Energy (oil and gas) profits levy

Bim Afolami Excerpts

Tuesday 22nd November 2022 Commons Chamber

[Tulip Siddiq]

As always, my hon. Friend is right, as is his point about how every time the Conservatives bring in a fiscal rule about lowering debt, they end up breaking it.

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

May I ask for some clarity on the hon. Lady’s remarks about oil and gas? What exactly is the Labour party’s position on whether we should have more oil and gas? If it thinks that we do need oil and gas, what would it do to achieve that?

[Tulip Siddiq]

I am not quite sure what the hon. Gentleman means. Of course we need more oil and gas, but we have said clearly that we should make fairer choices and tax those who say that they have too much money as excessive profits. That is what we are saying, and the hon. Gentleman needs to listen carefully. Labour would also have ended the VAT exemption for private schools, which would raise £1.7 billion every year. That would have been a fairer and more effective way of fixing the Tory economic crisis and bringing the deficit down, instead of pushing the burden on to hard-working families.

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

It is obviously foolish for the Opposition to pretend that a pandemic and a continental war, with its associated energy shock, would not be felt economically in this country. At the same time, it is clearly preposterous for them to try to talk down the UK economy as some kind of basket case, when we compare very favourably to some of our peers on debt to GDP, employment is still very high and we have an economy that exhibits so many underlying strengths. At the same time, it is fair to say that the autumn statement was greeted with some dismay on the Government Benches. The Chancellor of the Exchequer has obviously had to make some very difficult and challenging decisions, given the economic headwinds we face.

First of all, however, I should point to one of the bright moments in the statement, which was the Chancellor’s pledge on education funding. The £2.3 billion extra on top of what is already in the baseline over the next two years was very welcome. I am grateful to the 27 colleagues who, along with me, signed a letter urging the Chancellor not only to protect schools funding, but to invest further. Our view was that one of the groups most hard hit by the pandemic and that awful disease was children. The case for investing further in their education to deal with the backlog, helping them to catch up and ensuring they can have productive lives in the future, felt to us morally strong and it would have been indefensible to cut that spending. We are therefore extremely pleased that he responded in such a positive way.

I have only a few minutes, so I want to outline three lessons from the recent turmoil, two warnings and a hope for the future. The first lesson is predicated on a phrase that does not go down well in either marriages or politics—the four little words, “I told you so.” For those of us who have been tracking the path of the UK money supply over the last 10 years, the underlying inflation, which was baked into our system and has emerged over the last 12 months, has not, I am afraid, come as any great surprise. The fact that the Bank of England has been slow to recognise the importance of monetarism and money policy over the last couple of years is a cause of great dismay, not least because a number of us consistently raised this issue with the previous Governor when he was in front of the Treasury Committee and since. The denial of the kind of Bank of England orthodoxy that the money supply mattered has come back to haunt us in a big way. The enormous growth in the money supply has outstripped the growth in our economy—yes, coming out of the crash in 2007-08, but in particular coming out of the pandemic—and resulted in the inflation in this country that is now taxing every family. It is hard to see that the Bank has moved with alacrity to deal with it—if anything, I think the criticism is that it has been a bit slow—but I hope the lesson we learn for the future, and on which this House should concentrate and focus, is that the money supply matters. When we look around the world we see consensus around a loose monetary policy for far too long and we need to bear that in mind.

The second lesson is that the Bank’s handling of the bond market really matters as well. We had assumed that that was a benign market that we could take for granted, but it became clear that the Bank’s hangover from its quantitative tightening—its declaration of sales forward into the market—had a significant impact. That was then exacerbated by the so-called fiscal event. We also bear huge losses on that market from the Bank’s dealings. Admittedly, there have been profits in previous years, but the fact that we are bearing about £11 billion-worth of losses from the Bank’s trading in that market matters. Also, within that market, we discovered to our horror that pension funds were effectively gambling with borrowed money, shorting inflation through the so-called LDI— liability-driven investment—strategy, which became so systemically problematic for the economy that the Bank had to intervene again. That points to lax supervision and comprehension of the weaknesses in the bond market.

The third lesson is that we as a House have perhaps not concentrated enough on the operations of the Debt Management Office. I have yet to see anywhere an obviously declared policy decision to move our debt more towards index-linked or inflation-linked bonds. We have moved from 6% of our debt being index-linked 10 or so years ago to about 22%. That is a near-quadrupling of the figure. As I think the Chair of the Treasury Committee—my hon. Friend the Member for West Worcestershire (Harriett Baldwin)—said yesterday, that effectively means that the Government were shorting inflation. At a time when we had lost track of the money supply, or in fact, had decided that the money supply did not matter, that proved to be a foolish bet.

[Bim Afolami]

When I was on the Public Accounts Committee a couple of years ago, we looked at index-linked debt on the whole of Government accounts. If I recall this correctly, the answer we received was that there was no long-term risk of widespread inflation because there were global forces that were becoming deflationary, rather than inflationary. The points that my right hon. Friend is making illustrate well the poor analysis in that approach.

[Kit Malthouse]

I completely agree. I remember well debates with Mark Carney, when he was head of the Bank of England, about the combination of a rise in the money supply and the underlying inflationary effects in our economy being masked by deflationary effects, not least of global supply chains, and the fact that we now have so much stuff made and imported from China, as well as the effect of the internet. Once the curtain was pulled back and we had problems with our supply chains—and that curve of deflation bottomed out—lo and behold, the money supply suddenly became important again. Let us hope that we learn that lesson for the future.

Notwithstanding the difficult decisions that the Chancellor has made, another opportunity is coming for us to trim the sails: the Budget in the spring. As we move towards that moment, I hope that we can look towards some positive changes in the global economic environment. Hopefully, the war in Ukraine will start to recede. International container prices are already falling, as are energy costs. We can therefore think again in the spring and I hope that we will bear two things in mind.

First, we need to bear in mind that, in a tight labour market, tax rises can prolong inflation. If we, through tax rises, give people, in effect, a take-home pay cut at the same time as they face higher costs because of their mortgages and generally because of the cost of living, they are likely to start to demand more from their employers. I am afraid that that has a possibility of sparking a wage and price spiral, particularly as we know that the secondary effects of that inflation will take some time—possibly months, if not years—to work their way through the system. I would bear that in mind when we think about possible tax rises, particularly from fiscal drag.

My second concern—I give this warning to Ministers—is that chasing debt to GDP could become a hare that they are unable to catch. If the actions taken from a fiscal and monetary point of view damage our GDP number—if GDP falls—we have to work even harder to reduce costs, or debt, against that number. If the action taken to reduce the numerator in the equation paradoxically damages the denominator, the equation becomes harder and harder to reach. If we base our ability to reach that debt-to-GDP ratio on a lower figure—particularly with a 3% GDP debt limit—through tax rises, the only way to avoid a doom loop is to tax and tax, even if we know that we can never fill in the hole that we are digging.

Finally, let me turn to my hope for the future. When we get to the spring Budget, I hope not only that the global winds that are blowing against us will have receded somewhat, but that, frankly, we can restore our belief in capitalism. My strong view is that the only way that we will get out of this hole—a number of Members have said this in the past few days—is through growth. We will not tax our way to prosperity, nor will we tax our way out of this debt-to-GDP problem. We need to inject growth into the economy. The only way to do that is to let the wealth creators free by loosening the ties that bind them and by looking at the regulation and taxation on capital, in particular, so that people are willing to take risks. One of the most dismaying choices in the statement was the proposed increase in capital taxes, not least because that changes the risk-reward ratio, meaning that it is less likely that people will go out and start a business.

Although some of the decisions about research and development, including the vast amount of money that is being pumped into that across the whole UK, are extremely welcome, unless there is a strong, pullulating, dynamic private sector out there to pick up the ball and run with it, all the intellectual property that the money creates will just end up overseas, where plenty of venture capitalists and entrepreneurs will be willing to pick that up and run with it.

Believing again in capitalism, allowing people to keep more of their money and to invest it, and building businesses for the future will be critical to our overall success in the months, years and decades to come. As we move towards the spring Budget, I hope that Ministers will look again at the five-year OBR forecast, remembering that it is there not to be fulfilled, but to be beaten and bested. It is there to warn us of what might happen so that we can take action now to avoid it. I hope that come the spring Budget, that is exactly what the Government will do.

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

It is a pleasure to speak in support of this autumn statement. In the time available to me, I will talk about an issue that has come up a lot today, but I will talk about it in a very particular way to illustrate the problems we have with it. That issue is inflation.

Inflation is at the heart of our economic problem. Inflation is the reason why food prices are high. Inflation is the reason why energy prices are so difficult to manage. Inflation, as we have heard from many Members, is the core reason why the debt interest bill that the Government have to pay is now so high. We have heard a lot about the different global causes of this inflation, but it is worth making the point again that this inflation is happening in every single western country—it is happening in most countries in the world, not just western countries. We should never stop underlining that point. This is not about escaping political responsibility—I am not playing a party political game here—but we can deal with the problem only if we understand its true causes.

The first cause, as mentioned by my right hon. Friend the Member for North West Hampshire (Kit Malthouse), is about central banks and the policy of quantitative easing, which pumped several trillion pounds into the economy over the last 10 years. Regardless of people’s view as to whether that was necessary at the beginning as we came out of the financial crisis, many people rightly ask whether, if we—not just globally, but the Bank of England—expand the money supply to such a degree, it is a shock that, at some point, when there is an exogenous factor such as the war in Ukraine, inflation appears to be structurally embedded and higher than it was before. The Bank of England and global central banks, such as the US Fed and the European Central Bank, need to examine their policies over the last 10 years that have contributed to the global rise in inflation.

The second global cause of inflation is what has been going on in China. Its zero covid policy means that its growth rate this year is 3.2% or 3.3%, while its growth target is 5.5%. China tends to hit its targets—at least officially—so that shows that it is not soaking up global demand in the way that it did, which is also having a big impact. At the same time, it hurts supply chains across the world, particularly this country’s manufacturing businesses as well as others, which need China to be open.

Those problems have contributed to inflation, but I do not want to focus on them. I want to focus on the cost of energy, because that underpins many other things in our economy. Indeed, the difficulties that the pound sterling, the euro and many other currencies had, and still have, against the dollar in the last couple of months were in large part because of energy prices being priced in dollars, and the impact of that on the world economy.

We are trying to decarbonise our economy, as hon. Members on both sides of the House agree, but oil and gas are still hugely significant to absolutely everything in the economy. Structurally, demand for oil and gas from the developing world—not primarily China, but India and sub-Saharan Africa—is rocketing, because the people in those countries want to have what we have. They want to industrialise and make their lives better, and they need energy to do that. At the same time, we are seeing lower investment in new oil and gas by major energy companies. That is happening for myriad reasons, but principally because the messages that we have been sending around the necessary green investment have made shareholders demand higher returns for shareholders rather than those profits going into investment.

The long and short of it is that we do not have enough oil and gas and the demand for it is rising, so prices are going up. Although the war in Ukraine has hugely exacerbated and accelerated the difficulty, it is worth saying that the problems with energy have been building for a long time. Even when the war in Ukraine concludes, as we hope happens soon, prices will still be higher than we have been used to.

Every economic expansion in the world over the last 300 years was founded on not just innovation but cheap energy. We have to be honest as a House, as a country and as the Conservative party that all our hopes and dreams about what our economy should do—all the funds that we want to put into the NHS, all the infrastructure that we want to build, all the tax cuts that we want to give—are founded on having affordable energy for individuals and businesses.

What are we going to do about that? All hon. Members on both sides of the House agree that we need more renewable investment—more nuclear, more wind, more solar. We will always talk about investing more in those things, so it is about not just the investment, but our ability to get it done. I am sure many Members will share my frustration at the gap between our intentions, whether through legislation or policy, on the investments that are made and the big numbers that we talk about and see, and the slow deliverability of that on the ground. In energy in particular, the amount of time it takes to get a nuclear power station off the ground is too long. The amount of time it takes even to get a wind farm and wind terminals off the ground is too long; in fact it is getting longer. On solar, we have problems with planning in that area as well.

[Aaron Bell]

I thank my hon. Friend for what he is saying. The Science and Technology Committee, on which I sit, is currently looking at our nuclear investments for the future. Is he aware that, for example, the number of documents submitted in planning for Sizewell C is over 4,000 compared with about 1,000 for Hinkley Point C and it is basically the same design? Is that not an example of what he is talking about?

[Bim Afolami]

It is, and I would love to speak much more about that point, but I do not have much time. I would just say that we must start to take seriously the issues of delivering much more renewable energy on our own soil, and of exploring oil and gas in the North sea to the maximum we can. A lot of the other economic debates we have are largely irrelevant in the context of that energy challenge.

We have heard a lot today about investment for public services. I remind all Members, particularly Opposition Members, that we cannot oppose measures for the growth of our economy, and we cannot always oppose investments or incentives for investment for successful businesses or individuals and, at the same time, say that we need more investment in our public services. We need to remember that the only money spent by the Government is the money that we generate as a private sector and private enterprise. That is why we need to tackle inflation, that is why the core of tackling inflation is dealing with the cost of energy and that is why I support this autumn statement.

Economic Situation

Bim Afolami Excerpts

Wednesday 12th October 2022 Commons Chamber

[Chris Philp]

I have explained in response to an earlier question that spending restraint is not the same as real-terms cuts. We do not plan real-terms cuts, but we do plan iron discipline when it comes to spending restraint. The answers to the hon. Lady’s questions will be set out in full at the fiscal statement, which will be accompanied by a full Office for Budget Responsibility scoring and a set of OBR forecasts. That is when all those questions will be answered very clearly.

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

The intervention of the Bank of England in both the gilt market and the corporate bond market has alarmed many in recent days. I would be interested in the view of the Chief Secretary to the Treasury on the Treasury’s assessment of the cost to the Treasury and the fiscal position following the interventions by the Bank of England in those markets.

[Chris Philp]

I thank my hon. Friend for his question. It obviously depends on the prices at which the Bank and England buys and sells bonds or gilts in the market. It is worth observing that so far it has purchased considerably less by value of gilts than the limits that were set out originally. The volume of gilts that it has on its balance sheet is much less than the limits. On his question about fiscal cost, if there is any fiscal cost, that will depend entirely on market prices.

Financial Services and Markets Bill

Bim Afolami Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I hope there will be plenty of time to discuss the detail of the Bill both in Committee and on Report, so I wish to make some general comments on my worries about where it is situated. When J. K. Galbraith wrote about the 1929 crash, his advice for the future was that people could set up all the institutions they needed to try to prevent it from ever happening again, but the greatest protection would come from memory. I therefore want to go back in time to some of the lessons that we perhaps should have learned but did not.

I wrote about the big bang in the 1980s and I can remember the concerns we expressed about a wave of enthusiasm for deregulation similar to what we see today. That enthusiasm resulted, in effect, in a casino economy. The City of London and the finance sector are the most successful lobbyists in the history of politics in this country and they are incredibly powerful. Sometimes, that results in corporate capture, not just of Governments but even of Oppositions at times. That period of enthusiasm for deregulation resulted in a casino economy that eventually resulted in a series of crashes—we endured not just 2007-08 but other crises.

I was in this House in 2007-08 and was the first Member to raise the issue of Northern Rock. I remember that in the debate after Northern Rock, the Treasury itself spoke about the “excessive concern for competitiveness” that brought about elements of that crash. I worry that we are re-inserting into legislation an emphasis on competitiveness that could override so many other issues of concern.

Here we go again. We are introducing legislation and placing in it a reliance on the structures that we established after the 2007-08 crash, particularly the FCA. I believe the FCA has been a catastrophic failure. My constituents have gone through London Capital & Finance, Woodford and Blackmore Bond. We saw the FCA’s failure to address HBOS and RBS properly, and we are supposedly still waiting for the independent review of Lloyds that was established in 2017, yet the FCA has moved not one inch to take further enforcement actions. As I have made clear on the Floor of the House, I was concerned that the FCA chief executive at the time was accused—rightfully, I believe—of being asleep at the wheel. Before we even had the report on London Capital & Finance and so on, we appointed him as Governor of the Bank of England.

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

The right hon. Gentleman is making an important and interesting speech. On that point about the FCA, will he explain to the House whether he supports changing the regulatory structure and having one super-regulator, or something of a similar description?

[John McDonnell]

The hon. Gentleman knows where my mind is going. We instituted a regulatory review a couple of years ago, and Prem Sikka, a professor of accountancy, and a team of corporate specialists and finance specialists introduced an excellent report. He is now in the Lords and I warn Members that he will shred this legislation when it goes up there. He outlined that 40 bodies are regulating our finance sector in some way and that there is a need for consolidation and to learn the lessons of the experiences of some of these bodies so far. That job is still to be done. I was hoping that the bringing forward of this legislation would coincide with the Government’s clear recommendations on where we go on that structure and, in particular, the role of the FCA.

I am also concerned about the fact that, although we are having the debate about this legislation, we are not debating potential future threats. I am anxious that in this legislation we are not addressing shadow banking, where we have already seen elements of individual firm collapses, particularly in respect of equity firms, that could create a domino effect and then produce a significant collapse.

I am also anxious about the move away from MiFID II. That issue has been raised and was derided by some in the House. We have recently seen the evidence with regard to speculation on both energy and food prices. Of course the cost of living crisis has been caused by a combination of the breakdown of supply chains, covid and the war in Ukraine, but there is significant evidence now that these increases in energy costs and food costs have been exacerbated by speculation in the markets. This is speculation where the paper markets are distinct from the reality of commodity supply. It is not just me expressing that; it has been expressed elsewhere, particularly in the States, but also by a number of global institutions. I regret that we have not addressed that issue in this legislation. We need to hold to the MiFID II, particularly the constraints on asset holding with regard to food commodities, as I am anxious about price speculation forcing prices up.

I was critical of Gordon Brown on some of his response to the banking crash in 2007-08, but one thing he did successfully was bring the world together, and there were international meetings where we looked at a global response to these problems. I believe that we now need to look at a global response to the food and energy speculation that is taking place, which is exacerbating the cost of living crisis that our constituents are facing. In that way, the Government’s approach is lacking. We will have the discussion tomorrow about their response to the energy prices increase and the cost of living crisis. I am hoping that from that, and as we move forward, we will recognise that there is an international role to be played by this Government in bringing people together, in the same way as Gordon Brown did.

I am particularly concerned about the issue of food. The UN special rapporteur Olivier De Schutter has said that what is happening now is that people are betting on people’s hunger. That cannot be right. Anything that we do that undermines in any way our own national legislation, which is against speculation in essential products such as that, is dangerous, but if we fail to ensure that we take up our international responsibilities, we will regret that for the future, as our people increasingly confront the problems of hunger and starvation.

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

It is a pleasure to speak in support of the Bill. I will not repeat what so many hon. Members have said about the excellent work of the former Economic Secretary—my hon. Friend the Member for Salisbury (John Glen)—and the present Economic Secretary in bringing it to the House, but I want to bring up a couple of specific issues that may not have come up in the debate as much as they might have.

The former Chancellor, my right hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), mentioned the call-in power. There has been some criticism in the press, which may or may not have come from people within the regulators or from people speaking on their behalf, suggesting that the Government’s call-in power will somehow damage our regulatory system or that it is somehow illegitimate for the elected Government or this House—in extremis, if they feel that something is badly awry—to override the non-elected regulators in a specific area of financial regulation.

I put it on record that those concerns may be well intentioned, but I think they are wrong. It is critical that this House and the elected Government have that power over something as significant as the financial regulation of the sector that is our jewel in the crown. The sector employs millions of people, two thirds of whom are outside London. We all accept, on both sides of the House, that we should champion the sector and work with it. It is almost unconscionable that such a power does not already exist, so we should stand firm if, in the other place or in Committee in this place, Members wish to reject the call-in power. I think it is critical.

[Alison Thewliss]

The hon. Gentleman speaks with a lot of expertise in the area. Could he give an example of when the power might be used? In what circumstances might the Government want to use it?

[Bim Afolami]

Lest anybody should think I have any particular specialist knowledge, I stress that this is entirely my own view, but I could imagine a scenario in which the Government, supported by this House, intended certain changes to a regulation such as MiFID II. A strategy document might say that the intention is for a, b and c to occur, but when the regulations were drafted, that intention might not appear to come through. In that instance, it would be very legitimate for the House or the Government to say, “No, what we intend is the following, and we will change the detailed regulation in order to achieve the aim—the democratic aim, supported by the Government and the House—that we seek to achieve.”

There are a couple of other areas in which I think the Government could have gone further in the Bill, and which I hope we will consider in the coming weeks and months. The first is the bank levy. I know that this is not always a popular thing to say, but in politics it is sometimes important to say unpopular as well as popular things. When we have an internationally competitive sector, if the tax burdens of jurisdictions with which we are competing for people, for capital, for institutions or for new investment reach a point at which they are significantly, or even a little bit, less than ours—and people may find those jurisdictions attractive for other reasons—we should consider finding ways of reducing our own tax burden, which has risen in recent years. The bank levy was one of those, but it came during the aftermath of the financial crisis, which happened quite a long time ago. I think we should consider getting rid of it, in order to emphasise as much as we possibly can that Britain is still the leading centre of financial services for the world.

I am not saying that this is a panacea; far from it. The Bill contains 300-odd pages because we have a great deal to do. However, the bank levy is a tax, and if we impose high taxes on internationally mobile capital or institutions, there may well be a penalty for this country in terms of attracting those institutions. I ask the House, and in particular those on the Treasury Bench, to reflect on that point.

My second point concerns ringfencing, which the former Chancellor mentioned. When I was at HSBC—I probably should have declared at the beginning that I worked at HSBC before I came to the House, and indeed in other institutions in the City—I had the good fortune to work for quite a long time on the internal restructuring of the bank as part of a strategy of which ringfencing was a huge element. HSBC and Barclays were the two big British banks that had big consumer retail bits and big investment banking bits.

Even at that time, it was obvious to many of us that the most critical part of what we were doing in ensuring the safety of those institutions—and indeed, because they were so big, helping to ensure the safety of the whole financial services sector—was the recovery and resolution power, and not just the ringfencing aspect. While I think the review that has been carried out is very capable and very thorough, I urge the Treasury to look a bit further, and to ask whether we still need ringfencing even under the terms of the way in which it has been reviewed. Can we look again at the thresholds? Can we make this less onerous for big institutions?

Why should we do that? I return to what I said about competitiveness. If there are ways in which we can improve our competitiveness without compromising on safety, I think we should consider them.

[Ian Paisley (North Antrim) (DUP)]

Let me take the hon. Gentleman back to his earlier point about competitiveness, and the possibility of certain institutions being turned off from investing or establishing themselves, or removing themselves from the United Kingdom. Where does he think the single largest threat comes from, if there is a turn-off?

[Bim Afolami]

I would posit two particular jurisdictions. First, I think of the London stock exchange. The House may not fully appreciate the amount of capital that it has, through capital raising by means of initial public offerings and various other measures. However, we have seen a dramatic fall-off since even five years ago, let alone 10 years ago. Meanwhile, Amsterdam’s stock exchange is doing very well. I think that, although Amsterdam as a jurisdiction will never rival London or, I should say, the UK, because we have huge advantages and huge strengths, we need to consider the threat to the London stock exchange from that source.

Secondly, there is the middle east, where various jurisdictions, including some quite surprising ones—particularly Dubai—are trying hard to make themselves attractive to, in particular, capital from America and Asia, and to make themselves into a hub for some of this work. Again, they cannot rival us, but it is not necessary to match us fully to damage our competitiveness, and I think it important to bear that in mind.

[Ian Paisley]

Does the hon. Member think that that when it comes to those locations, especially the middle east, there may be an opportunity for, let us just say, funds to arrive at those destinations without being scrutinised to the same extent as they would be here in the United Kingdom? Is that a potential threat to the banking sector?

[Bim Afolami]

I do not want to cast aspersions on any other jurisdiction. It is clear that we should be proud of our own high standards. I know we will probably get to discussing illicit money from Russia later this year, as we did earlier in this Session. In this country we take action and we pride ourselves on our higher standards—that is not always the case everywhere—but that aspect of competitiveness is not a race to the bottom. This is a really important point. We can be competitive and have high standards. We should not say that the drive for competitiveness means that we drop our standards and end up with corruption, money-laundering and all the rest of it. That is not necessarily true. In this country we are proud of our institutions, proud of our sector and proud of our ecosystem, but that does not mean that nothing needs to improve, and this Bill contains a huge panoply of measures that can help to strengthen our financial services sector.

My last point is about mutual recognition agreements. These are quite dry technical things but ultimately they allow for the easing of doing business between one jurisdiction and another—for example, between the UK and Switzerland, with whom we have built a very good relationship. We should do much more of that, but we should work with the International Trade Department to ensure that our trade deals include much more in terms of services provision and not just mutual recognition agreements that are separate from that. Services trade will benefit this country more than pretty much any other country in the entire world, and we need to work with our International Trade Department, with the Foreign Office and with our international ambassadors to achieve that aim.

Oral Answers to Questions

Bim Afolami Excerpts

Tuesday 28th June 2022 Commons Chamber

[Rishi Sunak]

Again, 70% of workers in this country will have a net tax cut. That is what the Government are delivering. In just a couple of weeks’ time, the first £12,500 that anyone in work earns will be free of any tax or national insurance. That will deliver a £6 billion tax cut for 30 million people. As I said, for 70% of all workers, excluding the most wealthy, it represents a net tax cut, because we are on the side of hard-working people.

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

The Chancellor knows that a significant part of inflation is not within this Government’s control, and indeed not within the country’s control; it is a result of international energy costs, particularly oil and gas. That is happening globally because there is an imbalance between supply and demand across the world. What is the Treasury’s approach, working with other countries and major energy companies, to try to bring down those prices overall in the coming years? Unless we do that, increasing energy costs will be inimical to the economic growth that everybody in this House wants to see.

[Rishi Sunak]

My hon. Friend makes a thoughtful point, and he is right. As the Bank of England recently pointed out, the bulk of the excess inflation that we are seeing is being driven by global inflationary forces. He is also right that in the long term, the best way to combat that is to increase the supply of energy. In particular, the Prime Minister’s energy security strategy sets out a plan to do exactly that, which will have an impact on bills next year and beyond. Between now and then, we have the support in place to help people.

UK Gross Domestic Product

Bim Afolami Excerpts

Monday 13th June 2022 Commons Chamber

[John Glen]

No, I do not. I accept that that was a challenging period for economies everywhere. There was a period of adjustment, and the Government will be working in a co-ordinated fashion to remove any frictions and to ease the passage of trade, particularly for smaller businesses.

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

Much of the discussion in the House today has been about the fiscal aspects of inflation, but a huge part of the rise in inflation in this country and across the western world is the monetary system, in particular quantitative easing, which has continued long beyond the financial crisis, when it was put in place. We all know the Bank of England is independent in setting interest rates, but what is the Treasury’s view on working with the Bank of England to bring down inflation, bearing in mind the significant impact that quantitative easing has had on that? Will the Minister say a bit more about that?

Oral Answers to Questions

Bim Afolami Excerpts

Tuesday 17th May 2022 Commons Chamber

[Helen Whately]

I simply do not recognise the picture that the hon. Member is painting. This Government are absolutely committed to investing in infrastructure because that is at the heart of our ambitions for economic growth and levelling up across the country, including £96 billion for the integrated infrastructure rail plan for the north of the country.

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

I welcome the Government’s increased investment in infrastructure, but as the Minister knows, for the investment to be most useful we need to improve the deliverability of that infrastructure practically on the ground. Could she set out further what the Government are doing to improve the efficacy of all of that money going into infrastructure so that it actually gets delivered?

[Helen Whately]

That is an excellent question from my hon. Friend. We are not only investing in infrastructure but making sure that taxpayers’ money gets put to good use. One way we are doing that is by working with the Infrastructure and Products Authority and with Project SPEED, which specifically scrutinises the most important infrastructure projects in this country to ensure that we are doing a better job of making taxpayers’ money go further and doing it cleaner and greener as we go.

Oral Answers to Questions

Bim Afolami Excerpts

Tuesday 15th March 2022 Commons Chamber

[Helen Whately]

As other Ministers have outlined, we are supporting households with the rising cost of living, including a package worth £21 billion of support. In particular we are supporting those on universal credit by reducing the taper rate to ensure that work pays. Looking further ahead, through our commitment to levelling up we are investing across the country in skills and infrastructure, with the levelling-up fund to improve growth, boost prosperity, opportunities and pay, and thereby improve people’s standard of living.

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

The Minister will be aware of the positive contribution that financial services can make to levelling up all over the country. With that in mind, and with the work of my all-party group on financial markets and services on levelling up, will she commit that the Treasury will work with the industry to spread opportunity within the financial services sector, to help that sector spread opportunity through all regions of this country?

[Helen Whately]

My hon. Friend makes an important point, and I know he is knowledgeable about this sector. It is important to remember that financial services are to the benefit of the whole country, with two thirds of jobs in financial services being outside London and the south-east. Financial services are absolutely an important part of our ambitions for levelling up.

Financial Services: UK Economy

Bim Afolami Excerpts

Thursday 9th December 2021 Commons Chamber

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

It is a pleasure to speak in such a well-informed and thoughtful debate.

First, on the contribution of the financial services sector, I do not want to repeat what has been said by my hon. Friend the Member for South Cambridgeshire (Anthony Browne) and others about the tax paid, the growth or the jobs, but I want to bring up something that has not yet been discussed: the contribution during the acute phase of the covid pandemic in 2020, when about £75 billion was facilitated through the UK financial services sector. To illustrate what that means, in my constituency, which does not have a huge number of businesses compared with many other constituencies, over £100 million was facilitated through the financial services sector for businesses. That is a practical demonstration of the positive impact that the financial services sector can have on the lives of our constituents.

Competitiveness has been mentioned by many Members. I support what the Treasury want to do in adding growth and international competitiveness as a secondary obligation for the FCA and the Prudential Regulation Authority. I support the action in the Budget to reduce the bank surcharge on banks in particular. Had we left the surcharge where it was, from a tax perspective, it would have made the UK one of the most expensive jurisdictions in the world in which to operate a bank, and that is not in the UK’s national interest. I support the work that the Hill review did on listings, the general approach to public markets, the share trading obligation and the double volume cap. On a lot of these technical things, I think the Government are in the right place; we are going in the right direction, we are doing the right things and, as many others have said, the Minister is doing a great job.

On ringfencing, I will make a confession: before I came to this House, I spent some time at HSBC, where I worked in restructuring, and I had a lot to do with ringfencing. I can say from bitter personal experience that it is deeply complicated. It was well intentioned, but a review is overdue. I am glad that the Government are going to look at it. I ask them to look not just at whether ringfencing has done a reasonable job so far, but at the asymmetry of how it is imposed on UK-domiciled banks compared with our competitors, including the sheer complexity and cost associated with it, not just in terms of compliance and what we think of as regulation, but in terms of the IT systems, where people are and how the buildings operate. It costs a considerable amount of money and a huge amount of focus for big banks such as HSBC, Barclays and others. Without prejudging the outcome, I think that review is critically important.

Let me pick up something that my hon. Friend the Member for Kensington (Felicity Buchan) said about trade deals. The Government, and indeed the country, are right in pursuing our strategy on trade internationally, looking beyond Europe and seeking to strike as many good trade deals as we can across the world. We need to make sure that those trade deals are best in class. What I think of as a best-in-class trade deal today, in the modern world, has to include services, and it has to include financial services and other professional services, not just because that is a good thing for this country but because the nature of modern international trade is increasingly moving towards services rather than goods, particularly for advanced western economies such as our own.

We have a great opportunity to pioneer that at an international level. In particular, our regulators must seek to have many more regulator-to-regulator exchanges across the world as part of those trade deals. A lot of the regulations that are in place for financial services often happen at sub-national level, so it is so important that our regulators do that. I am sure those regulator-to-regulator exchanges will be very good fun indeed for all concerned.

My hon. Friend the Member for Wimbledon (Stephen Hammond), who is very experienced in these matters, talked about levelling up and about the positive regional aspect of the financial services sector and the jobs it creates outside London and the south-east. I completely agree, but I think of levelling up as not so much about levelling up places as about levelling up people. It is about people’s opportunities. Alongside all the technical work that we have already talked about, with regulations, ringfencing, the double volume cap, listing, public markets, prospectus directives and all that stuff, the financial services sector needs to do more—and I think it can do more—on levelling up in the United Kingdom.

What does that look like for the financial services sector? It means the industry doing more on alternative routes into the sector—apprenticeships and others. It also means the industry doing more not so much to provide more jobs outside London and the south-east, although that is always welcome, but to help to develop regional clusters around Edinburgh, Leeds, Bournemouth and various other places. There are significant numbers of financial services jobs in those places, but what more can the industry do to develop those regional clusters to give more opportunities to people from all over the country and from different backgrounds?

Let me briefly mention debt advice for those who have found themselves in problem debt after the covid pandemic. I think we all recognise that, for some people, debt has grown significantly. I think there is more that the industry can do to work with people with problem debt and help them get out of that situation, with the help of the legislation that is already in place.

Finally, if my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) were here, I am sure he would talk about small and medium-sized enterprises and access to finance. I do not want to steal his thunder, but we must think about SMEs getting access not just to debt but to equity finance, and about ensuring that underrepresented groups of entrepreneurs—often ethnic minorities or women—get more and better opportunities to raise funds for their businesses. That is the skillset—the core determinant—of a financial services sector: providing funds for people to realise their aspirations as individuals or as part of a business.

I will be doing some more work on this in the new year, as the Minister knows, but I urge the sector to do more on the levelling up agenda in its broader sense, in addition to working with the Government, with me and with colleagues, including the people here, on the technical regulatory aspects that are critical for our international competitiveness.

Conduct of the Right Hon. Member for Uxbridge and South Ruislip

Bim Afolami Excerpts

Tuesday 30th November 2021 Commons Chamber

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

This has been an interesting and fiery debate. I have listened carefully to every contribution. It has fundamentally been about the approach to governance; the conduct—not the character—and actions of the Prime Minister; and the principles of public life.

When I think about those principles, I think of words, which Members have read out, such as accountability, leadership, probity and transparency. We all agree with those things, but we have to then think about how they are translated in one’s conduct and actions. I put it gently to SNP Members that working hard for the people who elected us is a pretty good way to put in place the principles of accountability and leadership.

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

Will the hon. Gentleman give way?

[Bim Afolami]

No, I will make some progress.

Let us look at the contrast between what the Prime Minister is doing and what is happening in Holyrood. There is a new covid variant. We do not know how serious it will be, but it is right that we should be watchful. The economies of the United Kingdom and of Scotland are on the brink of recovery. In the face of that, the SNP’s priority is an independence referendum. Is that working hard for the people who elected it, bearing in mind the challenges that exist?

[Ian Blackford]

I commend the hon. Gentleman for at least trying to address the topic, but I gently say that the First Minister of Scotland went to the Chamber today to address the covid crisis. The First Minister and I, in my speech to the SNP conference, have made it crystal clear that our first priority is dealing with that. The difference is that the First Minister of Scotland went to the Chamber to answer Members. We have repeatedly asked the Prime Minister to make covid statements here, as he should. He does not do that; he does press conferences. He should be accountable to Members, but he has failed to be.

[Bim Afolami]

Where I would gently disagree with the right hon. Gentleman is that the position of the Deputy First Minister, Mr Swinney, has explicitly been that independence is the priority. The First Minister has said that, regardless of what happens with covid or the economy, she wants another independence referendum by the end of 2023.

Let us look at another aspect of working hard for the people who elect us and of translating those principles of accountability and leadership and the things in public life that we say we care about. Between 2007 and 2019, the rate of job creation in Scotland increased by about 5%. For the rest of the United Kingdom overall, the increase was about double that. Rather than focus on increasing the rate of job creation in Scotland, the SNP in Holyrood went into coalition with the Greens, whose website—I checked it myself—says explicitly that they want a universal basic income and that they think negative growth is manageable. That is not the action of a Scottish Government who are concerned about working hard for the people who elected them.

Let us turn to another issue, such as drug deaths, which many Members have already mentioned. Scottish drug deaths are the highest in Europe, but the response of the SNP is to decriminalise class A drug possession.

We would all agree that making long-term decisions in the public interest is another good way to implement and translate the principles of accountability, leadership, transparency and probity—all the things that we come to the House to do. What have the Government, led by the Prime Minister, done? On the vaccine roll-out, they opted out of the EU vaccine scheme, which was a brave decision at the time, because lots of people said that it would damn us to being at the back of the queue. In fact, we are at the front. On the green industrial revolution and the 10-point plan, we were lauded internationally at COP26 for our leadership on that issue. On the decision we made on social care, a subject that so many Governments have ducked, I suspect—dare I say it—that the Prime Minister was given advice saying, “Look, this is a really difficult issue. Is it right that we do it?” and the Prime Minister said, “Yes, we need to tackle social care, and we need to come up with a plan that is fairer and better for everybody in this country.” That is what dealing with the long-term interests of the people who elected us is about.

To finish by paraphrasing what the hon. Member for Midlothian (Owen Thompson) said in his speech, even Peppa Pig can see that this Government and this Prime Minister are taking the right actions, and the SNP is not.

Health and Social Care Levy

Bim Afolami Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

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

It is a pleasure to follow the hon. Member for Nottingham East (Nadia Whittome), but I must disagree with her that the Government are kicking the can down the road. We are doing precisely the opposite by trying to tackle what is a very difficult problem, as everybody has already described. As many Members have said, politics is about choices. Ultimately, the choice is this: either we put more money into the social care system and borrow extra; or we decide not to tackle the problem, and allow it to continue and continue. I wholeheartedly support the Government in trying to tackle what has been a very difficult problem for a very long time.

I thought it would be useful to address in my remarks some of the criticisms of the plan that need pushing back on rather strongly. Many speakers have said that it would be better to use income tax, not national insurance. I disagree, because national insurance is paid by both individuals and employers; it is a broader-based tax, which raises more money. And guess what? By having a broader-based tax, everybody is going to benefit. It is not bad to have a more broadly-based system, where everybody in the country is going to benefit.

Certain Opposition Members have said that a wealth tax on the wealthy, in and of itself, will somehow fix all the problems. I am afraid that we are dealing with billions of pounds—£12 billion, £13 billion or £14 billion—and no wealth tax in the world has been designed to yield anything like that amount, so that would not deal with the problem.

Many Members have suggested that this levy does not deal with social care at all. The point is that it deals with both health and social care; they are linked. Therefore, by accelerating money in the next 18 months to two years to deal with the backlogs that have developed in the health system due to covid, we actually help to deal with the social care problem. Then, as is very clear in the documents, from October 2023 more money will flow more directly into the social care system, so the levy deals with both these things.

It is worth addressing the point made by many colleagues on the Government Benches—including my constituency neighbour, my right hon. Friend the Member for Hemel Hempstead (Sir Mike Penning), and others—that this is somehow unfair because certain parts of the country, such as my own, have higher house prices and others have lower house prices. That is an observable fact. However, there are many problems with doing something much more complicated. First, it would be difficult somehow to change a system on the basis of fluctuating house prices in every county, region or district council. It is also difficult to come up with those differences when, yes, certain areas have higher house prices, but then there are also higher costs for social care in different parts of the country. It is much better to have a broad-based system that is broadly the same across the country, although I am in agreement with certain hon. Friends that the Government should look at all possible options in detail as we look to implement the tax.

I turn to the idea about which I have heard so much from Opposition Members: that this tax is somehow not progressive, but regressive. They think that if they keep repeating that, it will make it true. I took a look at companies. Let us think about big companies versus small companies. The smallest 40% of companies will pay nothing extra as a result of this measure. The next 40% will pay, on average, about £400 more. The smallest businesses are really not going to be paying a lot of national insurance.

Let us turn to individuals and consider the richest individuals. Somebody who earns a very high amount—let us say £1 million a year—will, by my maths, be paying £12,500 extra as a result of this measure. A basic rate taxpayer pays something like £3.40 a week. I am afraid to say to the Opposition that this is a progressive, fair and broad-based way of dealing with the problem.

In addition, we need to think about outcomes. Members on both sides of the House have made the fair point that the money, in and of itself, does not deal with the problem. Yes, we need better pay for carers. Yes, the system needs to be better. Yes, we need to be sure about what we are getting with the money. Yes, there needs to be reform. We should study all that, and work with the Government over the next few weeks and months as the White Paper comes out. I will be supporting the Government in the Lobby this evening.