High Street Bank Closures
Andrew Griffith Excerpts(3 years, 6 months ago)
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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—
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 ExcerptsFriday 24th February 2023
(3 years, 6 months ago)
Commons ChamberRead Full debate Co-operatives, Mutuals and Friendly Societies Act 2023 View all Co-operatives, Mutuals and Friendly Societies Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 November 2022 - (30 Nov 2022)
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(3 years, 7 months ago)
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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.
Digital Pound
Andrew Griffith Excerpts(3 years, 7 months ago)
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The Economic Secretary to the Treasury (Andrew Griffith)
Before I give my statement, may I add my voice to those in the previous statement on the Turkey and Syria earthquake? My heart goes out to all the people affected by that.
With permission, Mr Speaker, I will make a statement about the steps the Government are taking to consider the future role of a potential digital pound. His Majesty’s Treasury is today publishing and laying in Parliament a consultation paper jointly with the Bank of England, “The digital pound: a new form of money for households and businesses?”. This paper aims to open a national conversation about the future of money in the United Kingdom.
The way money is used in the UK is changing, as it is across the world. Cash will remain important, but banknotes, issued by the Bank of England, are being used less frequently by households and businesses. New technologies are allowing for the emergence of new forms of digital money, and new ways and devices to pay for goods and services with it. International developments have the potential to affect the UK domestically and our position as a global leader in finance. Ensuring that public trust in money remains high, and that forms of money and payments meet the evolving needs of individuals and businesses, are fundamental responsibilities of the Government on which Parliament must have its say.
We are determined that the UK should remain at the forefront of innovation in money, payments and financial services. This is part of the Government’s vision for a technologically advanced, sustainable and open financial services sector—a sector that is globally competitive and acts in the interests of communities and citizens, creating jobs, supporting businesses and powering growth across all parts of the UK.
A UK digital pound would be a new form of digital money for use by households and businesses for their everyday payment needs. The digital pound would be a new form of sterling, similar to a digital banknote and issued by the Bank of England. For people and businesses, the experience of using a digital pound would be very similar to using other forms of digital money. For example, it would be accessible online via smartphones and computers, as well as through cards that could be used at point-of-sale terminals.
I want to be clear that the Government are legislating to protect access to cash and ensuring that the UK’s cash infrastructure remains sustainable long term. Therefore, as part of the wider landscape of money and payments, the digital pound would sit alongside, and not replace, cash —a digital counterpart to familiar, trusted banknotes and coins, and subject to rigorous standards of privacy and data protection. It would be denominated in sterling, and digital pounds would always have the same value as, and be interchangeable with, the equivalent physical banknote. Unlike cryptoassets and stable coins, the digital pound would be a central bank digital currency; sterling currency issued by the Bank of England, not the private sector.
A digital pound would help to ensure that money issued by the central bank—which is currently available only as cash—remains available and useful in an ever more digital economy. Knowing that there is an ultimate backstop to convert our money—money in our bank or e-money account—into cash or a CBDC at any time is the foundation of confidence in all forms of money, both day to day and in a crisis.
As cash is less and less used, the importance of a digital pound to provide that constant access to Bank of England-issued money could rise. It will safeguard the UK’s monetary sovereignty in a changing global financial system. It could provide a platform for private sector innovation, promoting further choice, competition, efficiency and innovation in payments.
On the basis of our work to date, the Bank of England and HM Treasury judge that it is likely that a digital pound will be needed. It is too early to commit to build the infrastructure for one, but we are convinced that further preparatory work is justified. A future digital pound would be a major piece of national infrastructure, which would take several years to complete. It would need to be safe and secure, and the legal basis for the digital pound would be determined alongside consideration of its design. Its launch would require deep public trust in this new form of money—trust that their money would remain safe, accessible and private.
The journey towards issuing any digital pound, therefore, necessarily involves an open national conversation about the future of our money, in parallel with important detailed technical consideration by experts across UK public authorities, and be informed by evolving market trends. The consultation we have published today will be open for four months. It opens that conversation and seeks to build the foundation of public trust. It sets out our vision of why a digital pound may be needed alongside our vision of how a digital pound could work, should we decide to issue one.
Like a physical banknote, no interest would be paid on the digital pound. Privacy, user control and use of data in line with UK data protection laws are of paramount importance. So I want to reassure the House that our vision for a digital pound would have the same privacy protections as bank accounts, debit cards or cheques. Neither the Government nor the Bank would have access to digital pound users’ personal data, except for law enforcement agencies under limited circumstances, prescribed by Parliament in law and on the same basis as applies to other digital payments. The digital pound would not be anonymous because the ability to identify and verify users is needed to prevent financial crime.
Drawing on the feedback we receive in the consultation, we are committed to move to the next phase of work. That will inform a future decision on whether to progress to building and launching a digital pound. I assure hon. and right hon. Members that a further update to Parliament will be made prior to that. It will also inform our current proposal for its form and function, decisions on which will be taken forward in the next stage. At this exciting time of change in money and payments, this consultation is a vital step in positioning the UK to act decisively, should we choose to introduce a digital pound.
Andrew Griffith
It is always a pleasure to hear from the hon. Lady, in what I think was a welcome from His Majesty’s Opposition for the joint consultation between the Treasury and the Bank of England. She rightly raised issues that I assure her are addressed in the consultation, about which we would like to hear. They include how to ensure privacy, which will be embedded in the design. It is important that we come forward with, potentially, a digital pound precisely to avoid this space being colonised solely by, for example, private large tech companies.
I can assure the hon. Lady that this issue will not in any way distract from our important work on financial inclusion. Cash will indeed continue, and no part of the consultation talks about in any way replacing it. Rather, this is about ensuring access to that currency, so that potentially it will no longer be gated behind existing financial institutions; it could be something that new participants make available to citizens without some of the constraints that are sometimes put on the financial services system. The consultation also addresses the risk, which the hon. Lady rightly raised, should everybody withdraw their money all at once to invest in this digital currency.
However, the hon. Lady’s comments were a speech of two halves, and the second half was as wrong as it was unnecessary. This Government have never promoted a crypto wild west. The current Financial Services and Markets Bill contains more measures to protect consumers. The risks that consumers face have always been extremely clear, but when it came to financial promotions, one of the biggest challenges we faced was the Mayor of London and Transport for London, which gained a reputation for accepting particular adverts from the crypto industry.
Harriett Baldwin (West Worcestershire) (Con)
The Treasury Committee has opened an inquiry into crypto, and this morning we had a session at which the chief executives of the major high street banks appeared before us. The real question we wanted to ask them was why they have been paying our constituents so little on their savings since the Bank of England started to increase rates. Is not the logical conclusion of the consultation process that my hon. Friend has opened today that each of us should be able to hold a digital currency account at the Bank of England, and to earn the Bank rate on our holdings and disintermediate the entire banking sector?
Andrew Griffith
I thank my hon. Friend for her, as ever, wise points, as well as her wise chairmanship of the Treasury Committee. It is absolutely imperative that savers get the interest rates that they are entitled to. I commend my colleagues in National Savings and Investments, who have significantly increased the rates offered to savers. Of course, she also raises one potential opportunity, in that, although a digital pound would sit alongside our existing financial services infrastructure, it potentially offers consumers and citizens a different choice, which could involve the ability to hold currency through intermediaries other than the current banks.
Stewart Hosie (Dundee East) (SNP)
When I was in the US with the Treasury Committee some years ago, we were given two choices: either 95% of all crypto was fraud and froth, or 100% of all crypto was fraud and froth. Clearly, a central bank-backed asset is a different beast; but nevertheless, I have three questions. First, what problem is this idea designed to solve? Secondly, what happens if this digital asset becomes volatile? If it stops behaving like a currency and starts to behave like a bond or equity, or debt, or something speculative like a non-fungible token, how will it be regulated? Thirdly, the Minister said the digital pound, in this new form, will always be worth the same as a traditional pound. What if the market determines that that is not true and there is a divergence between the fiat currency value and this new non-fungible, Bank-backed token? Who picks up the tab when people potentially start to lose money?
Andrew Griffith
The right hon. Gentleman runs the risk, if I may say so, of confusing a particular attribute of what is a very large sector. This is not a cryptoasset; the digital pound would not have those speculative attributes. The fact that £10 in digital pounds would be fully exchangeable for £10 in His Majesty’s finest banknotes would prevent that divergence—if it did not, that would present the right hon. Gentleman with a profitable opportunity that he could use to supplement his other activities. He raises other questions, which are rightly the subject of the consultation. I extend the invitation to all parts of the United Kingdom, and we look forward to his constituents and compatriots being able to contribute.
Richard Fuller (North East Bedfordshire) (Con)
If I was the Minister, I do not think I would not be quite as confident in my response to the SNP Opposition spokesman: that a digital pound will not affect the pound in our pocket. However, I broadly welcome the consultation, and I am very pleased that this Minister will be overseeing it. He will be aware that during covid we went through a period of extreme authoritarianism in this country. He will also be aware of some of the risks from central bank digital currencies to individual financial freedoms—he enunciated some of them in his statement. At the end of the consultation, will the Minister therefore also look to draft a financial liberty charter that this House can vote on, to protect the freedoms that we experience with currencies today?
Andrew Griffith
My hon. Friend and, indeed, predecessor highlights one of the potential concerns: one is either instinctively too early or too late in bringing matters to this House. Although this is a long-term project—the consultation makes it clear that a digital pound would not be introduced before the second half of this decade—it is right that we start conversations on precisely the important matters that influence the liberty of every one of us at this moment in time. So while I will eschew his choice of words, I assure him that liberty remains paramount, which is one reason why it is very clear that any digital pound should not replace, but should sit aside, the anonymity that is currently offered by physical cash.
Sir Stephen Timms (East Ham) (Lab)
I welcome the Minister’s statement. Firms setting up to deliver blockchain-based financial services in the UK complain that getting a licence here takes far too long because the Financial Conduct Authority does not have the capacity to process the applications. A number of very successful firms have been forced to leave the UK altogether as a result. What plans does the Minister have, as part of this work, to tackle that particular problem?
Andrew Griffith
The right hon. Gentleman might usefully and productively have a conversation with his own Labour Front Benchers, who only a moment ago were accusing us of moving too fast. The two points show that the financial regulators have in this particular case got the balance about right in their approach to cryptoassets. He will also know that last week we published a proposal for the regulation of cryptoassets more generally. This is not a cryptoasset; this is a digital pound. He makes a point that others have also made to me about the speed with which our financial regulators reach their conclusion. I understand that point. Whatever conclusion they reach, it would be desirable that they do so in a way that is as effective as possible and gives as much certainty as possible. It is one reason why there are powers in the Financial Services and Markets Bill, which he will know is going through the other place at the moment, that will compel the financial regulators to publish more of their operating statistics, so that he and I will be able to see how they discharge their duty to regulate in an effective manner.
Alun Cairns (Vale of Glamorgan) (Con)
Digital currencies in a whole range of formats are part of a fast-moving and dynamic sector of an emerging economy. To date, the regulators have struggled to keep up with the skills and capacity to bring about appropriate and effective regulation of the sector. What plans does my hon. Friend have to develop capacity within the regulators to give confidence in the marketplace that the digital pound, as well as other digital currencies, will have confidence among users?
Andrew Griffith
My right hon. Friend makes an important point. To govern is to choose and we ask our regulators to make choices to prioritise. It is one reason why we are looking at reform of long-standing areas, such as the 40-year-old Consumer Credit Act 1974, to see if we can modernise it and make it more fit for purpose, deliver better customer outcomes, and potentially free up the regulatory environment so they can make choices to focus on the new and emerging threats and opportunities that this domain represents.
Sir Chris Bryant (Rhondda) (Lab)
Further to the question from the Chair of the Treasury Committee, the hon. Member for West Worcestershire (Harriett Baldwin), can the Minister be a bit clearer? Will this be an interest-paying currency, yes or no?
Danny Kruger (Devizes) (Con)
I have two concerns. The first is on privacy, which other Members have mentioned. The proposal is that the Bank of England can become your bank. The Minister says the currency will be private but not anonymous, but the reality is that in certain circumstances it could be neither. It should be possible for authorities to observe the transactions of any citizen if they have cause to do so. Will he confirm that? My second anxiety is on the implications for cash. Will the money used through this new digital mechanism require cash to be withdrawn from circulation in exact proportion? If not, his proposal to print new money will be a sort of cryptocurrency quantitative easing with inflationary implications. If cash will be withdrawn in proportion as the digital pound is issued, we are talking about the end of cash are we not? Progressively, the digital coin will replace the use of cash.
Andrew Griffith
I accept that the Command Paper has just been published, but when my hon. Friend has the opportunity, he will be able to look at the detail of the operation of such a scheme, which will reveal that there will be platform intermediaries. People will not have a bank account directly with the Bank of England, except in very narrow circumstances. I understand the concerns, and it is right that we debate the balance between freedoms and our duty to protect citizens from fraud and other things that this House, from time to time, will decide justify the piercing of that veil of privacy.
I want to reassure my hon. Friend on cash. By design, this proposal will not replace cash. From a monetary policy perspective—although that is something, as with all these questions, that Members may respond to during the consultation—it is envisaged that it certainly will not increase money supply, and the one-for-one nature I talked about earlier is important in that regard. To be clear to my hon. Friend, the arbiter of that decision will be individual citizens making the choice as to how they wish to use their money—how they wish to spend it and how they wish to store it.
Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)
The crypto and digital assets all-party parliamentary group, which I chair, greatly welcomes the consultation and the progress being made by the Minister. We are hopeful that a digital pound could enable faster payments and lower cost payments to improve inclusion across the UK. The other issue I wish to raise is international interoperability, in particular with colleagues across the Commonwealth. Will the Minister look at what progress can be made in the realm of collaboration with Commonwealth partners?
Andrew Griffith
I thank the hon. Lady for her question and for her work as chair of the crypto and digital assets APPG. I hope it has been a productive number of weeks with the consultation paper on the regulation of cryptoassets and today’s joint consultation paper with the Treasury. The APPG does good work in educating and providing opportunities for Members of this House to engage with this rapidly growing area, which is important to financial inclusion and ensuring that we design in financial inclusion at the start.
The hon. Lady makes a very important point about international interoperability. About 90% of all member countries of the Bank for International Settlements surveyed are looking at doing something similar, so it is right that we engage. We have a strong position of leadership in the financial community, as well as an adherence to the highest quality regulatory standards. That is absolutely in keeping with what we are trying to achieve today.
Anna Firth (Southend West) (Con)
I absolutely welcome the Minister’s statement and the commitment from him and the Government to keep the UK at the forefront of innovation in financial services. I heard his answer to the hon. Member for Rhondda (Sir Chris Bryant) that this will be a zero interest-bearing currency, but surely in the fullness of time we cannot have a situation where banks deposit their money at the Bank of England and get the full 4% base rate, while retail consumers and individuals get zero. If the Minister agrees with that, is this not a way to stop the consumer being ripped off by the big four and getting only 0.83% on their interest, while the banks are getting 4% from the Bank of England?
Andrew Griffith
I thank my hon. Friend for her endorsement of today’s proposals. She should know that I am as concerned as she is about the fair deal for savers in general. As interest rates have increased, it is absolutely appropriate that savers benefit. It is a virtuous activity, and one that we on the Conservative Benches are very keen to support. The issue of central banks paying other banks interest on deposits is complex. There is a matrix of regulatory advantages and disadvantages from the status of being a bank, and I would be very happy to engage with her more to understand that.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
I do hope that one day the Minister will come to the Durness highland games in north-west Sutherland. He will be very welcome, and he will see just how much money is taken out of the cash machine in Durness—by the way, what a battle we had to get it put back when it was removed! If he goes along the north coast to Wick, he will see how much money is donated to the Wick gala: it is gathered in small shrimp nets and buckets. Tapping an iPhone on a shrimp net simply does not work.
My point is obvious: we rely on cash. In my vast and remote constituency, access to cash is a real challenge if people have to travel huge distances. May I have an assurance that when the Treasury looks at safeguarding access to cash, it will take into account the challenges facing constituencies such as mine?
Andrew Griffith
It is indeed my aspiration to visit the hon. Gentleman’s expansive and rural constituency one day. Let me reassure him and the House that this long-term project will in no way take my or my officials’ time and attention away from any of the endeavours that have been put in place to promote access to cash. There are new powers in the Financial Services and Markets Bill, there are obligations on the regulators, and we are working with the banking industry and with Link.
As a Member who represents a rural constituency, albeit somewhat south of the hon. Gentleman’s, I fully understand the importance of access to cash for communities, for people who may be disadvantaged and use cash to budget, and for our increasingly elderly population. That focus remains, and it is not diminished by this longer-term project. As hon. Members, particularly Opposition Members, have highlighted, we have the opportunity to design in financial inclusion and to ensure that no matter who someone banks with, they can benefit from the UK digital pound.
Aaron Bell (Newcastle-under-Lyme) (Con)
I thank the Economic Secretary for his statement and for the consultation. Perhaps it is apt that it is being launched on the day we have a new Department for Science, Innovation and Technology. That shows that this Government are taking the long view, as well as managing the short-term pressures that we are going through.
The Economic Secretary mentioned public trust, which will be crucial. In launching the digital pound, what measures will the Government be willing to take to safeguard people against the risk of scams? As we have seen with cryptocurrencies, with bank cards and with online banking, people are vulnerable to scams when things are new. What measures do the Government envisage to ensure that launching a digital pound does not put people at risk?
Andrew Griffith
My hon. Friend makes two important points. The first is about the long-term nature of this Government, whose focus on delivery extends to the Prime Minister’s organisation of Departments to ensure that they deliver the outcomes that the British people expect.
My hon. Friend also highlights the importance of financial education. I can commit that, as part of the national dialogue on this important issue, we will give thought to how we ensure that we educate our citizens to prevent them from falling prey to the terrible financial scams that people are trying to perpetrate in the financial system today.
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
I declare non-pecuniary interests as chair of the all-party parliamentary group on blockchain and as a vice-chair of the crypto and digital assets all-party parliamentary group. I am glad to see the co-chair, the right hon. Member for East Ham (Sir Stephen Timms), in the Chamber.
The Minister will know that I led the first debate in this House on cryptoasset regulation; I think he was the Minister who responded. Central bank digital currencies played a major part in my speech, so I welcome the opportunity for a consultation. For all the bad press that cryptoassets have—alas, justifiably—received, there exists an undeniable opportunity, as I am sure he will appreciate, for CBDCs to create an accessible, reliable store of value using the principles of distributed ledger technology. Will he elaborate on the aspects of financial inclusion he hopes to bring forward to ensure equal access to the CBDC for the most digitally excluded of our constituents, not just for the crypto bros?
Andrew Griffith
I thank the hon. Member for his contributions to the ongoing debate. I have said that there is an opportunity for us to design in financial inclusion; that is one of the advantages of consulting early and of building a consensus across the House on a subject as important as our nation’s currency. He is quite right that it needs to be accessible and reliable as a store of value; the opportunity for it to sit side by side with cash and with the existing bank and digital payments system should give us the ability to drive financial inclusion outcomes.
Antony Higginbotham (Burnley) (Con)
I welcome the Minister’s statement and the foresight that he and the Treasury are showing in getting the consultation out early. What assessment has the Treasury made of the potential impact on our small and medium-sized enterprises—particularly import and export SMEs, which are big users of foreign currency?
Andrew Griffith
As my hon. Friend knows, one of the points of friction—one of the costs—is the exchange of currency. It has come down greatly over time, but is still often measured in the percentage points. A true central bank-issued digital currency—a digital pound—that could be much more readily converted without the current number of intermediaries could be a real opportunity for small and medium-sized enterprises engaged in that all-important activity to our great nation: exporting our goods and services.
Jim Shannon (Strangford) (DUP)
I thank the Minister for his statement. I and many of my constituents, like those of other hon. Members, are still committed to using cash. How will the Minister ensure he sends a message that today’s announcement does not mean that we are moving to a cashless society? How will he secure access to cash? It is already at risk in rural areas as a result of banks’ continuing withdrawal and centralisation, which is leaving people with no option but to operate digitally even when they feel vulnerable and feel that their finances are at risk.
Andrew Griffith
Today is not about access to cash; it is about the long-term plans for a digital pound. However, the hon. Member makes a very well-understood point. We are legislating in the Financial Services and Markets Bill to ensure that, for the first time in this country since the Celts minted the original currency, communities will have a statutory right of access not just to withdraw cash, but to deposit it, because it is the ability to deposit that drives the desire of retailers and others to take cash. We want cash to continue to circulate in our society, and we are making provision for that in the Bill, which I hope will soon be on the statute book.
Carol Monaghan (Glasgow North West) (SNP)
I have a couple of questions about safeguarding. The Minister said in his statement that the Government will not
“have access to digital pound users’ personal data, except…under limited circumstances”.
Can he give me an assurance that those circumstances will not include Government agencies aggressively targeting vulnerable individuals, for whatever reason?
Several hon. Members have mentioned cash. We know that cash can give people financial independence, particularly if they are in a coercive relationship: not having somebody see every single spending decision they make gives them a slight amount of independence. What safeguards on the digital pound will be put in place to ensure that people still have that protection?
Andrew Griffith
I thank the hon. Member for those points; her point about safeguards against coercive control in particular is well made. This is where something like a digital pound can have utility: unlike existing banking relationships, but like cash, it is not subject to the caprices of a particular commercial entity that may apply its own policies. I commend our payment services industry—the UK is blessed with a strong, healthy and competitive banking sector—but for the safeguards that the hon. Member seeks, the digital pound would be additive to the current situation.
Mr Deputy Speaker (Mr Nigel Evans)
I thank the Minister for his statement and for responding to hon. Members’ questions.
Oral Answers to Questions
Andrew Griffith Excerpts(3 years, 7 months ago)
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Sarah Green (Chesham and Amersham) (LD)
The Economic Secretary to the Treasury (Andrew Griffith)
We want everyone to have appropriate access to banking services. Decisions on branches are commercial decisions for firms to take, but we have ensured that the regulatory structure treats customers fairly. As well as digital and telephone banking channels, alternative in-person services are available via the Post Office, through industry-driven initiatives and through new shared banking hubs.
Sarah Green
Following a string of local bank branch closures in recent years, news of yet another branch shutting up shop in Amersham on 1 March has caused great concern to my constituents. Some of those affected will struggle to make the journey to the next nearest branch, and they are not confident that the promised alternative provision will meet their needs. Does the Minister agree that the creation of banking hubs should be triggered by the communities that need them? Will he meet me to discuss the need for such a hub in my constituency?
Andrew Griffith
I would be happy to meet the hon. Lady to talk about the challenges her constituents face. In its information pack about the closure, Barclays revealed that only 22 customers use the branch regularly, and that 92% of users are able to fulfil their services through other means.
Andrew Jones (Harrogate and Knaresborough) (Con)
The work to deliver a new banking hub in Knaresborough is progressing so well that we are looking at an opening date in only a few months. Will my hon. Friend come to Knaresborough when the hub is open?
Andrew Griffith
I will be delighted to visit, and I commend the good work done by Link and the access to cash action group.
Bob Blackman (Harrow East) (Con)
The Economic Secretary to the Treasury (Andrew Griffith)
For under-18s, financial education is a key part of building financial capability. The statutory citizenship curriculum provides essential knowledge so that 11 to 16-year-olds are prepared to manage their money well.
Bob Blackman
I thank my hon. Friend for that answer. Cambridge University has demonstrated in its research that it is actually primary school education that is vital to prepare young people for financial education, but at the moment only one in five children has access to this. Will he consider using part of the dormant assets fund, which I believe totals £880 million, to gain access for children to financial education?
Andrew Griffith
My hon. Friend makes an important point about it never being too early to start the important work of financial inclusion. I am convening the financial inclusion policy forum next week, and I look forward to engaging with him on this all-too-important topic.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
Greg Smith (Buckingham) (Con)
The Economic Secretary to the Treasury (Andrew Griffith)
My hon. Friend makes an important point. That is why the Financial Services and Markets Bill rightly improves the accountability of regulators to Parliament. It is about not just the cost of regulation, but the speed and efficiency of it. I read with concern work from TheCityUK suggesting that 90% of industry respondents thought that the speed of authorisations was either “somewhat” or “extremely” detrimental.
Feryal Clark (Enfield North) (Lab)
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Andrew Griffith
This Government bow to nobody when it comes to cracking down on tax evasion. It is wrong and illegal, and the Government do not support it.
Chloe Smith (Norwich North) (Con)
UK Infrastructure Bank Bill [Lords]
Andrew Griffith ExcerptsWednesday 1st February 2023
(3 years, 7 months ago)
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Abena Oppong-Asare
I am not going to take any advice from the Government. They have been in government for 13 years, and what have they delivered so far? I suggest that the hon. Lady support our amendment, which would ensure that things go through properly.
The devolved Administrations must be included in the development of the UK Infrastructure Bank. I have already mentioned the fantastic wind energy sector that we have in Scotland, and I was excited to read about the opportunities that the bank has identified in Northern Ireland. We do not believe that amendment 2 is necessary to ensure that all regions and nations of the UK benefit from the Bill, so we will not support it.
As we enter another year of low growth and failed Conservative government, we know there is a vital need to invest in the infrastructure of the future. We support the establishment of the UK Infrastructure Bank and have sought to improve the Bill throughout. We want to see stronger objectives and reporting for the bank, so that it can play a role in meeting our net zero targets while creating good jobs across the country and supporting the UK supply chain’s resilience, but what the bank needs most of all from the Government is an ambitious plan. Once again, the Government are on the back foot and U-turning at the last minute with amendment 1, on the bank’s reviews. It is yet another sign that Labour is the party with a plan for government—a party that will grow the economy and create jobs for the future.
The Economic Secretary to the Treasury (Andrew Griffith)
It is always a pleasure to follow the hon. Member for Erith and Thamesmead (Abena Oppong-Asare). I thank all hon. Members who have tabled amendments and contributed to today’s debate, as well as those who made valued contributions in Committee. Notwithstanding a certain number of amendments, I feel that generally there is good consensus across the House about the core purpose and objective of an important institution.
If we are fully to meet our responsibilities to spread opportunity to all parts of the United Kingdom and support the all-important transition to the clean energy economy, it is right that we take bold action now with institutions such as the UK Infrastructure Bank. We have therefore introduced the Bill to make explicit—with a legislative lock, if you like—the scope of the bank’s objectives
“to support regional and local economic growth”
and
“to help tackle climate change”.
Enshrining the bank in legislation will help to establish it as a long-lasting institution. That is important to colleagues across the House, as we have heard, who agree that it is a welcome initiative. I am glad that there has been general consensus today about the importance of the Bill.
I turn to Government amendment 1, which stands in my name. In Committee, I committed to looking again at the frequency of statutory reviews into the UK Infrastructure Bank and undertook potentially to propose a different frequency at a later stage of the Bill’s passage. It would be a gross mischaracterisation to call the amendment a U-turn; it is simply an example of a listening Minister in a listening Government trying to do what is best to get the institution on the right footing. I thank hon. Members who brought the matter to my attention and shared their views, particularly my predecessor, my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who raised the point in Committee.
It is, I hope, a sign of strength that I considered afresh what was appropriate for the first review period. However, given the pre-existing reviews to which the Cabinet Office and HM Treasury have already committed, and the need to allow a nascent institution time to embed itself, I remain of the view—having taken the question away and looked at it again—that it is right for the first review period to be seven years. However, I recognise the strength of the arguments for, the appropriateness of and the desire for a shorter period between every subsequent review to ensure that this House applies the necessary accountability. My amendment 1 would therefore reduce the interval between each regular review after the first.
Abena Oppong-Asare
Does the Minister remember rejecting our amendment about the reviews? He is saying that this is not a U-turn, so I just want to hear from him about that aspect.
Andrew Griffith
I hope the hon. Lady would never dream of trying to score cheap political points, as distinct from our good-natured and collaborative discussions in Committee. Rather than setting a new timeframe there and then, we looked at precedent in a quest for the optimal timeframe. I undertook to come back on Report and share a proposal with the House, precisely as I am doing today. Having listened and having made that determination, I can feel the warm radiation of support from the Opposition. I hope to see that good will extending to supporting the rest of the Bill without further amendment.
Richard Fuller
As it gets warm and huggy between the two Front Benchers, I would like to remind the Minister that I also tabled an amendment in Committee. I hope that he is feeling warm and huggy towards Government Back Benchers as well. He seems huggy, though I am not sure it is politically correct to say that any more. I want to emphasise that the Minister has been listening, which is why he has come back with the amendment. That is the right thing for him to do.
The serious part of my point is how the institutional culture of the bank is set. The Minister will know from his own experience that the first few years are very important. He says that the first review period will be seven years, and I understand that, but can he share with the House some of his thinking about how that responsibility will be balanced? I think Members on both sides of the House are concerned that we set the institutions and regulators out there a task, but then we do not have the time, the information or the control to hold them to the original principles that we have set. Does the Minister broadly agree with that? Is he comfortable with the way the legislation will now be framed?
Andrew Griffith
Let me assure my hon. Friend and the whole House that this institution will not lack the proper scrutiny. In that initial set-up period it will be reviewed by both the Cabinet Office and His Majesty’s Treasury. It will not lack scrutiny. It has an obligation to report annually. On some of the amendments we have discussed today, I have already procured a commitment from the bank to put more information into the public domain about its investments and their location, which Opposition Members have rightly pressed us for.
Although the bank is yet to reach its full complement of staffing and run rate of operations, it has already benefited from a serious review by the Public Accounts Committee of this House. I think it would be worth trying to correct some misapprehensions, but I do not for one moment take away the importance of regular scrutiny. We are talking about public money, and it is of the utmost importance that we engender trust as well as good value for public money.
That Public Accounts Committee report is a good and important piece of work. I absolutely commend the work of the Committee, which does a sterling job to protect the interests of taxpayers. We should always remember our duty of care when we are spending other people’s money. It is a good piece of work, and I am grateful for it. We will respond to it in the usual way through the Treasury minute process to get that on the record.
However, I want to address one or two of the points raised. The report raised concerns about governance, but this is an institution that has benefited from strong financial governance from the get-go. All deals done to date have been reviewed by the full UK Infrastructure Bank board before being approved. Because of that, early deals were also approved by HM Treasury Ministers to ensure that we protected taxpayers’ money.
I am proud, as we all should be, of the bank’s work as it continues to engage with the market and across Government, building on its first 18 months in which it has done 10 deals worth more than £1 billion of additive, incremental investment across all parts of the United Kingdom.
Richard Fuller
My hon. Friend has just used the magic word “additive”. Would he care to explain further, in the context of these new clauses and amendments, that the issue of additive capital is a crucial part of the bank’s responsibility? This is not just about protecting taxpayers’ money, but about attracting third-party private capital. One of the points about the proposal to spread the objectives is that it becomes harder to attract that capital when the mission of the institution is more diffuse. The more focus it has, and the more focus my hon. Friend has, the more likely we are to achieve the objective of additive capital that he has outlined so clearly.
Andrew Griffith
My hon. Friend is, once again, absolutely right. The principle of being additive is baked into the core charters and constitutions, as well as the steer that my colleagues and I will give.
New clause 1 would insert a provision to prevent the sale of the bank. I understand the concern that has been expressed by Members in the past, but I can reassure them that the bank is intended to be a long-lasting institution. I have detected a strong degree of consensus about the importance of this, both in Committee and here in the Chamber, just as our commitment to net zero is long-lasting and a subject of consensus. We intend the bank to be permanent; it is an essential part of the Government’s infrastructure strategy. Moreover, the new clause is simply not necessary. In the event that any future Government considered a sale of the bank—and that is not my expectation—it would require primary legislation at the time. The new clause cannot bind the House on a future occasion, and in any event it is not necessary, so I ask for it not to be pressed to a vote.
The hon. Member for Erith and Thamesmead has tabled a new clause and an amendment. New clause 2 would require the bank to publish an annual report addressing the geographical spread and ownership of bodies in which the bank invests. That is, of course, its core purpose, and I therefore do not think we need the new clause. We debated this proposal in Committee and, for the reasons that we set out then, we do not propose to accept it now.
The new clause is simply unnecessary, because the bank will already be reporting on its investments: it will publish a summary of them in its annual report and accounts. It captures data in all its deal assessments, and will be happy to make them publicly available. I have received a letter from the bank confirming that it will make publicly available the names of developers and/or sponsors of the projects it supports. It will also provide the geographical location of these projects. I feel pressed by colleagues on this matter. I have procured more information, as the hon. Lady has requested and, again, I ask for this new clause not to be pressed to a vote.
As for jobs, it is actions, not lines of statute, that count. We do not need to deliver an amendment to deliver good jobs; just ask the employees involved in the NextEnergy, Gigaclear and Fibrus investments which the bank has already supported. Every job is a good job. The bank is committed to pursuing the highest environmental, social, resilience and governance policy standards, and we do not feel that there is any added value in simply adding extra lines of statute or red tape for the sake of it, as the hon. Lady proposes. It is actions, not words, on which we are focused.
Amendment 5 asks for the bank’s objective to include reducing regional inequality and improving pay, productivity and living standards, as well as supporting supply chain resilience. However, those are already implicit in the bank’s current objective. That is the very purpose of setting up a UK infrastructure bank—the clue is in the name—and we now have a track record to show what the bank is doing to support regional and local growth.
Andrew Griffith
I will give way one final time, but my hon. Friend will have to make it count.
Richard Fuller
I am not so sure about that, but I know that my hon. Friend has a lot of reading to get through. As he obviously knows, part of what is inherent in the net zero objectives is the fact that there will be an increase in supply chain resilience.
Andrew Griffith
My hon. Friend did indeed make his intervention count, because that is a very pertinent point. Of course, the whole purpose of the bank is infrastructure and capability building, and the commitment to regions is at its heart. Regional and local growth are among its core objectives. The more diverse infrastructure we have in all parts of this great United Kingdom, the more we are naturally adding resilience and achieving our objective. Indeed, the strategic steer set by the then Chancellor in March last year makes it clear that the bank must focus on geographic inequalities by reference to the levelling-up White Paper, which includes a comprehensive set of levelling-up objectives and measures and supports the Government’s strategic approach to levelling up. We would rather do that on a portfolio basis than investment by investment, as proposed by the hon. Member for Erith and Thamesmead.
Amendments 3 and 4, tabled by the hon. Member for Tiverton and Honiton (Richard Foord), focus on the important issue of water quality. This is an area where the Government do not need any lessons. We are taking the lead in this matter, and are taking the action that the hon. Gentleman’s party and its leader failed to take in coalition. Sometimes one detects the fervour of a convert, or even the working-out of some past guilt about their failure to take action on water.
Selaine Saxby
It is obviously delightful to have another Devon MP who cares passionately about the environment, as did his predecessor. I cannot help but wonder whether, if the Liberal Democrats were serious about this, the Secretary of State for Energy and Climate Change from 2012 to 2015 might have implemented some of these things. Does my hon. Friend the Minister agree that there seems to be a trend of creating opportunities for dodgy graphics and social media content, rather than making serious changes to legislation?
Andrew Griffith
My hon. Friend makes an important point. It ill behoves a party that aspires to be taken seriously as a force in British politics to be all about clickbait, misleading graphics and half-truths, rather than about, for example, the data, which show that monitoring has increased from just 5% in 2016—a level at which it would be wrong for anyone to characterise themselves as having their arms around this long-standing issue—to more than 90% today. I understand from my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs that it will be 100% by the end of this year. We are the party that is taking action. We are the party that is finding the data, exposing the conduct of the water companies and putting record investment into the sector to solve this long-standing problem. We are the party that provides the solution.
The hon. Member for Tiverton and Honiton needs to consider whether he wants to be part of the problem or, as we all are, part of the solution. One of his amendments is entirely superfluous, as such a measure is already underwritten by the objectives in the world-leading Environment Act 2021. Only yesterday, we announced ambitious interim targets to deliver those objectives in our environmental improvement plan. I believe that the hon. Gentleman was in the Chamber for the statement that preceded this debate. For that reason, we will accept his amendment, because it sits within the actions that we are taking and the commitments that we have made.
Finally, the amendment tabled by the right hon. Member for Dundee East (Stewart Hosie) would require explicit consent from the devolved Administration before using powers under clause 2(6) that touch on devolved competence. However, I was pleased when his colleague, John Swinney, the acting Finance Secretary, wrote to me indicating that he was happy with the content of the Bill, and would recommend that the Bill receive a legislative consent motion. Last week, I was even more pleased—imagine my delight—when the Scottish Parliament gave the Bill an LCM. The right hon. Member for Dundee East will see that not just the Government but his colleagues suggest that his amendment is not required by the Government in Holyrood. As a result, I very much hope that he will not seek to push it to a vote.
This is an incredibly important milestone and moment in establishing a new national institution that will deliver real social purpose and make an enormous difference to the lives of our fellow citizens across the United Kingdom. Establishing it today in statute will give the market greater certainty and confidence, and encourage significant private sector investment in all of the bank’s priority sectors. By partnering with the private sector—by mobilising the life force of private capital, the ferocious, problem-solving power of business—in areas that might otherwise struggle to get the investment they require, we will help speed up the transition to net zero and level up the UK. With the exception of amendment 4, which I have indicated the Government will not oppose, I hope Members understand the reasoning—even if they do not agree—that I have set out as to why we cannot accept the amendments and new clauses and that they respect the time of the House and agree not to press them to a vote.
Richard Foord
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Businesses and bodies the Bank invests in
“(1) The Bank must publish an annual report setting out—
(a) the geographical spread of businesses and bodies it invests in, and
(b) the ownership of the businesses and bodies it invests in.
(2) The Bank must prepare and publish a ‘Good Jobs’ plan for all businesses and bodies it invests in, which requires the business or body to improve productivity, pay, jobs and living standards.” .—(Abena Oppong-Asare.)
This new clause would ensure that the Bank considers the location and ownership of the businesses and bodies it invests in and only invests in businesses and bodies who create “Good Jobs” plans to improve productivity, pay, jobs and living standards
Brought up, and read the First time.
Question put, That the clause be read a Second time:—
Andrew Griffith
I beg to move, That the Bill be now read a Third time.
The Bill will place the UK Infrastructure Bank on a statutory footing and enshrine key aspects of it in legislation, ensuring that the bank’s purpose is clear and enduring. It will enable the bank to lend directly to local authorities and the Northern Ireland Executive, and His Majesty’s Treasury will be able to put the bank into funds. The Bill also guarantees a high standard of transparency and accountability to this House.
The Bill will now enable the bank to be fully operational, ensuring that its two strategic objectives are put into statute. It marks the next chapter for the UK Infrastructure Bank as it continues to develop operationally. Since the summer of 2021, when the UKIB became operational, 10 deals worth close to £1.1 billion have been completed, including providing financing for a new £500 million fund that could double the amount of subsidy-free solar power in the UK.
The UKIB has a transformative potential that I know is recognised and supported on both sides of the House. I would like to thank my immediate predecessors, my right hon. Friend the Member for Salisbury (John Glen) and my hon. Friend the Member for North East Bedfordshire (Richard Fuller). I also thank the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) and her colleague the hon. Member for Hampstead and Kilburn (Tulip Siddiq) for their appropriate challenge, but also for the support they have given the Bill.
I would also like to put on record my sincere thanks and the best wishes of this House to the UKIB, including its chair, Chris Grigg, and its chief executive, John Flint, who have both done such great work in establishing the UKIB to date. Finally, as is customary, I would like thank my Bill team—Alex McBeath, Milly Rainford and Lorna Cosgrave—along with those in my private office at the Treasury, who have supported me ably throughout this process.
I am honoured to have played a part in taking this Bill—one that will deliver meaningful, material benefits for our country and our constituents—through the House of Commons, and I commend it to the House.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.
Non-domicile Tax Status
Andrew Griffith Excerpts(3 years, 7 months ago)
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The Economic Secretary to the Treasury (Andrew Griffith)
Although we may not agree, it is always a pleasure to hear the passion that the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) brings to her role.
The public expect us to have a plan for the economy, for growth and for the country, and we do. As the Prime Minister has said, we have five priorities that deliver on the people’s priorities: to cut inflation by half, to grow the economy, to get the national debt down, to cut NHS waiting lists and to stop small boats crossing the channel. As we deliver against these pledges, we will move towards a better future, with our economy growing faster and the benefits shared across the whole of our country.
Just as we did in the pandemic, we will continue to support the most vulnerable. That is why we uprated benefits by inflation—an £11 billion commitment. It is why we honoured the triple lock on pensions—that is billions more on supporting pensioners on low incomes. It is why, when Putin’s war on Ukraine hiked the global cost of energy, we delivered a generous subsidy to cushion households’ energy bills: £900 for each household last year and £500 this year, on top of a £900 payment for everyone on means-tested benefits.
The Opposition do not want to dwell on this because they recognise no limits when it comes to spending other people’s money. Opposition Members who say we are prioritising the wealthiest simply need to look again. At the same time, we need to make sure that our economy is fertile for growth, and it would be wrong to make decisions based on what is politically expedient at the cost of public services. As the Chancellor has said, it is important to look at any proposals on non-doms in the light of the true impact on the public finances.
I will respond to some of the points Members made shortly, but let me first remind the House that it is well established, in particular in developing policy, that Ministers of the Crown must be able to receive free and frank advice from officials, especially when that advice is market sensitive. It is entirely right that Parliament hears Government decisions first, but that should be through the established process of a fiscal event, when the Government can set out their decisions on market-sensitive issues such as tax in an orderly fashion.
We started this debate with a demolition of the arguments put forward by the hon. Member for Ealing North (James Murray) by my right hon. Friend the Financial Secretary to the Treasury. My hon. Friend the Member for Aylesbury (Rob Butler) raised a valid point, to which we have yet to receive an answer, about why successive Labour Governments did not take action during their years in power. I am very happy to take an intervention if shadow Ministers would like to answer that right now.
My right hon. and learned Friend the Member for Northampton North (Michael Ellis), a master of the constitution, rightly observed that the motion is unconstitutional, irregular and injurious to the public interest. My hon. Friend the Member for South Cambridgeshire (Anthony Browne), with his deep knowledge of these matters, reminded us that 35 countries have similar schemes. He also reminded us a number of times during the debate about the Labour party using this debate, once again, to restate its credentials as the party of envy. Labour Members have not learned and they have not changed.
My hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell) reminded us of how we on this side of the House have taken millions of people out of tax entirely, with an increase in the rate of the personal allowance from £6,500 when we took office to £12,500 today. My hon. Friend the Member for Amber Valley (Nigel Mills) gave us his own view that he sees a case for reform in this area.
People across the country are looking to us in this House to get inflation down, cut debt and unleash growth, and we have a plan to do so. It is an inflating-cutting plan that will see the economy growing, debt falling, NHS waiting lists cut and small boats stopped—that is what we will deliver. Our plan is rooted in economic stability and the prudent management of our finances. Not for us the shadow Chancellor’s spend now, pay later economics. In the three weeks since Labour Members promised no “big Government chequebook” they have made £45 billion of unfunded spending commitments. That is why her predecessor, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), left us a note saying, “I’m afraid there is no money.”
The right hon. Member for Leeds West (Rachel Reeves) has been busy. One minute she is hanging out with masters of the universe in Davos, the next making promises to masters of the unions in Deptford. From glühwein to white wine, the only common denominator is spending more of other people’s money. But we will not be distracted from our important task, and we will not indulge in this sort of procedural politics from the Opposition, which I regret is the sort of thing that lowers the esteem of this House. Disregarding established precedents while prejudicing the process of consideration would not be in the public interest, especially when we have just weeks to wait until the fiscal event. Instead, our focus is delivering on the people’s priorities, and delivering a Budget to help achieve them. That is what we are focused on, and that is why Conservative Members oppose this desperate and distracting motion.
Question put.
Cryptocurrency Regulation
Andrew Griffith Excerpts(3 years, 7 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Economic Secretary to the Treasury (Andrew Griffith)
It is a pleasure to serve under your chairmanship, Ms McVey. I congratulate the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) on securing this debate on crypto regulation, which follows the first debate on cryptoassets, led by her fellow party member the hon. Member for West Dunbartonshire (Martin Docherty-Hughes) in September last year. The hon. Lady is absolutely right that this is an important sector for innovation, and I commend her and the crypto and digital assets all-party parliamentary group for their work to upskill Members of this House in this important emerging area.
My goal is simple: we want the UK to be the home of an open, well regulated and technologically advanced sector. As the hon. Lady said, recent events have highlighted some vulnerabilities in the cryptoassets sector, but it is a big sector. We have seen how FTX’s collapse has impacted some consumers, but as with any emerging technology—and this technology is at an emerging stage for all its myriad potential uses—there will be risk. We understand the importance of risk in the system and that, regrettably, that brings failures as much as success and opportunity. That is part of the process of change itself.
The hon. Lady talked about how cryptocurrencies could be an area of Brexit opportunity, and because we have taken back control of our rulebook, this House—importantly—has the opportunity as well as the obligation to bring forward regulations. In that context, she talked about being the mum of a 14-year-old, all the potential jobs and the advice that she would give. Clearly, this is a world that has captured the imagination of young people. Anything we can do to get our young people to equip themselves with more STEM skills is very positive.
The hon. Lady also talked about the positive benefits in a sector in which, owing to its nature as a nascent and emerging sector, people are not always clear about its use cases. She made a powerful point about the use case in Ukraine and allowing that financial system to continue to work. Government policy is that we will introduce timely, sensible and balanced regulation to allow the safe use of the technology and allow participants in the sector to understand with certainty the environment in which they operate.
On the potential economy, the hon. Lady might be familiar with the work done by PricewaterhouseCoopers that estimates that blockchain technology, which underlies what is often referred to as crypto, could boost the UK economy by £57 billion by 2030. That is a sizeable opportunity and we are keen for the UK to seize its fair share. She talked about other jurisdictions that have introduced regulation, and it is right that we learn from them and use the opportunity to perfect our own regulation, but obviously we must ensure that we capture—if that is the right word—a fair share of the opportunities.
The fintech sector is a great success story for both the City of London and the wider UK economy, and last year the UK attracted more fintech investment than the next 13 European countries combined, so we have a real lead. Natural extensions of that sector are crypto firms and cryptoassets—people working with blockchain. It is important, therefore, that the regulations we introduce facilitate that.
The hon. Lady rightly raised the role of our regulators and their speed and agility. I will write to her, but will share now the figures that I have. I understand from the Financial Conduct Authority that 41 such firms are registered in the UK. Obviously, the FCA has its own regulations around that—the hurdles that firms have to clear—and I am interested in general, as we seek to have an agile and proportionate financial regulatory system, in our regulators moving at the right pace.
There are measures in the Financial Services and Markets Bill more generally to encourage the regulators—indeed, to compel them—to be more transparent about their key operating statistics, such as those in respect of speed. I think the hon. Lady talked about the number of authorisations and the average processing time for authorisations, which I hear about widely across the financial services sector and know is a focus for the FCA. It is important that it is: we cannot have a financial system that is competitive internationally if it has a slow latency and if it does not operate at speed. I share the hon. Lady’s concern, and if there are any additional measures I can obtain, I will of course write to her.
The hon. Lady talked about the importance of engagement between Ministers and the sector. I want to assure her that during my relatively short time in this role I have held a desire for broad and deep engagement. This is a really big sector. She might be interested to know that rather than having a standing council, as it were—Governments sometimes set up a group of 12 anointed figures and all the engagement is there—I want to be much more agile and to engage with a much broader range of people. My undertaking is to have six roundtables with the sector, but with a variety of sector participants, during calendar year 2023. That will build on the three roundtables that I have already held with the sector in the first few months since my appointment. That is a real commitment; this area rewards a lot of time being spent on it.
I assure the hon. Lady, members of the all-party group and industry bodies that I want to take an evidence-based and proportionate approach to regulation. That is something to which we all aspire. It is not helpful in any domain for people to make sweeping statements without offering facts and proof.
I hope I have addressed most of the hon. Lady’s points. There is one final point on which I wish to offer clarity: where we go from here. I do not have the precise date, but I assure the hon. Lady that the Government will very soon come forward with our consultation paper on the regulatory approach to cryptoassets. That will be a matter of weeks, not months, but I do not have the precise date. I urge people to get ready to respond to that paper. We will engage on the back of it, because it is of course just the next step in the process. The purpose of the consultation is that we have proportionate regulation, that we do it right and that it is practitioner led.
Of course, the flipside is that consultative processes sometimes makes things take a little longer than one might wish in a fast-moving domain. In order to get the balance right, I urge those with views to be ready to advocate them. They should be assured that they have a Minister and a Government who are keen to see the sector grow and to harness the benefits for the United Kingdom and the hon. Lady’s constituents. I would be delighted to return to update this place frequently on the progress of this exciting new sector.
Question put and agreed to.
Mortgage Guarantee Scheme Extension: Contingent Liability
Andrew Griffith Excerpts(3 years, 9 months ago)
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The Economic Secretary to the Treasury (Andrew Griffith)
Today I can inform the House that the mortgage guarantee scheme will be extended by an additional year to continue to support homebuyers and movers with smaller deposits. The scheme will now close to new accounts on 31 December 2023.
HM Treasury launched the mortgage guarantee scheme in April 2021, which provides a guarantee to participating lenders across the UK who offer mortgages to first-time buyers and existing homeowners with a deposit as small as 5% on homes with a value of up to £600,000. Since its launch last year, the scheme has successfully restored the availability of 91 to 95% loan-to-value mortgage products, directly supporting over 24,000 households to buy their homes—85% of which were by first-time buyers. Since 2010, more than 687,000 households have been helped into home ownership through Government schemes.
While the mortgage guarantee scheme was originally planned to close to new mortgage applications on 31 December 2022, HM Treasury has decided to extend the scheme by an additional year to continue to provide lenders with the confidence to offer low-deposit mortgages to consumers.
Guarantees issued under the scheme are valid for up to seven years after the mortgage is originated. Participating lenders pay HM Treasury a fee for each mortgage entered into the scheme. This is set so that expected claims against the guarantee should be covered by revenue from the fee.
In order to ensure products remain available, HM Treasury will therefore be extending the duration of the Government’s contingent liability for an additional year beyond its planned closing date of 31 December 2022. The Department is also reducing the maximum contingent liability cap from £3.9 billion to £3.2 billion, which remains set at a level so as not to constrain the ability of lenders to access the scheme. This liability would only materialise if the sum of commercial fees paid by lenders would not be sufficient to cover calls on the guarantee.
Authority for any expenditure required under this liability will be sought through the normal procedure. HM Treasury has approved this proposal.
[HCWS471]
Life Insurance Taxation
Andrew Griffith Excerpts(3 years, 9 months ago)
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The Economic Secretary to the Treasury (Andrew Griffith)
The Government are announcing the following measure— of which there are two components—which will take immediate effect from today.
The first part of the measure applies to re-insurers of a specific type of long-term insurance business known as basic life assurance and general annuity business (BLAGAB). It addresses a possible tax mismatch in the life insurance rules where re-insurance precedes a transfer of BLAGAB. In this situation the measure eliminates the possibility of a mismatch by classifying the re-insured business as BLAGAB in the hands of the re-insurer. This will protect Exchequer revenues needed to fund vital public services.
The second part of the measure addresses an industry concern that the current scope of section 92 of the Finance Act 2012 may be unnecessarily wide and is blocking commercial transactions. It amends that section so that it does not apply where substantially all the insurance risks of a book of BLAGAB are assumed by a re-insurer.
The draft legislation will be published today on gov.uk: https://www.gov.uk/government/publications/re-insurance-in-the-course-of-transfers-of-long-term-business. It will be accompanied by a tax information and impact note and an explanatory note. A copy of the legislation will also be deposited in the Libraries of both Houses.
[HCWS453]