UK’s Financial Services Industry

Bim Afolami Excerpts

Monday 21st June 2021 Commons Chamber

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

It is a pleasure to speak with you in the Chair, Madam Deputy Speaker, as always.

I am delighted to speak about the UK’s greatest success story and one of our most vibrant and innovative sectors, financial services. I am proud to champion it in Parliament through my role as chair of the all-party parliamentary group on financial markets and services. I speak as a former corporate lawyer at Freshfields Bruckhaus Deringer, and Simpson Thacher & Bartlett. I have also worked in strategy and restructuring at HSBC, so I have experience in the sector. I would like to use this debate to set out my vision for the future path of our financial services sector at a very critical time, to ensure that it delivers benefits to constituents and businesses across our great country.

As the Minister I know appreciates, it is difficult to overstate the importance of financial services to the UK economy. It accounts for almost 7% of the UK’s total economic output. The sector employs over 1 million people, two thirds of whom work outside of London, contrary to what many believe, providing benefits that extend well beyond the historic walls of the City square mile, to bustling financial hubs such as Edinburgh, Belfast, Cardiff and Leeds. Financial services are also a major contributor to the Exchequer, accounting for more than £1 in every £20 of total UK tax receipts, which go to support our public finances and important services such as the NHS. At the same time as having that domestic focus, the UK leads the world as an internationally competitive financial centre. Financial services are an advert for global Britain, attracting international investment.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Member agree that the potential of Brexit to allow for the regulation of our financial services has not yet been realised and that there is more to do in legislating appropriately to ensure a balance, so that growth and the regulation of practice and outcome go hand in hand? We can do better; the potential is there.

[Bim Afolami]

I thank the hon. Gentleman for his intervention. Indeed, he is right, and I will comment later on ways in which we can use our new freedoms to improve the output of the financial services sector.

Some say that we should not speak too much about financial services, lest it upset certain people in the country or is alienating in some way. I suppose that is a hangover from the financial crisis, but I completely reject that view. We are at a new moment now. We have a fantastic financial services industry; it is world leading, and we need to be proud of it. Indeed, in the face of the unprecedented economic uncertainty created by the pandemic, our financial services industry stood up to the challenge. The financial system remained resilient and responded to customers’ needs, demonstrating the central role that it plays in facilitating and protecting our economy.

When corporates were strapped for cash, there was no liquidity failure in the banking system. Instead, bank lending surged. Working in partnership with the Government, the Treasury and the Bank of England, the sector was able to provide a comprehensive package of support, which included facilitating over £75 billion in emergency finance to 1.6 million businesses. I am pleased to announce to the House that more than £100 million of that support went to my constituency of Hitchin and Harpenden to support more than 2,400 fantastic local businesses through covid and the lockdown. That was on top of an array of forbearance measures for personal customers, including 2.75 million mortgage payment deferrals, 1.8 million credit card and loan payment holidays, and 27 million interest-free overdrafts to customers. In short, our financial system did its job. When there was a crisis, it provided a safety net for the constituents and businesses of Members on both sides of the House.

However, now we need to look forward and build back better from coronavirus. Our financial services industry is at a crossroads. Brexit and the return of rule-making powers to the UK for the first time in decades has created a unique chance, as the hon. Member for Strangford (Jim Shannon) remarked, to refit our financial services sector in a way that is better suited to our domestic needs and even more internationally competitive. Parliament, Government, regulators and the industry now have the opportunity to ask fresh questions about what the future of financial services in the UK should look like and how we should fine-tune the rules that govern the sector to provide the right conditions for it to thrive.

At the same time, the UK faces huge international competition. Across the Atlantic, New York is cementing itself as a leading international financial centre. In Asia, financial hubs are catching up with us fast, whether it be Hong Kong, Singapore or other cities. The ambitions of our European friends and neighbours to create onshore financial centres within the European Union bloc at the expense of London—let us not kid ourselves about that—is becoming increasingly apparent. If we are to continue to reap the benefits from this world-leading sector based here in the UK, it is crucial that we get our regulatory changes right in the next period, ensuring that the UK remains an attractive location for both domestic and international firms in the years to come.

Let me now turn to the steps on how we can achieve this. I am glad to say that the Government are wasting no time in realising their ambition to strengthen the UK’s position as a global financial hub. The Prime Minister met financial services leaders on this precise issue only a few weeks ago. Central to the Government’s ambition is the landmark Financial Services Act 2021, on which I spoke in this House and served in the Committee, as the Minister will remember. I once again commend him and his team for their hard work in achieving this vital piece of legislation, which already puts down much of the groundwork on which we can build. Alongside that, I commend the findings from the Government-commissioned reviews from Lord Hill and Ron Kalifa on, respectively, listings and FinTech. I appreciate the work the Government are doing to implement their recommendations without hesitation. I have been checking on this. When one engages with what the Government are actually doing, it is clear that they are more than exceeding expectations in really looking at these reviews to see what can be done as quickly as possible.

In the longer term, the Treasury is undertaking a wide-ranging review of the future regulatory framework for financial services. It is important to be clear that this is not—I repeat, not—a regulatory race to the bottom, as many would suggest. The Chancellor rightly stated, when setting out his vision for the sector in this House, that the UK will maintain the highest, most effective global standards as we look to shape the future of the industry. Indeed, there is no future of the industry with poor-quality, bargain-basement regulation; the future of the industry is high-quality, high global standards. However, we should take the opportunity to fine-tune this regulation, where it benefits the UK, to make it simpler and more responsive to the industry. The future framework should also be more proportionate, particularly to mid-tier providers—I have them in my own constituency in certain areas—that are currently saddled with disproportionate regulatory costs compared with many larger financial institutions that have armies of lawyers and accountants and various other people to help to deal with that regulation. Frankly, Brexit makes sense if we can take the opportunities available to us to do things better and more flexibly in areas where we have a real advantage. Financial services is one of the key areas in which we can do this.

As our powers are returned from the European Union, we must strengthen the political accountability to which regulators will be subject given their enhanced responsibilities. We have given them enormous power to make rules that have a huge impact on the livelihoods of literally millions of people. That power needs to be properly scrutinised and checked by Parliament and indeed this House. However, this House is not currently best equipped to carry out this role in terms of our structures. Scrutiny of the sector currently lies with the Treasury Committee, but its remit is incredibly broad in dealing with everything that the Treasury deals with. Therefore, having sustained and detailed oversight of technical regulations and aspects of financial services is going to be difficult. I encourage the Minister to consider the conclusions of the recent report by the all-party parliamentary group on financial markets and services. Ah, there it is—he has it in his hand; he has read it, which is good. It calls for a new specialist Joint Committee of both Houses to be established with a specific remit for overseeing not the Treasury, which already has the Treasury Committee, but our regulators and the financial services sector in particular. That would ensure that Parliament could take a central role in helping guide and scrutinise regulators while balancing the needs of the sector with the wider public policy aims that we all know.

Looking abroad, we need to promote international trade in financial services. As we review our framework, we need to understand that the Government’s work on trade agreements is vital but, frankly, whether it be within this House, outside this House or in the press or the media, too rarely do people think of trade as including services. I urge the Government to ensure that we apply the same level of focus in our trade agreements on services as we do on any goods. The Government must prioritise financial services in their trade deals and their emerging trade agenda more broadly and be explicit about their key importance to our country. In economic terms, the opportunities for financial services with our international trade are huge.

Promoting international trade is also about ensuring that we attract the best international talent to the UK. The new global talent visa and the new Office for Talent will be very important steps in helping achieve that ambition. I commend the Government on bringing them into force. It is also worth saying that, on the international agenda, our emerging partnership with Switzerland is very promising. I ask the Minister for his reflections on how that partnership could help really strengthen our financial services sector and, indeed, our industry.

One key area in which the UK risks falling behind its international competition is getting the right levels of taxation for the banking sector. At present, the UK’s banking industry is burdened with a number of sector-specific taxes such as the bank levy and irrevocable VAT that are not dependent on profits and represent a fixed cost to firms each year. Indeed, almost half of total tax receipts are made up of such sector-specific payments, taking the UK’s taxation rate for banks well above financial centres such as New York and Frankfurt. I therefore agree with the Government’s view that the planned increase in the main corporation tax rate to 25% would make the UK’s bank taxation system uncompetitive. To help address that, I support the Chancellor in his Budget announcement of a review to the bank surcharge, which is an additional 8% charge that banks pay on their profits that dates from the aftermath of the financial crisis. It is my view that the time has come to get rid of that surcharge. This is not about giving tax cuts to bankers: it is about the UK remaining a competitive place for firms to do business so that the public can continue to benefit from the success of the sector in this country.

I have already mentioned Ron Kalifa’s FinTech review. Without repeating all its requirements or recommendations, I bring the Minister’s attention to four key things about how we navigate the new world in which we find ourselves, the world of FinTech and how the Government should address them. First, in relation to policy and regulation, we need dynamic leadership that protects consumers yet nurtures FinTech activity and encourages competition. Secondly, on skills, we need to ensure that FinTech has a sufficient supply of domestic and international talent and the means to train and upskill our current and future workforce. My personal view is that we need to retrain and upskill adults in support of UK FinTech by ensuring access to short courses from high-quality providers at low cost. We should support the establishment of new coding schools all over the country, with two-year courses and admission on aptitude, raw ability and potential only. Such a measure could be a real benefit. Indeed, we need investment in FinTech. We need to help complete the funding ladder from start-ups right the way through to the initial public offering. Indeed, we also need national connectivity. We should not just accept where FinTechs are in the UK, whether it be in London or anywhere else. We need to strengthen their connections across all four nations.

For domestic customers, saving and investing should be simplified. At a time when the complexities and choices facing consumers are ever more complex, we need to make it all much easier for people. It is currently vastly easier to spend online today than it is to save and invest for tomorrow. We need to help harness technology to drive investment.

Turning this picture round will require thinking about financial services regulation, and it is good to see a number of regulatory barriers to financial services customer journeys under scrutiny. The Financial Conduct Authority’s support for an open finance agenda is a key example of that, and more opportunities will become available to UK policy makers as we build our regulatory framework. In turn, that will enable us to bring the UK’s regulatory agenda closer to the saving and investment needs of UK citizens. For that to work, trust will be key. Existing brands such as Fidelity are already working hard in that space.

I have considered a number of topics in this speech, but I will draw my remarks to a close. To echo the Chancellor’s words, financial services are a jewel in the crown of the UK economy. The sector is one of the engines of Britain’s economic prosperity, and it should be put front and centre of any future trade deals, and in our regulatory changes. My specific questions to the Minister are these. First, will he update the House on the Treasury’s plans for the 8% surcharge and whether it can be scrapped? Secondly, will he provide an update on implementing the recommendations from the Hill and Kalifa reviews? Thirdly, what is the Government’s emerging view on how Parliament should scrutinise the regulators that implement so many financial services rules? Finally, what opportunities does the Minister see with our trade agenda, and in particular our deepening relationship with Switzerland?

As we look to build back better from the pandemic and level up every corner of the UK, we have a once-in-a-generation opportunity to restructure the way our financial services sector works. We must take that opportunity and help to set Britain’s financial services sector up for a new global future.

Economy Update

Bim Afolami Excerpts

Wednesday 16th June 2021 Commons Chamber

[Steve Barclay]

With respect to the hon. Lady, the number on the furlough has come down. As I mentioned in my opening remarks, there has been an increase in the level of employment since November, and my right hon. Friend the Member for Preseli Pembrokeshire mentioned some of the challenges around employers wanting to hire and finding on some occasions that the furlough is an impediment to labour moving. Actually, I do not think the data bears out the hon. Lady’s point. The furlough has been a very expensive but essential measure in order to reduce economic scarring, but it is right that it tapers as we bounce back and more businesses open, and I think the data supports that.

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

As the Chief Secretary has mentioned, unemployment is down. It is 2 million people fewer than originally forecast in April last year, and the unemployment rate at the moment is about 4.7%. Does this not show that our plan for jobs is working, and will the Chief Secretary set out how the plan will help people take advantage of the many vacancies that there are across many sectors?

[Steve Barclay]

I agree with my hon. Friend that the plan for jobs is working. We see that in the furlough data from the end of April, which is the last set of data that we have. There were 3.4 million people on furlough—down from a peak of 8.7 million—which shows the effectiveness of that. Output grew by 2.3% in April, and there was growth of 2.1% in March. Again, one can see the trajectory and the improvement there. Indeed, GDP data so far through 2021 has come out above the Office for Budget Responsibility forecast. There is still much work to do, but my hon. Friend can take comfort from the trajectory, which shows that the plan is indeed working.

Finance (No. 2) Bill

Bim Afolami Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

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

I welcome the Bill. It is worth trying to get under the skin of Budgets, because it is so difficult. There are so many documents, there is a huge build-up, and large parts of it are incomprehensible to anybody other than the Financial Secretary. As Members of Parliament, we have to try to get under the skin of what, fundamentally, is going on here—what are the Government trying to do with the key measures?

In my view, the Chancellor is fundamentally trying to deal with one big thing that has not got enough attention in the House: our productivity problem. He is dealing with some of our deep-seated, deep-rooted economic productivity problems in two principal ways. The flashier one—and there has been some discussion of it today—is the super deduction, but I will not linger on that. In particular, I want to talk about the Help to Grow scheme, which is fundamental, transformative and can make a big difference to businesses across my constituency, Hertfordshire and, indeed, the whole United Kingdom.

On the super deduction, from listening to some of the criticism from Opposition Members, I do not think they really understand the nature of what is going on. One of the biggest economic problems that we have had for a very long time is a lack of private sector investment compared with our neighbours. That private sector investment has been further damaged by the covid pandemic for obvious reasons, as everybody appreciates. The super deduction is an inventive, creative, clever new way of turbocharging and increasing private sector investment and moving it forward so that we can help build back better during this very difficult phase that we are trying to come out of.

The hon. Member for Ealing North (James Murray) kept going on about tech companies. Well, I am afraid that he obviously has not read the detail. The super deduction is about plant and equipment. Plant and equipment tends to impact manufacturing businesses. I know that the Labour party is going through all sorts of internal difficulty and transformation at the moment, but it is a sad day when the Labour party cannot welcome measures that will benefit manufacturing businesses up and down this country.

[Sammy Wilson]

Furthermore, had the hon. Member for Ealing North read the detail of the Bill, he would know that the super deduction is on new capital equipment, not on second-hand capital equipment. So even the manufacturing of equipment, provided it is made here in the United Kingdom, will generate jobs and income for firms here in the United Kingdom, which will then, as the hon. Member for Hitchin and Harpenden (Bim Afolami) pointed out, increase productivity in the firms that invest in the machinery.

[Bim Afolami]

I welcome that intervention. Opposition Members have also been saying, “This is only going to benefit the big companies, and the poor small companies won’t benefit.” First, it does benefit all companies if they qualify. The smaller companies already have the annual investment allowance, which is continuing and has been welcomed by everybody, including by them. And—whisper it—big companies are important for our productivity too! Big companies employ lots of people, so it would be negligent of the Government to say, “We are not going to bring forward a measure that will help our economy because it might benefit big employers that employ thousands of our constituents.”

[Kevin Hollinrake]

May I add another point to my hon. Friend’s list of positives? Lots of the money spent because of the super deduction will be spent in the supply chain, thereby helping SMEs.

[Bim Afolami]

Indeed. I am having too much fun on the super deduction—I will talk about the Help to Grow scheme in a moment—so I shall finish on it. The super deduction is not something that the Chancellor just thought up as something that it might be a good idea to try; it is backed by fundamental economic analysis by people as eminent as Andy Haldane, the chief economist of the Bank of England, who I saw today has been appointed chief executive of the Royal Society of Arts. He is an incredibly able guy who has done a huge amount of work and thinking on this issue and is one of the many economists who have talked about investment being a key problem for our economy.

That brings me to the second key thing that the Budget will do for productivity: the Help to Grow scheme. So much of what we talk about in this place is the big numbers—the massive infrastructure projects, the huge budgets for the public services and all of that, which is all very important—but specific measures for small and medium-sized businesses often do not reach the Floor of the House. They are either hyper-localised in one’s constituency or they appear to be too big and too macro. The Help to Grow scheme could be really important, because it does two things that will directly help small and medium-sized businesses such as the family business that my wife runs, which employs five people, and hundreds of thousands of other companies like that.

First, the Help to Grow scheme helps to deal with our economic difficulty—pointed out by Andy Haldane, among others—which is that in most areas of the economy and of the country, we have an incredibly well-performing top 10% of highly innovative, successful companies, and we have our poorest-performing companies, and the gap between those two groups is greater than it is among all our competitors. That gap is around 80% larger in the United Kingdom compared with France and Germany. That is a significant economic difficulty for us. The question is: why is that the case?

The Bank of England’s analysis points out two key things among lots of different things. The first is technology adoption. In effect, the most successful, innovative companies adopt the newest technology and use it well, and the companies at the bottom end do not. The Government are trying to address that diffusing of knowledge throughout the economy and throughout different regions with the Help to Grow scheme. How? The Government are providing grants and assistance for productivity-enhancing software for companies in every single sector and the ability for them to get online help and advice on what technology to adopt. That could make a huge difference to hundreds of thousands of businesses all around the country and should be welcomed by everybody in this House.

The second aspect of our productivity difficulty is management and our utilisation of human capital—that is, the people who work in businesses up and down the country. How are we dealing with that? The Chancellor has an MBA from one of the best MBA schools—if not the best—in the world, Stamford, and went on to have a very successful career in finance. Not everybody will be able to do that or has the time and ability to do that, but everybody—right down to the small companies in each of our constituencies—can get huge benefit from access to high-quality management training provided by the very good local business schools up and down the country. The Help to Grow scheme gives the individual managers and owners of SMEs the ability to access that sort of knowledge, which is the sort of knowledge that most people running SMEs do not get.

If we combine that improved management capability—by the way, the Bank of England has identified that management capability is poorer in this country than it is in our competitors—with the adoption of technology, we have a ready-made mix of policies directly targeted to improve the most difficult aspects of our productivity problem. I do not know whether Help to Grow will deal with everything—I suspect it will not—but it will make a big difference, and it is a shame that so few Opposition Members have managed to understand and see the depth of seriousness of the Chancellor’s approach in that regard. That really needs to be brought out.

I shall finish—[Interruption.] Yes, I know I should finish. Hanging over us today is not just as an unusually cold April but the spectre of inflation potentially coming back in the next year, two, three or four years. There are many people warning about this from all over the world. If inflation does come back to whatever degree, interest rates may need to go up in future. If interest rates do go up, lest the House forgets, the need for fiscal responsibility will not have gone away. Small rises in interest rates do not just affect households trying to get mortgages or businesses trying to expand or to get debt; they also affect the Government hugely. Underpinning the Chancellor’s approach across everything I have said and lots of other things that have been talked about is a core understanding that fiscal responsibility matters. This Finance Bill helps to keep that in check, reminds the House of that, puts us on the right course and deals with our productivity problems, and I welcome its Second Reading.

Financial Services Bill

Bim Afolami Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

[Kenny MacAskill (East Lothian) (SNP) [V]]

Obviously there is much in the Bill that deserves support, although some of it has come about through our self-inflicted wounds from Brexit. However, the greatest comment I will make is on the opportunities of what should be added and on what is currently missing. I endorse the comments of my hon. Friend the Member for Glasgow Central (Alison Thewliss) and support points made by other Members, particularly those who spoke to amendments 4 and 30, which deal with economic and corporate crime.

We are in a difficult time at the present moment. People are suffering. They are making sacrifices. They welcome fixed penalties being given out to those who act rashly—sometimes stupidly, sometimes deliberately. Equally, they are aware that huge rip-offs are not being dealt with and remain unpunished, which causes a great deal of angst and upset, which needs to be addressed.

When I was Justice Secretary of Scotland, I recall that we set up a serious organised crime taskforce, with a model that has been replicated elsewhere and indeed has been extended to issues beyond serious organised crime. It had clear benefits, but there were also obstacles faced by law enforcement. It had the benefit of bringing together all the agencies, but they faced the same challenges. We had to recognise the extent of the challenge and bring in organisations that had previously been left out, from environmental protection through to local government. There were clear challenges in dealing with corporate crime. There is a lack of a legislative framework—there is insufficient legislation there—to allow Police Scotland, City of London police or police services elsewhere, or the Crown Office and Procurator Fiscal Service in Scotland, or indeed the Crown Prosecution Service south of the border, to carry out a diligent, good job. They lack the powers.

I am always minded of the Woody Guthrie song, “The Ballad of Pretty Boy Floyd”:

“As through this world I’ve wandered, I've seen lots of funny men.

Some will rob you with a six-gun, and some with a fountain pen.”

The tragedy in this country is that it is usually quite easy to deal with those who rob you with a six-gun. Dealing with those who rob you with a fountain pen has proven far harder, which is why significant changes are required, because it is just not good enough that corporate criminals go unpunished, which we know happens. Anyone who has seen “The Inside Job”, which includes Matt Damon, will know the fraud that went on in the financial crash. We have seen LIBOR and forex. We have seen Serco.

Meanwhile, fixed penalty notices are issued for rash and stupid actions, and rightly so, but where is the responsibility being taken by the shareholders and corporate leaders? They have to be held to account. These amendments would help to address that, making sure that we have greater fairness between the small guy and the big guy, bringing us into line with the United States of America, where the wolf of Wall Street is being prosecuted, while ensuring that we keep up corporate standards, which sadly in some instances have slipped quite shamefully. It is only right and appropriate that we make sure that fraud and money laundering are dealt with every bit as strenuously and firmly as bribery and tax evasion.

These are hard times. People are making sacrifices, and it is about time that those who are abusing their powers in the corporate boardroom were held to account. We need to have the legislative framework.

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

I rise to support the Bill and to focus my brief remarks on the wholesale market, rather than the retail market, which most Members have addressed so far. In particular, Government amendments 22 and 23, which the Minister mentioned in his opening speech, clarify beyond any doubt that non-UK firms—all firms that do not have the UK as their principal place of business—are not within the scope of the rules on the parent undertaking. That is particularly relevant to me. I brought the subject up in my Second Reading speech and it is something on which I have corresponded with the Minister and his team. I am very glad that he and the Treasury have engaged on the Bill in this way. It is a telling example of how good Ministers behave, and the Minister has been exemplary in taking on board comments on the Bill from a range of Members. I commend him for that.

I have a couple of short comments on what others have said. On new clause 16, tabled by the SNP, in my speech on Second Reading I gave my view that there is a need for increased scrutiny by this House of the regulators, but the Minister is right to say that we need to consider that in its entirety in the consultation on the future of the regulatory framework. That is the right way to do it. It is very important to get it right, and I look forward to sending in my remarks if I have not already, and seeing the Government’s response to those points.

I shall finish by addressing certain amendments that were introduced in Committee or that have been mentioned today, on the European Union—new clause 12, new clause 20 and many others—whereby, effectively, Opposition Members have tried to impose requirements on the FCA or the PRA to assess the impact of the differences between the EU and UK regulatory frameworks. The conceptual problem with that is—as I think that all hon. Members, and indeed the Government, need to see—that over the next five to 10 years we are going to be in a very different regulatory world. We need to think of attracting companies and investment on a global basis, not with a purely European focus as was the case in the past.

The Minister has already mentioned our success in relation to FinTech. The Chancellor has mentioned his focus on making sure that the London stock exchange is more attractive and effective for others coming from abroad. The European Union’s drivers and incentives are not the same as ours in this country, so it would be wrong for us to necessarily seek to follow the rules blindly. It is not a race to the bottom; it is a race for us in this country to win the global competition for safe, beneficial, productive capital and business. That is what the Bill helps set us up for.

[Christine Jardine (Edinburgh West) (LD) [V]]

It is an honour to follow the hon. Member for Hitchin and Harpenden (Bim Afolami) in this Report stage debate and to speak on a Bill that is of so much importance at this juncture for our economy and the circumstances that we face. The sector that it deals with is so important, and it cannot be overstated. The financial services sector is vital to our recovery, not just because of the jobs it provides and the tax that it contributes to the Exchequer, but because of the number of people, families and communities in this country whose future wellbeing depends on a well-regulated and successful financial services sector.

The Liberal Democrats, my own party, have tabled two amendments—new clauses 22 and 23, both of which address the issue of debt repayment and recovery, but at this stage we shall not be pressing them to a Division, so I prefer not to discuss them. Instead I shall discuss the amendments that we will be supporting, specifically new clause 7, tabled by the hon. Member for Walthamstow (Stella Creasy), of which I am one of the signatories. As I alluded to, our support is recognition of the need to act now to create an environment that enables our economy and the people at the heart of it to recover as quickly and as financially painlessly as possible. The scale of the potential problem that awaits us as we emerge from the current crisis is frightening for businesses and for households. The most recent research from StepChange estimates that more than 3 million people are in arrears and priority debts, and potentially 6 million people—more than the population of Scotland—are behind on household bills. For those people, that creates stress, financial hardship and sleepless nights worrying about how to feed their children.

We should have no truck with any company or organisation that in any way exploits the difficulties that covid has created. That is why I put my name forward as a co-sponsor of new clause 7, which would bring the non-interest-bearing elements of buy now, pay later lending and similar services under the regulatory ambit of the FCA. We need to act now, before we have another scandal. Such companies facilitate overspending online and costs appear lower than they actually are. One in four shoppers used such companies in the run-up to Christmas. More people are being furloughed and made redundant, so even if something seems affordable now, it might not be in future, either for the country or for individuals.

In the past year, we have heard much about the crossroads at which our economy, and indeed the country, stands. Our financial services sector was worth £132 billion to the UK economy in 2018 and had more than 1 million jobs. It has suffered. It is worth 7% of our economy. In my city of Edinburgh, we have the second-largest financial services sector in the UK and the global financial centres index ranks it as 13th in the world. The scale of what we are facing cannot be underestimated, which is why the Bill should be amended as I suggest.

Spending Review 2020 and OBR Forecast

Bim Afolami Excerpts

Wednesday 25th November 2020 Commons Chamber

[Rishi Sunak]

Business rates are, of course, a devolved competency, and I am sure the hon. Gentleman can talk to the Scottish Government about their plans. They will receive £2.4 billion of Barnett consequentials as a result of what we are doing this year, and they could choose to use some of that funding to provide support in the way that he asks.

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

Earlier this week, I spoke to many people and companies— training providers and others—in my constituency about apprenticeships, and how we need to improve the system and make it more flexible. Will the Chancellor set out in further detail what the measures in this spending review will do to help businesses, training providers and young people get the apprenticeships they deserve?

[Rishi Sunak]

My hon. Friend knows this well, from his own business experience, and he is absolutely right. What businesses have been asking for is more flexibility on how levy funds are used. I am pleased that we can deliver that today. It means businesses can transfer their unspent levy funds down the supply chain easily, in bulk, to small and medium-sized companies. We are going to create a matching service for that to happen, and we are also going to allow employers, in certain industries at first, to front-load some of their training funding, which is what they also wanted. Those obviously will be funded by the Government—all those changes that happen as a result of our getting less in the levy funding—but we think they are the right thing to do. They will support business and support apprenticeships, and he is right to raise it.

Financial Services Bill

Bim Afolami Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Monday 9th November 2020 Commons Chamber

[John Glen]

As my hon. Friend mentioned to me a few days ago, he is aware that the Ministry of Justice is conducting a consultation on that matter, and that will drive the Government’s response overall, but it is a matter we take seriously. Following the Financial Action Task Force review at the end of 2018, we needed to move forward a number of measures to improve and tighten our regime. It is critical for the integrity of the United Kingdom’s financial services industry to have in place the appropriate sanctions and the important regulations on reporting standards across the whole of financial services.

Let me turn to clause 32, which will strengthen our breathing space scheme that supports people with problem debt. That has long been a priority of mine as City Minister, and I put on record my gratitude to my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst), who introduced a private Member’s Bill on this issue, for all her efforts, and to Members across the House for the consensus on that legislation’s introduction. The Bill contains crucial amendments that are required to implement fully and effectively statutory debt repayment plans, which will help people facing problem debt to pay back what they owe within a manageable timeframe. The Bill’s measures will allow us to compel creditors to accept these new repayment terms, providing greater peace of mind to consumers, many of whom will be vulnerable.

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

I congratulate the Minister on the work I know he has done over many years on this subject. I understand that the Bill amends the Financial Guidance and Claims Act 2018 to ensure that the statutory debt repayment plan can include debts owed to the Government or Government Departments. Will he explain a bit further how that will work in practice? What will the ranking for claims be for creditors? Will it require a mediated process?

[John Glen]

I thank my hon. Friend for his question. As he says, the purpose of the measure is to provide, during the eight-week moratorium—longer for those with a mental health condition—a set of options, and it is key that the Bill will allow us to compel creditors to accept the new repayment terms. He is right to say that it will provide peace of mind to all consumers, with a compulsion under the provision to bring in debts owed across the public and private sector. He asked me to list the hierarchy of debts, which is probably beyond my capacity at this point, but I am happy to write to him to set out in more detail what the provision gives us room to do.

Clause 33 complements the Government’s pioneering Help to Save scheme, which supports people on low incomes to build up a nest egg. These changes will ensure that people can continue to save through a National Savings & Investments account after their participation in the scheme ends.

As I mentioned earlier, there will be some areas where this country will decide that it is right to diverge from EU regulation. Clause 34 is a good illustration of that, making amendments to the packaged retail and insurance-based investment products regulation, commonly known as PRIIPs. That EU legislation was laudable in its aims, although, one might argue, not quite as laudable in its outcomes and achievements. Concerns have been raised by Members across the House, and most tenaciously by my hon. Friend the Member for Basildon and Billericay (Mr Baron), that it is not working as intended and that there is a risk that consumers may be inadvertently misled by disclosures that firms must provide under the regulation. I am pleased finally to be able to address those concerns. The Bill will allow the FCA to clarify the scope of the regulation. It will tackle the issues around misleading performance scenarios and allow the Treasury to extend an exemption from the PRIIPs regime for undertakings in collective investments in transferable securities—UCITS—which are a type of investment fund.

These are some examples of how we intend to take advantage of a new ability to address issues in retained EU law. However, we have no intention of needlessly, ideologically or recklessly diverging from EU legislation. Instead, we will maintain existing regulations where they make sense for the financial services industry in this country. One instance of that approach is clause 35, which finalises reforms to the European market infrastructure regulation, which the UK supported as an EU member state, while clause 36 contains a change that should provide certainty to markets by ensuring the legal validity in the past and in the future of the financial collateral arrangements regulations.

Finally, clause 37 will make the role of the chief executive of the Financial Conduct Authority a fixed five-year term appointment that is renewable only once, in line with other high-profile roles in financial services regulation. That was recommended by the Treasury Committee not so long ago.

I recognise that Members might be concerned that some of the Government’s prior commitments are not included in the Bill. I assure the whole House that our focus on these issues has not wavered. One issue that came up in questions to the Chancellor earlier was access to cash. The Government are committed to ensuring that everyone who needs it has easy access to cash. I have heard representations on the issue from Members across the House in recent weeks, including my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell), whom I met recently, and Members from across Scotland and the whole UK.

Earlier this month, we launched a call for evidence, seeking a wide range of views on the subject’s key considerations. Once we have reviewed the findings, we will bring forward legislation as soon as parliamentary time allows.

--- Later in debate ---

[Mr McFadden]

I do, and I will talk later about the Basel III regulations; certainly Basel II did not prove to be any kind of protection against what happened in 2007 and 2008.

The other issue that we will have to consider is the role of Parliament in debating and deciding these matters. The approach that we will take is to ask at each stage what these measures will mean for the UK financial services industry, for the wider economy and for consumers. Do they guarantee robust regulation in the public interest, or do they expose the consumer to greater risk?

There is a particular onus on the UK to get this right, because we are a medium-sized economy with a globally significant financial sector. There are obviously crucial benefits of that to the UK: the huge number of jobs generated around the country by financial services; the investment that comes into the country through being a world leader in the sector; and, of course, the tax revenue that goes towards supporting our public services. But, as we have also learned, there are risks if things go wrong, and it is in no one’s interest for the post-Brexit regulatory system to result in a race to the bottom, where the public are exposed to greater risk in the name of increased competitiveness.

We know that parts of the financial services sector will be knocking on the Minister’s door. They will not put it in terms of watering things down; they will tell the Minister that they could be so much more competitive if only he changed this rule or that rule, or gave them this or that exemption. Of course, we do not argue that any rulebook should be frozen in time. Regulation must adapt to circumstances and innovation, but these things are there for a reason. Capital has to be held against lending and other products for a reason. These rules are the public’s insurance policy against the risks involved in the enormous capital flows that go across countries and between financial institutions. They are the as yet untested firewall against a repeat of what happened across the globe a decade ago.

[Bim Afolami]

What is the right hon. Gentleman’s view on an expanding, ever more complex set of measures obscuring good supervision and prudential management of the financial services sector? To what extent would he welcome any efforts—whether cross-party or by the Government—to simplify regulatory standards while also ensuring that they continue to be robust? There is a danger for many in different parts of the industry not of watering things down, but of such complexity making it very difficult to manage a business on an ongoing basis.

[Mr McFadden]

Nobody should be wedded to complexity for complexity’s sake. As I said, beneath the complexity, the issues are actually not that complicated. They are about the safety of insurance and resilience when things go wrong, and that is what we are focused on, rather than defending complexity for complexity’s sake.

The second thing that we will have in mind as we debate the Bill is the broad question of what financial services are for. The Chancellor set out green goals for the UK financial services industry in his statement today, and we welcome, for example, what he said on green gilts. But those green goals are not mentioned in the accountability framework set out in the Bill. Indeed, in schedule 3, the accountability framework states that the regulator must have regard to

“relevant standards recommended by the Basel Committee”.

The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) was right to say that that should be a minimum, not a maximum, given the importance of resilience and robust regulation. The regulator must also have regard to

“the likely effect of the rules on the relative standing of the United Kingdom as a place for internationally active credit institutions and investment firms to be based or to carry on activities”

and

“the likely effect of the rules on the ability of…firms to continue to provide finance to businesses and consumers”.

Nothing there speaks of the green goals. Do the Government intend to amend the Bill as it progresses, to reflect the statement made by the Chancellor today? There is an opportunity here to put regulatory power behind the goal of net zero and, indeed, broader social and governance considerations for the greater public good. As it stands, the Bill is silent on that—it does not do that yet. When will the Bill be reconciled with the statement that we heard this afternoon?

Thirdly, we will want to ensure that the UK maintains the highest standards when it comes to transparency, money laundering and corruption. We have already had the report from the Intelligence and Security Committee referring to the “London laundromat”, where illicit funds can be washed and corrupt financing rendered more obscure. The UK’s globally significant financial services sector must not be tainted with any sense that this is an easy place for illicit or corruptly obtained finance to be washed through different institutions. As the Bill progresses, we will seek to ensure the highest possible standards with regard to these issues. Of course we want a successful, globally competitive financial services sector, but it has to be based on clean money, honest endeavour and socially responsible goals.

I turn to some of the individual measures in the Bill. As the Minister said, clauses 1 to 7 deal with new prudential regulation requirements, the implementation of the Basel rules and the new accountability framework, which I quoted from a moment ago. As I said, the schedule on the accountability framework states that, when making these new rules, the regulator must have regard to the likely effect on the “relative standing” of the UK as a place for firms to be based or carry on activities. I want to explore that with the Minister. Does that clause about the relative standing of the UK mean that, every time a regulated entity says, “We don’t want you to do that because it will affect our competitiveness in relation to other countries”—and they are liable to say that quite a lot when regulatory proposals are put forward—the regulators have to keel over and give in? How does this point to the UK being a leading player in the kind of environmental or social regulation that can help to ensure that the power of our financial services sector is a force for good? What is the guarantee that the provision does not, in fact, become a deregulator’s charter, on the basis that we should not do things that some in the industry could claim put us at a competitive disadvantage relative to other countries? The wording is crucial. The accountability frameworks, Parliament’s role in them and what they should cover will be the subject of significant debate as the Bill progresses.

On capital ratios, the FCA has estimated that total pillar 1 capital requirements will decrease by 5%. What is the justification for decreasing the capital requirements when we know that over-leveraging was a key cause of the financial crisis? How can the Government ensure that the onshoring of these powers does not result in a chipping away of the public’s insurance policy on financial risk? Similarly, in relation to Basel reforms, the Bill’s impact assessment talks of

“flexibility to tailor the actual detail of these subject areas to the UK.”

Given the weakness of the Basel rules in the past, it is clear that they should be seen as a floor, not a ceiling. Adherence to international standards is a minimum, not a maximum to be wriggled out of when we get the chance, so what exactly is the flexibility to be used for?

Clauses 8 to 19 deal with LIBOR and the governance of benchmarks. For my sins, a few years ago I served on the cross-party Parliamentary Commission on Banking Standards, which was established in the wake of the LIBOR scandal, which exposed manipulation, mutual favours and price setting based on conjecture rather than actual trades. The benchmark was abused to benefit traders, rather than markets or the end consumers of those trades, so it is right that it goes, but so many contracts around the world have been based on it that the Bill has to put in place a system for dealing with such so-called tough legacy contracts. The principles behind benchmarks should be clear: they should be based on actual trades and costs and should be insulated against manipulation for personal gain by those who submit the information to the benchmark in the first place. That will be the task of the FCA.

Clauses 22 and 23 establish the new Gibraltar authorisation regime. I share the warmth towards Gibraltar that is felt in all parts of the House. The measures could be described as a necessary consolation prize for taking Gibraltar out of the EU, by ensuring continued market access on a free basis between Gibraltar and the UK.

Clauses 24 to 26 give us a picture of how equivalence will work from the UK point of view, at least in part, by establishing the overseas fund regime, which negates the need for fund-by-fund approval and will instead be based on country-by-country approval and extending the time period for such funds to trade in the meantime. In his statement earlier this afternoon, the Chancellor had more to say about how we will grant equivalence recognition to others, but of course he could not say what would happen to UK companies that sell services overseas, because over that he has no control.

What was announced today dealt with one end of the telescope, because that is the position we are now in. Whatever this can be described as, it certainly cannot be described as taking back control, for we are now dependent on a response from others in respect of the crucial UK companies in the overseas markets in which they want to trade. There is also the question of how equivalence decisions are to be granted. Are such decisions a matter of economic policy or foreign policy—or both? I would be grateful if the Minister addressed that when he responds.

--- Later in debate ---

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

I am reminded of something that Lyndon Johnson, who is a bit of a political hero of mine, said at some point in the 1960s when he was talking about speeches on economics and finance. I hope I do not test your indulgence too much, Mr Deputy Speaker, because he said that making a speech on economics was a bit like peeing down your leg: it seems hot to you, but never to anyone else. I am reminded of that before I embark on my detailed comments on the Bill. I strongly welcome the Bill, and I do not want to repeat what other hon. Members have said about the good things in it. I speak as a former corporate lawyer working in strategy and restructuring at HSBC. Before that, I was a corporate lawyer at Freshfields and at Simpson Thatcher. Over the weekend, I was speaking to several people in the industry, including a constituent who I happen to have done a few deals with in the past—a man called Tim Lewis, who is an expert on financial regulation at Travers Smith. There are technical points I want to make to the Minister, and indeed I have written to him separately on some of them. I do not expect him to deal with them all in his summing up, but I think they are worth considering. He is looking forward to that, I can tell.

The Bill’s core purpose is to ensure a regulatory regime that continues to operate effectively after the end of the transition period at the end of this year. The first point I want to make is that the Bill empowers the FCA to impose obligations directly on certain parent undertakings of MiFID—markets in financial instruments directive—investment firms. But the current parent undertaking concepts in the Bill go beyond the equivalent EU legislative drafting in two important ways. I will not bore the House by going through that in immense detail, but proposed new clause 143B uses the wider concept of authorised parent undertaking. That matters because, effectively, it covers any entity that is regulated by the FCA. In its discussion paper, the FCA indicates that it currently regulates about 3,000 MiFID investment firms. However, it states on its website that it regulates nearly 60,000 firms in total. Those additional firms include, for example, small credit brokerages and insurance intermediaries. Therefore, the current proposal is, in short, a huge expansion of FCA power over smaller firms, going much further than what the equivalent European regulators can do. That is something we have to think about.

There is another way in which the proposals go beyond the EU regulation, and that is in relation to non-authorised parent undertakings. Today, it is accepted that parent undertakings will be caught by the regime where those undertakings are incorporated in the UK. However, it is not the case that any parent undertaking that has a UK office will be caught by the current regime. For example, a US-incorporated holding company with a US head office and a UK branch would ordinarily be out of scope of the rules.

Why does that matter? It matters because if the definition of non-authorised undertaking is retained in its current form in the Bill and is adopted by the FCA, that would lead to a significant expansion of the current rules. The effect might be to require some firms to restructure to close down existing UK branches of overseas businesses. It might push firms to ensure that overseas holding companies that carry out no substantive operating activities cease all UK activity, such as holding meetings in the UK, to avoid having a UK place of business. Again, this is a technical point, but it is an important one. To come to some of the points that have already been made, the Bill sees a big expansion of FCA powers, and we have to be very careful about that, particularly as we come out of the transition period and they expand beyond what is happening in the European Union. That is a particularly important point.

I also speak as the Member for Hitchin and Harpenden. In my constituency, I have not only many people who work in financial services, but some small financial services firms. The technical term for one group of firms is exempt CAD—capital adequacy directive—firms. The Bill and the FCA discussion paper leave open the question of how such firms will be treated. These firms are investment consulting, corporate finance and private equity firms, and their activities are limited to giving investment advice and arranging deals. In that sense, they do not hold much money; they are effectively providing advisory services. Today, they have a capital requirement of €50,000. The default position in the Bill is that the new rules will apply to them in full. If that is the case, many will see a significant increase in their capital requirements shortly after losing the benefit of the cross-border EU services passport, which some of them use. The Bill again effectively leaves it to the FCA to determine whether to make an exemption or transitional provision for these firms. Again, I make the point that the FCA needs to be scrutinised really carefully in relation to the powers it has under the Bill.

When making rules to implement and maintain parts of the investment firms prudential regime, the FCA will be required to have regard to a new list of matters. I do not want to repeat all the points made by my hon. Friend the Member for Wimbledon (Stephen Hammond), but these matters relate to important public policy considerations, including the relative standing of the UK as a place for internationally active investment firms to carry on activities. This point needs clarifying a bit further, whether from the Treasury Bench or in the Bill. It is clear what the Treasury is trying to do. It is trying to have a balanced approach between maintaining our reputation as a safe financial services centre in regulatory terms and ensuring that we do not fall too far behind other jurisdictions in our general attractiveness. However, I think we need to push the regulators much harder. I would like further clarity in this Bill on how regulators will need to actively seek to ensure that the UK financial services industry will be able, first, to support the UK economy and our ability to compete with overseas firms internationally, in addition to the UK’s relative attractiveness as a place to do business. This may sound like a technical difference, but I assure the House that it is not. If we do not clarify this and do not choose to try to expand the regulator’s requirement to think about our relative standing and competitiveness, not just in relation to this investment firms’ prudential regime, but across all of its rule making, I fear that this may be another example of the creeping weight of regulation and complexity that we have seen in recent years. I ask the Minister to confirm that the Government will at least consider publishing a financial services strategy in due course.

I wish to talk about how we are going to scrutinise the regulators and how this House and indeed this Parliament as a whole can do that more effectively. It is clear to me that the weight and volume of legislation and regulations after we leave the transition period will be quite significant, and I urge the Minister to consider strongly, within the review that the Treasury is already conducting, setting up a specialist financial services Committee in this House, perhaps a Joint Committee with the House of Lords, to consider not just statutory instruments that come through this House, but the actions of our regulator. What happens without that detailed oversight, involving a specialist group of people who are spending a huge amount of time on it? Financial services regulation is technical, as everybody in this House who has been listening to me for the past 10 minutes knows. We need to consider that.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) made the point about the huge changes in global finance—the growth in asset prices, and the increasing role of central banks and quantitative easing. Regulators are playing a huge role in those decisions, yet the oversight by Parliament is relatively slight. So I want the Government to consider how we can strengthen this House’s ability to scrutinise our regulators, particularly as they are getting a huge number of powers in this Bill. However, I would like to finish by saying that I commend the Bill, the Minister—I know the hard work he has been doing—and his team. I also commend the industry, which has been feeding in and discussing the Bill with the Government and other Members. The Bill is very important. It is a landmark Bill. I am sure there will be more financial services Bills to come, and I support it.

Future of Financial Services

Bim Afolami Excerpts

Monday 9th November 2020 Commons Chamber

[Rishi Sunak]

The hon. Lady will know the importance of offshore wind in her area, and she will have welcomed the Prime Minister’s announcements for that sector, including the increase in the amount of domestically manufactured content as we look to build on our advantage as a user of offshore wind to make sure that we also build an advantage in manufacturing the turbines. That is exactly what the hon. Lady is asking for, and this Government are in the process of delivering it.

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

I welcome the Chancellor’s statement, which foreshadows a huge increase in powers for the Financial Conduct Authority and a huge increase in the amount of legislation and regulations that will come through this House. What thought has the Chancellor given to establishing a specialist financial services Select Committee of this House, perhaps with some oversight capacity, so that we can manage this huge influx of legislation and regulations once we get out of the transition period on 1 January?

[Rishi Sunak]

It is not for me to suggest that the Treasury Committee needs something else to do, but my hon. Friend is right that there will be a change in the regulatory alignment after leaving the transition period, which is why our future regulatory framework review is so important. We are just embarking on phase II of that. It will consider the right balance between Government, Parliament and the regulators. That is the appropriate place for him to feed in his thoughts on how we can get that balance right.

Black History Month

Bim Afolami Excerpts

Tuesday 20th October 2020 Commons Chamber

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

It is a pleasure to speak in this debate and to follow many other hon. Members. We have talked a little bit about black history—that is appropriate, as it is, indeed, Black History Month—and I would like to echo some of the things that have been said so far. We have already talked about how black history is British history, and British history is black history; these things are synonymous. I want to say right at the beginning that, whatever our different political views—this got a little bit tetchy for a while, but I hope it has calmed down—the one thing on which we can all agree is that black history is British history. That shared bond that people in these wonderful four nations all share together—whether they be white, black, Asian or whatever ethnicity—is critically important. Indeed, it is one of the reasons why I think the Union we have is so precious.

In that spirit of camaraderie and friendship, I would like very gently to take on some of the points that we have heard from certain Labour Members—very gently. I have heard very moving speeches from Labour Members, including the hon. Member for Brent Central (Dawn Butler), who is always very passionate about this issue. She knows a lot about it and campaigns a lot about it, and I think everybody in this House respects her for that. However, as somebody who loves history—I studied it as a boy and at Oxford University—I think it is fair to say that, when I entered Oxford University in 2004, this issue, if I were to paraphrase it, of decolonising the curriculum, which has been mentioned, was not a common issue and was not talked about very much. I studied history at that university and enjoyed it very much, and my studies included this issue and a range of different things in all different continents and different countries. I also studied a lot of British history, and I can tell hon. Members that, throughout my whole life, the study of this country’s history has not made me feel inferior. It has not made me feel that I do not belong here. It has not made me feel that somehow my unique part in the story of this country—indeed, the unique part that all of us of every ethnicity has in this country—is not recognised.

[Kemi Badenoch]

My hon. Friend is making a very important point about who we identify with. Given what the hon. Member for Brent Central (Dawn Butler) feels about children who read books by authors of a different colour to them, would he agree with me that most children do not actually know the colour of the skin of the author of a book they are reading, and in fact we do not need to have people who share the same skin colour as us to identify with them?

[Bim Afolami]

I thank the Minister for her intervention. It is interesting because I have three boys—they are mixed race boys—and my wife told me something recently. I do not know whether I am meant to announce this in the Chamber, but why not? [Interruption.] Yes, I should be careful. She remarked to me recently that when she was trying to identify the black individual in an illustrated book with people of different colours—dark, mixed race, white, Asian: it was a complete mosaic—my son did not know what she was talking about. He could not conceive—[Interruption.] No. He did not understand how we would think about one individual as different from another simply on the basis of the colour of their skin. It is worth saying that he is very young, but my broader point is—

[Several hon. Members rose—]

[Bim Afolami]

No, no. My broader point is that it is very important that we do not allow the teaching and interpretation of our necessarily complex and diverse, yet brilliant and great British history to become very ideologically divisive. I would therefore reject comments from those who say that somehow we need comprehensively to reframe the entire nature of our history to address what they suggest. I believe that what we need to do—

[Christine Jardine (Edinburgh West) (LD)]

Will the hon. Gentleman give way?

[Dawn Butler]

Will the hon. Gentleman give way?

[Bim Afolami]

I will continue. What we actually need to do is to look forward, understand our past, understand where we have failed and understand that we have made progress, but accept that there is much further to go.



I would like to pay tribute to my hon. Friend the Member for Windsor (Adam Afriyie), who was the first black Conservative MP in the modern era; I do not want to get involved in the historical debate about when the first non-white MP was elected, because we will get ourselves tied up. He has done credit to himself and his family through his service in this House, his record as a successful businessman before coming to the House and the kind advice, wisdom and guidance that he gives to all Members as a senior Member. I remember watching him on “Question Time”—I think it was even before he had been elected, such was the reliability of the voters in Windsor that people were sufficiently confident he would win as a Conservative. I remember watching him and thinking, “Maybe I can become a black Conservative MP as well.” I pay tribute to him.

[Dawn Butler]

Why, because you saw somebody who was black, and—[Interruption.]

[Bim Afolami]

I was trying to be so nice to the hon. Lady. I do not know why she is carping from a sedentary position, but I will continue. Two words have come up quite a lot in the debate. I would like to address them, and I address them as a Conservative.

[Tulip Siddiq]

Is this what they teach you at Eton?

[Bim Afolami]

Okay; let’s address this. The hon. Lady shouts from a sedentary position, “That’s what they teach at Eton.” First, I am not sure that they did, but regardless of that point, yes, I went to Eton College. It is a good school. I am proud of being able to go to that school. I am proud of the fact that people of all backgrounds and all races are able to go to that school. I reject the idea that if someone is black or non-white, there are certain places that they are not able to go.

--- Later in debate ---

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Interventions should be short. I did remind the House about the length of speeches, and we are in danger of a time limit being imposed if we are not careful.

[Bim Afolami]

Thank you, Mr Deputy Speaker. I like the hon. Lady as well. What she says has a huge amount of truth. Of course there is a difference between people of different backgrounds, and it is in that diversity that we find strength as a country. I accept that I have had advantages that certain white working-class boys or girls may not have had, and I have had advantages that certain black people from working-class backgrounds may also not have had. Of course that is true, but at the same time—and I think this view is shared on both sides of the House; it is not partisan—we need to make sure that everybody can aspire to everything and there are no no-go areas, whatever someone’s race or background. That message of aspiration is one of the key reasons why I became a Conservative.

We have made progress. I do not want to repeat what others have said about where we have fallen short and need to make progress. I look at what my friend the noble Lady Morrissey, has done over the last few years with the 30% Club to get more women into senior positions in big public companies. We should look at that sort of approach and think about how we can increase the number of black people and other minorities in leadership positions.

[Christine Jardine]

Will the hon. Member give way?

[Bim Afolami]

I will continue, because time is short.

That sort of aspiration is important, but the question is often how we get there. As I have said, we need to seek out and identify talent wherever it appears, support people who do not necessarily have the advantages that others have—that is people from all types of background and of all races—and accept the diversity and intersectionality that the Member for Hampstead and Kilburn described. At the same time, we must reject the fundamental principle of identity politics, that we are mostly black, Asian, white—one of those characteristics. We must allow individuality to be the primary focus of how we think about diversity, opportunity, support and aspiration. I reject the idea, for example, that we should have quotas. I believe in targets and help in identifying where people need support.

I see that the hon. Member for Bath (Wera Hobhouse) is on the Liberal Democrat Front Bench. She has not made a speech yet, so I will not criticise her, and I am sure that she will address the point that I am about to make. Liberal Democrats say—and many people in Labour have suggested this in the past—that we should have all-black shortlists, but I reject that approach. Quotas are a bad idea, because that means that everyone else will look at the Minister, or at me, or at my hon. Friend the Member for Windsor and say, “They are only there because of their race.” That is a dangerous thing. We need to recognise the past, welcome our progress and look forward to the future with confidence as a United Kingdom.

Oral Answers to Questions

Bim Afolami Excerpts

Tuesday 15th September 2020 Commons Chamber

[Jesse Norman]

I can tell my hon. Friend that 67 local businesses registered for the scheme and that it was used 53,000 times in Bridgend, which, while not like the heroic figures we have seen elsewhere, will have provided a very important boost to the local economy. I am sure that he will have had the experience that Members across the House will have had of walking into a café or restaurant and having the proprietor say, “Thank you so much. It has made a vital difference at a critical time of year for us.”

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

What fiscal steps his Department is taking to support businesses affected by the covid-19 outbreak.

[Miriam Cates (Penistone and Stocksbridge) (Con)]

What fiscal steps his Department is taking to support businesses affected by the covid-19 outbreak.

[The Economic Secretary to the Treasury (John Glen)]

The Government recognise the extreme disruption that the pandemic has caused businesses, which is why we have delivered a generous and comprehensive package of support, in line with best practices globally, totalling more than £190 billion. That has included grants, loans, the furlough scheme, the self-employment income support scheme, deferred VAT payments, business rate reliefs and protections for commercial tenants.

[Bim Afolami]

I thank the Minister for his answer. Will he and the Treasury consider reviewing the rules of the furlough scheme to deal with cases where some small businesses, particularly one in my constituency, missed out on that scheme through administrative error and, in effect, paid staff when that could have been done through the furlough? Will he discuss that with me separately to see whether we could review the rules to deal with that sort of administrative mistake?

[John Glen]

Obviously, the scheme has helped 1.2 million employers, and that involves 9.6 million jobs. I am happy to engage with my hon. Friend on the specific example he raises. No appeal process is available for those who have made administrative errors, but if a mistake has been made by Her Majesty’s Revenue and Customs, a complaints procedure can be followed. I will follow up on this with him personally.

The Economy

Bim Afolami Excerpts

Wednesday 8th July 2020 Commons Chamber

[Wes Streeting]

The hon. Gentleman makes a really important point. Of course, the devolved Administrations can provide their own policy responses, but we know that decisions taken here on public spending have a direct impact on their ability to respond accordingly, too.

We have said throughout this crisis that we would not criticise for criticism sake, and beyond the kick-start future jobs fund announced today, we welcome the attempt to make sure that the furlough scheme gets people back to work, instead of making them redundant through the jobs retention bonus. We are glad that the Chancellor included provision to get people into training and apprenticeships in his statement, and we welcome the additional resources provided to the Department for Work and Pensions to help get people back into work. In so far as they can, we hope that the cut in VAT and the limited “eat out to help out” scheme will be of some assistance to our tourism and hospitality industries, but this falls far short of what we called for and what was promised. We were promised a new deal, but the Chancellor’s big announcement was a meal deal. The Chancellor said that we cannot have endless extensions to the job retention scheme, which was echoed by the Chief Secretary, and that we cannot allow furloughing to go on forever. We agree. We have never argued otherwise. This straw man argument does a real disservice to the concerns coming from those employers and industries that face the biggest and longest hit as a result of covid-19.

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

Does the hon. Gentleman not accept that, as the Chancellor confirmed, there is still a Budget to come later in the year and that the announcements today were not the sum total of everything that the Government will do? He should continue the constructive tone that he has used in part of his remarks and say, “Now we should work together on both sides of the House to see how, in the autumn Budget, we should extend things and see what needs to happen once we understand the economic situation at that time, which will be different from what it is today.”

[Wes Streeting]

The shadow Chancellor has always been willing to work with the Chancellor and we would be very happy to engage with the Government in terms of the flexibility that we are calling for in the sector-by-sector approach. In fact, as the Government did in establishing the job retention scheme, we would encourage them to sit down with employers and trade unions to look at what support is needed, for how long and across which sectors to make sure that people come through this crisis. The challenge with what the hon. Gentleman describes is that for too many businesses it will simply be too late. When there are some businesses that are still shut down through no fault or choice of their own, it is completely unreasonable for them to see Government support beginning to wind up before they can actually open their doors to business. The public health response and the economic response have to go hand in hand. I would have thought that point would be obvious to the Government.

Part of the Government’s challenge is demand and getting consumers spending again, as we have heard, but many of the challenges are also supply side, where a cut in VAT or a £10 discount on a Tuesday night is neither here nor there. Beyond tourism and hospitality, we have seen job losses across a range of sectors in recent days and weeks. The Chancellor offered nothing for manufacturing, including for companies at risk in aerospace and automotive industries, and nothing for the businesses whose doors are still closed. We fear that the Chancellor’s refusal to accept a more flexible and tailored sector-by-sector approach to business support and job retention is a failure of judgment that will be reflected in higher unemployment figures. I would be delighted to be proven wrong on that point.

In his statement, the Chancellor said that people need to know that although hardship lies ahead, no one will be left without hope. I am afraid, as we have already heard, he offered no hope whatever to the excluded, those who have consistently fallen through the cracks of the Chancellor’s support for employed and self-employed workers. Instead, they remain forgotten. Some of this is about choices and priorities. It is not clear why many of those facing the greatest financial hardship were offered no direct financial support in what the Chancellor announced today. Those who will benefit from the cut in stamp duty will, by definition, be better off.

--- Later in debate ---

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

Like everybody in the House, I welcome the Chancellor’s statement, and I think it is worth considering that we have a twofold economic problem here, which we will have to deal with over the next few months. The first difficulty is one of demand, as there is a chronic demand shortage. The Government have done their best to stoke and increase demand over the summer and autumn, and I think those measures will be successful, but there are other fundamental structural problems with the economy that this crisis has shown us.

One is accelerated technological change on the high street in retail, and in automation in the industrial sector. The second is skills. We talk about building infrastructure, building back better and a green recovery. None of those will matter—all the money from the Government will not deal with the problem—if we do not have people with the right skills who can do the work.

The third structural problem we have is within our financial sector, with companies not having sufficient equity, or rather having too much debt, so that when the crisis is behind us they will not be able to grow sufficiently fast. Again, that is a structural problem with the economy.

There are three things that the Government and the House should consider over the coming months. First, while the crisis is here, we should maintain a loose fiscal policy and loose monetary policy. That is very important, because there needs to be sufficient demand growth over a sustained period of time for businesses to expand with confidence and not think that it will be pulled away in a couple of months’ time. For them to expand with confidence, there needs to be sufficiently loose monetary and fiscal policy. If they can do that, spending will grow robustly enough for there to be demand to create private sector jobs without subsidy from the public sector over the medium term.

The second thing we can do is adapt our financial system to make sure we can get more equity into businesses and reduce the debt burden. I have proposed certain things in work I have done. The Chancellor referred earlier to my work “Unlocking Britain”, which discussed how we can recapitalise the SME sector. Something like that needs to happen within our financial system so that we can reduce the debt burden for companies to give them equity so that they can grow.

The third thing, which connects with skills directly, is that we need to improve the ability of labour—people—and capital, money, to move from sectors and companies that are declining into those that are growing and have the potential to power forward our recovery. Those are the measures that the Government need to consider in the months to come.