire GDP of our economy, is of the utmost importance. Unsurprisingly, a number of colleagues have raised this matter in both Houses.

The Government have a clear vision for the future: an open, sustainable and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across all four nations of the United Kingdom. That was reiterated in the Edinburgh reforms late last year. Together with the Financial Services and Markets Bill, they amount to the most far-reaching reforms in a generation. I hope my hon. Friend would agree with me on that. The Bill contains a number of measures to address precisely the purposes and concerns my hon. Friend raises. It updates the regulators’ objectives to ensure that for the very first time they consider the sector’s critical role in supporting the UK economy. The Financial Conduct Authority and the Prudential Regulation Authority will be given a new secondary objective to facilitate the international competitiveness of the UK economy and its growth in the medium and long term. That is absolutely right, and the Government expect that to result in real change and in different outcomes.

My hon. Friend referred to the amendments to the Financial Services and Markets Bill tabled by Lord Lilley in Committee in the other place. They seek to enhance the role of the judiciary to provide additional checks and balances on the exercise of regulatory power. He is quite correct when he talks about the many benefits of common law—predictability and certainty among them—but that is not the only way. My hon. Friend is passionate about seizing the opportunities of Brexit for this country, and I reiterate to him that the Government, through the Bill as it relates to financial services, are repealing retained EU law. It will remove prescriptive provisions and hundreds of pieces of retained EU law entirely.

On judicial accountability, which we see in many domains, my hon. Friend raises a number of examples, including on employment tribunals. It will, of course, be up to the UK courts to determine how domestic legislation and rules are interpreted. All the corpus of financial services regulation will ultimately sit subject to that.

My hon. Friend raised the Financial Regulators Complaints Commissioner and a case of which I was not aware of its findings, although voluntary, being ignored. Let me say from the Dispatch Box that were that to be a pattern of behaviour, that cannot be right. That is not a reasonable expectation from our regulators. It is something we should look at, were that be the case. There is an existing mechanism for redress and it is important for all of us that that is taken with the most significant gravity.

Parliament has a unique, special role and responsibility in relation to the scrutiny and oversight of our regulators. Select Committees—the Treasury Committee in particular but not exclusively—provide scrutiny of financial services policy through, for example, Select Committee inquiries and regular hearings on the work of regulators. The Treasury Committee has a dedicated Sub-Committee on financial services regulations, and it is currently conducting an inquiry into the PRA’s strong and simple framework. In addition, the Committee conducts pre-commencement hearings following the appointment of the chair and chief executive of the FCA and the chief executive of the PRA, and can subject them to ongoing scrutiny hearings. If the Committee does not wish to support the appointment of the FCA’s chief executive, it can recommend that it be put to a vote on the Floor of the House.

There are a number of mechanisms in the UK’s domestic framework that allow the Treasury to hold the regulators to account. For example, under section 1S of the Financial Services and Markets Act and section 7F of the Bank of England Act 1998, the Treasury

“may appoint an independent person to conduct a review of the economy, efficiency and effectiveness”

of the use of resources by the FCA and the PRA respectively. I am not aware of that mechanism having been used, but it strikes me as a particularly useful one. My hon. Friend and others may wish to make representations to the Treasury if in future they still consider that there are deficiencies in how regulation is carried out.

HM Treasury can direct the regulators to carry out an investigation into specific events if it is in the public interest. FSMA also provides the Treasury with the ability to make recommendations to the regulators in open letters on issues related to matters of economic policy. Finally, the Government use regular engagement with the regulators to hold them to account. As the Minister responsible for financial services regulation, I engage regularly with the FCA and PRA’s chief executives on a wide range of issues, including their performance. I hope that my hon. Friend will take it in good faith that they are suitably challenged about how we are getting the financial services we need in this country.

I accept that there is more to do. In the Financial Services and Markets Bill, at the behest of my hon. Friend and others, we have introduced a package of measures to strengthen the accountability to Parliament of the PRA, the FCA and the Payment Systems Regulator, to strengthen their relationship with the Treasury and, importantly, to enhance their engagement with the firms that they regulate. I am grateful for the positive engagement of colleagues in both Houses who have made a number of very sensible suggestions in Committee. I hope that our incorporation of some of those suggestions in Government amendments assures colleagues that we are taking the matter, and their concerns, very seriously.

I fully understand that many people in the industry are concerned about not just the volume of rules but the speed with which decisions on those rules are made. I was grateful, although disturbed, to read the recent TheCityUK report revealing that 90% of those surveyed about the FCA felt that the efficiency of authorisations was in some way detrimental to the attractiveness of the UK as a place to do business. That pains me, but I am content that my concern is shared by the leadership of the organisations; I have been assured that improving performance in that respect will be a priority. The Bill will require the FCA and the PRA to report on their performance, not only on operational measures but in the discharge of their new growth and competitiveness objective, as part of their annual report.

I thank my hon. Friend again for raising such important points and for kindly staying until the Adjournment for recess. I know that his concerns are shared by many colleagues in this House and will continue to be taken seriously. We have a great opportunity to get this right, and it is important that we do so. I will dedicate myself over the coming weeks and months to working with colleagues to ensure that we get the best outcomes and that we listen carefully to what he and other Members, in both Houses, have said about this important matter.

Question put and agreed to.