Money Laundering and Terrorist Financing
Emma Reynolds Excerpts(2 weeks, 2 days ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
The integrity and resilience of the UK’s financial system are fundamental to our country’s prosperity and security. A strong financial system supports jobs, businesses and families up and down the country, and helps to make Britain a safer and more prosperous place to live and work. However, the same openness that makes the UK attractive for trade and investment can be exploited by criminals and terrorists who try to move and hide their illicit money through our financial system. These activities are not victimless crimes; they fund serious criminal activity, undermine trust in our economy, and threaten the safety and wellbeing of our communities.
Today the Government are publishing two key documents that lay out our approach to identifying and managing these risks to UK citizens and their interests. The UK’s fourth national risk assessment of money laundering and terrorist financing, published jointly between His Majesty’s Treasury and the Home Office[1] and HM Treasury’s response to the consultation on improving the effectiveness of the money laundering regulations[2] together represent a robust, risk-based approach where regulation is underpinned by a comprehensive assessment of current and emerging threats. Our aim is clear: to keep criminals’ money out of our economy, strengthen the defences of our financial system, and ensure the UK remains a secure and attractive place to do business.
The NRA takes account of the latest developments and information since the previous publication in 2020. The report has been laid before Parliament.
The key findings from this assessment are as follows:
The UK continues to be exposed to a high level of money laundering risk. Since 2020, the wider context has shifted due to increasing global insecurity, which has altered the risk landscape and the methodologies used by criminals
Money laundering increasingly overlaps with kleptocracy and sanctions evasion, as sanctioned actors use established laundering networks to hide funds.
The increasing adoption of new technologies are enabling novel methods for laundering and terrorist financing.
Cash-based money laundering remains a significant threat, including cash smuggling, use of cash-intensive businesses, money mules and misuse of legitimate channels including post offices to introduce criminal proceeds into the financial system.
Terrorist financing in the UK typically involves small sums for basic needs or overseas transfers, using both illicit and legitimate routes.
The NRA highlights both a strengthening of the UK’s defences and the evolving nature of the risks we face. Since the previous assessment, significant steps, including under the economic crime plan 2023-26, have enhanced the UK’s response. These steps, including expansion of public-private partnership working and legislative reforms, support the UK’s alignment with international standards, including those set by the Financial Action Task Force.
The findings of the NRA will directly inform policy, regulation and operational priorities for Government, law enforcement, supervisors and regulated businesses. By equipping these partners with up-to-date risk intelligence, we are ensuring that everyone involved can respond proportionately to the threats we face, protecting the UK’s reputation and making it a safer place to live, work and invest.
Alongside the NRA, the Government are publishing their response to a recent consultation on the money laundering regulations, which attracted over 200 responses from industry, law enforcement, supervisors and civil society. The Government will introduce targeted changes to the MLRs reflecting an evidence-led, risk-based approach, ensuring that regulation is focused on the highest risk activities and threats to the UK system, while closing loopholes such as those related to the registration of certain trusts.
The amendments include changes to requirements for enhanced due diligence for complex transactions and high-risk countries; clearer customer due diligence requirements for pooled client accounts and non-financial firms; closing a key loophole on registration of trusts owning UK land or property on the trust registration service; improved onboarding in bank insolvency scenarios; better information sharing between supervisors; and updated rules for crypto asset service providers and the sale of “off-the-shelf” companies. Other issues will be addressed through guidance, working closely with supervisors to ensure that regulated firms are taking a consistent and risk-based approach.
These reforms, together with the updated NRA, will further strengthen the UK’s defences against illicit finance, while supporting responsible businesses and protecting people’s savings and livelihoods. We remain committed to ongoing engagement with stakeholders and will keep the MLRs under review to respond to emerging risks.
These publications mark an important milestone in our plan for change, supporting economic growth while ensuring that our financial system works for people and businesses, and denies criminals and terrorists the resources they need to do harm.
[1] https://www.gov.uk/government/publications/national-risk-assessment-of-money-laundering-and-terrorist-financing-2025
[2] https://www.gov.uk/government/consultations/improving-the-effectiveness-of-the-money-laundering-regulations
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Financial Services Reform
Emma Reynolds Excerpts(2 weeks, 3 days ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
With permission, Mr Speaker, I shall update the House on the content of the Leeds reforms.
The reforms encompass the Government’s financial services growth and competitiveness strategy, which is our 10-year plan for financial services. This plan will make the UK the global centre of choice for financial services investment by 2035, with all parts of the country benefiting from its success, building on our thriving regional financial services clusters around the country.
The financial services sector is one of this country’s largest and most productive sectors. It is worth 9% of total economic output and provides 1.2 million jobs across the UK’s nations and regions. Our strategy will unleash the potential of the sector to catalyse growth, enterprise and opportunity in the rest of the economy. That will mean that working people will get better returns on their savings, that home ownership will be unlocked for tens of thousands more people, and that more businesses will get access to the capital that they need to grow.
The Secretary of State for Business and Trade recently presented to this House our modern industrial strategy in which financial services was identified as one of the key eight growth driving sectors on which the Government will focus. This builds on the successes of our first year in office, which I am proud to highlight: the fastest growth in the G7 in the first quarter of this year; four interest rate cuts; faster wage growth in the past 10 months than the previous 10 years of the last Government; the FTSE100 yesterday at a record high; and business confidence at its highest in nine years. [Interruption.] I will not take lectures from the Conservatives, who presided over inflation at 11% and debt rising year after year.
Our vision is of an active state working in partnership with business, and the Leeds reforms were co-designed with industry. The Chancellor and I undertook extensive engagement in its preparation, and I was pleased to see financial services firms across the country and the Confederation of Business Industry welcome our reforms publicly. The reforms reintroduce informed risk taking into our financial services system to deliver prosperity for working people. We will always ensure that financial stability is a prerequisite for economic growth, and we continue to uphold our commitment to the high international standards that underpin the resilience of the global financial system.
I will briefly set out the details of our package to the House. First, the Government are delivering a competitive regulatory environment to attract investment and drive growth. We have set out plans to deliver the most significant reform to the Financial Ombudsman Service since its inception, ensuring that it no longer acts as a quasi-regulator and returning it to its original purpose as an independent, impartial dispute resolution service for complaints between consumers and financial services firms.
We are also streamlining the senior managers and certification regime to reduce the burdens imposed on firms by 50% and to reduce approval times. We have tasked the Financial Conduct Authority to report back by September on how it plans to address concerns about the application of the consumer duty for firms primarily engaged in wholesale activity.
Secondly, our reforms unlock capital for investment into our infrastructure and businesses. We are doing this by supporting the Bank of England’s changes to MREL—the minimum requirement for own funds and eligible liabilities—and by confirming our approach to Basel 3.1, implementing lower capital requirements for domestically focused banks from January 2027 while preserving flexibility in our approach for international banks to ensure that the UK remains competitive and aligned with international standards.
We are also committing to meaningful reform to ringfencing, while maintaining the aspects of the regime that support financial stability and protect customer deposits. We welcome the Financial Policy Committee’s review of the overall bank capital levels needed for UK financial stability and its decision to ease its loan-to-income restriction on mortgage lending. I am delighted that this decision will enable up to 36,000 additional first-time buyers to access mortgages in the first year.
Thirdly, we are making the UK the location of choice for fintechs to start up, scale and list, and we want the wider financial services sector to embrace innovation too. The FCA and the Prudential Regulation Authority will launch a scale-up unit to ensure that fast-growing businesses have the support they need to grow. The regulators will also introduce a new streamlined authorisation regime that will enable innovative firms to start operating while they await full approval. We are modernising and future-proofing the regulatory framework for payments and e-money, including stablecoin, and we are establishing a new model to deliver next-generation retail payments infrastructure.
Fourthly, we are seizing opportunities in key areas of UK leadership, from speciality insurance and asset management to sustainable finance. Our insurance sector has been world-leading for centuries, and we are committed to staying at the front of the pack by creating a new captive insurance framework and holding an industry showcase event later this year to sell the sector globally. We are also future-proofing the regulatory regime for our asset management sector, which is the second largest in the world, and we will publish draft legislation on that early next year.
The UK is already a leading global hub for sustainable finance. We have set out plans for a stable regulatory framework, and we are giving industry clarity by deciding not to pursue a green taxonomy and by focusing instead on ambitious policies that support investors to invest in the transition. I look forward to continuing to work with Lord Alok Sharma and the Transition Finance Council, which he chairs, to make the UK the leading international hub for raising transition finance.
Fifthly, we want to go further in building a new retail investment culture and boosting our capital markets’ competitiveness. We have taken great strides to reform our pensions system, led by the Parliamentary Secretary to the Treasury, my hon. Friend the Member for Swansea West (Torsten Bell), so that people can have better savings in retirement. We want savers to get the best returns on their savings. For too many their money is not working hard enough, and for too long advice on investments has been the preserve of only the wealthiest in society. To address this, the Chancellor has announced the biggest reform of the financial advice and guidance landscape in more than a decade and the introduction of targeted support in time for the new tax year. The Chancellor and I welcome the steps being taken by industry to help consumers engage with investing. I particularly thank Chris Cummings of the Investment Association for the work he is leading on that.
We are also considering reforming the individual savings account system to ensure better outcomes for both savers and the UK economy. We are allowing long-term asset funds to be held in stocks and shares ISAs next year. This will allow more individuals to invest in assets that will support the UK’s success while seeing better returns on their savings. To ensure that our capital markets support British business, we are announcing a new listings taskforce with the Office for Investment to attract world-leading businesses towards initial public offering in the UK. We are publishing a wholesale financial markets digital strategy to harness innovation as well as our ambitious design for the digital gilt instrument pilot.
Finally, we are taking steps to enhance the UK’s leadership in financial services, ensuring that the UK remains the most open and connected financial centre in the world. We will launch a concierge service—the Office for Investment: Financial Services—to attract international financial services firms to invest in the UK and grow their business. We are further facilitating cross-border activity with the publication of guidance on our overseas recognition regimes and a memorandum of understanding with UK regulators, a copy of which I will place in the Library in both Houses.
Through these steps, the Government have placed financial services at the heart of our growth mission. Our 10-year strategy is ambitious, includes the most far-reaching reforms to financial services for a decade, and will unleash the fantastic potential of our world-leading financial services sector. We are backing British businesses, unlocking home ownership for tens of thousands of people across the country, supporting savers to get better returns, and investing in our shared future. I commend this statement to the House.
Mark Garnier (Wyre Forest) (Con)
I am very grateful to the Minister for advance sight of her statement. There is much in these Leeds reforms—many of which were formerly known as the Edinburgh reforms—that can be welcomed, and some of the details were laid out by the Chancellor in her Mansion House speech last night.
The Conservatives will always support reforms to our financial sector that ensure that the City of London remains a global powerhouse, but the Chancellor’s rhetoric last night about growth and stability obscures the truth of this Government’s record of delivery. Inflation is now at 3.6%—the highest in the G7—and growth has all but stalled. Despite yesterday’s fanfare for reform, the reality is that having run short on other ideas, the Government are now forced to turn once again to the City of London for inspiration—a last throw of the dice, hoping that it will provide an engine for the growth that their policies are stifling.
Last night the Chancellor described her Government as a “beacon of stability”, but let us not forget the actual legacy that was handed over to her. We enjoyed near record levels of employment. Unemployment was at historic lows, and inflation was under control. That is the stable foundation on which this Government were handed the keys, yet they now preside over instability. The Office for Budget Responsibility, the OECD and the Bank of England have all sounded the alarm that our growth prospects have collapsed. The Government claim to be cutting red tape for industry, but let us remember that their plan to make work pay would in fact burden employers with over 70 new regulations, reminiscent of the 1970s.
The Chancellor’s talk of unleashing the power of the City comes even as her party threatens to smother businesses in paperwork and expense. When it comes to proposals for financial services, the Conservatives welcome much that gives the sector confidence and clarity, but warm words must be matched by careful delivery. On reforms to the Financial Ombudsman Service, there is agreement that it should return to its impartial roots as a fast and effective dispute resolution service, not a quasi-regulator, but so many business and consumers are awaiting clarity, so can the Minister confirm whether these changes will limit the FOS’s power to make backdated legal determinations, and what impact will the reforms have on ongoing legal proceedings, such as the crucial car finance case before the Supreme Court?
Streamlining the approach of the FCA and the PRA may remove unnecessary friction, but we must ensure that this does not become window dressing while critical challenges remain. The FCA and the PRA must accept that stability in the markets is not the only way to deliver growth. Both their objectives must be aligned and equally ambitious in their drive for reform.
The Chancellor trumpeted reforms to ISAs, including new rules for long-term asset funds, which we welcome if that broadens access to higher-return assets for ordinary savers, but there is still no certainty on the future of the cash ISA. Without clarity, the Government risk undermining their own ambition to promote home ownership and inclusive investment, which again was trumpeted by the Chancellor during her Mansion House speech last night.
On capital investment policy, we welcome MREL reform, which was a change I championed during the recent passage of the Bank Resolution (Recapitalisation) Act 2025. This will help challenger banks to compete and expand lending.
We cautiously welcome the Government’s review of ringfencing rules, but will they confirm that all options are being considered, including alignment with the US and the EU, which, as the Minister knows, never implemented ringfencing rules?
More broadly, the history of the last Labour Government reminds us that good intentions are never enough. The Financial Services and Markets Act 2000, introduced by the then Chancellor, along with the tripartite system, was well conceived but badly implemented, contributing to the events of the 2008 financial crisis. It falls to this Government now to demonstrate that they will not repeat those mistakes.
Finally, at Mansion House last night the Chancellor missed a crucial opportunity to be straight with the British people and rule out further tax rises. Will the Minister guarantee that working families and businesses will not face more tax increases? Will she rule out any further surprise raids on the British taxpayer?
Britain’s financial services sector has always thrived when reforms are clear. The test of these reforms will come when the full details emerge, but ultimately growth will come only when the Chancellor realises that hard-working people and businesses across the country are the real engines of economic growth.
Emma Reynolds
Well, half of that was all right, I suppose. I do want to start constructively and thank the hon. Member for his welcome for some of the reforms. I will answer some of his specific questions before I come to the wider points.
On the Financial Ombudsman Service, we have set out in great detail what we will do. As he will be aware, some of the changes require primary legislation. We are proposing an absolute time limit of 10 years, but with discretion for the FCA to give longer periods in the case of products with a longer lifetime. I cannot comment on the ongoing car finance issue, which as he knows is working its way through the courts.
The hon. Member talked about the regulators’ different objectives. We have been very clear with the regulators that we expect them to embed their secondary objective to facilitate economic growth and competitiveness while obviously complying with their other objectives. He will see that in the remit letters that the Chancellor sent to the regulators at the last Mansion House speech last November.
On ISAs, I welcome what the hon. Member said about long-term asset funds, which we think will unlock great opportunities for savers. We continue to consider reform to ISAs. We would like to ensure that more people have the opportunity and confidence to invest, which is why we hope that targeted support, which will be introduced by firms by the end of this tax year—we have worked at pace on this—will really shift the dial and give people that confidence to invest.
I think the hon. Member said he was in favour of what we are doing on MREL, and I know that he agreed with the Bank Resolution (Recapitalisation) Act, which we put through the House and is coming into force today. I thank him for his support on that.
On ringfencing, we have detailed which areas we will look at. I am happy to write to him further on that, but one area, for example, is sharing resources across the ringfenced and non-ringfenced parts of banks. We want to ensure that we strike the right balance between growth and stability.
I turn to the hon. Member’s points about economic stability. I will take no lessons from the Conservatives—I hate to say it. We had inflation at 11%, people paying extremely high mortgage rates and debt rising year after year. The only thing that was stable under their Government was wages, which were flatlining.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I thank the Minister for the statement and look forward to the Treasury Committee talking to—or interrogating—her, and indeed the Chancellor, about the detail as it emerges. Since the election, one of the things the Government have been talking about, leading on from the previous Government, is the secondary remit letters to the regulators about encouraging growth as a secondary objective. Can she tell us when the Government will be clear about their own appetite for risk in the sector so that both firms and the regulators know how far the Government will be prepared to go? She and I know from our experience in this place that if too many consumers suffer under any changes, this place is where that will be raised, and then there is a tendency for the Government to turn around and say, “Well, you went too far.” For the sake of the sector, the regulator and our constituents, will she tell us—or will she tell us when she can—where the Government’s line on risk will fall?
Emma Reynolds
I thank my hon. Friend for that thoughtful question. I am happy to talk to the Committee about that in more detail. What I will say is that the Leeds reforms regulate for growth instead of seeking to eliminate risk from the system altogether. We know that in order to get greater returns, there is a need to take informed risk. The reforms will enable firms and consumers to take informed risks. But we will always support the regulators and legislate in a way that protects consumers from bad practices and bad actors.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call the Liberal Democrat spokesperson.
Daisy Cooper (St Albans) (LD)
There is much to welcome in the statement. I hope that it sends a strong signal to the fintech sector and sustainable finance that UK plc is open for business, but it is important to get the balance right between growth and risk.
We Liberal Democrats welcome the announcement of a scale-up unit. Will it have a mandate to look at liquidity and valuation, which are two of the challenges that prevent British start-ups from scaling up here at home?
On the retail investment culture, we welcome plans to reform financial advice and guidance and to launch a national advertising campaign. We believe that we should trust people to weigh up the risk and rewards of investment, if they are properly informed. But we also know that money habits are formed at a young age. Will the Minister advise whether the Government have any plans to introduce financial literacy as part of the school curriculum—indeed, from cradle to grave? Will the Government confirm when they will bring forward any reforms at all to cash ISAs? The uncertainty around the issue is undermining their own goal of incentivising more investment.
On mortgages, many renters have been crowded out of getting on to the housing ladder, so this announcement will sound exciting to them, but what reassurance can the Minister provide that this additional lending will not result in boom and bust? With inflation jumping today, how many of those up to 36,000 first-time homeowners will realistically get on the housing ladder in the next year?
We welcome the streamlining of checks on senior managers, but will the Government confirm that those changes will not expose financial firms and their customers to greater risk? If the Government want a step change in economic growth, this is a start, but they must go further and faster by having a better trading deal with the EU.
Emma Reynolds
We have a very good deal with the EU, which we agreed in May this year and will continue to build on. I was pleased to have invited the European Commissioner for Financial Services, Maria Luís Albuquerque, who was at the dinner last night at the Mansion House. I will try to get through all the hon. Member’s questions.
On liquidity and valuations, I point out that we have some of the deepest capital markets in the world. Last year, the amount of equity capital raised in London was larger than in the next three European exchanges put together. However, I recognise the issues she talked about.
On the advertising campaign, Chris Cummings of the Investment Association is leading the secretariat. He will also be looking at risk warnings. That is not to say there should not be risk warnings, but that there should be a balance in risk warnings to ensure that warnings are also informing people of the benefits of investing over the long term.
The hon. Member rightly talked about the importance of financial education and capability. We will put forward suggestions on that in the financial inclusion strategy, which we will publish in the autumn. However, as this is a cross-Government effort, I reassure her that I am speaking and meeting actively with the Minister for School Standards so that we are aligned with the Department for Education’s curriculum review.
The hon. Member asked about mortgages. May I reassure her? Obviously, we have had extensive regulations since the global financial crash and we are not going back to the bad old days when there were no verification checks on affordability and 125% mortgages. But the system we have got means that people on modest incomes are unable to get on the housing ladder. Nationwide has said that because of the Bank of England’s recent decision, it will be able to help an additional 10,000 people a year with its helping hand mortgage to fulfil their dream of home ownership. I think that is a great step forward and will mean that people across the country, like many in this House, can benefit from the security of home ownership, and particularly those on modest incomes and in generations that are being deprived of such opportunities.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call John Grady, a member of the Treasury Committee.
Emma Reynolds
I could not agree more with my hon. Friend. We are intent on building the 1.5 million homes that we promised at the election. I remind the chuntering hon. Gentlemen on the Opposition Front Bench that even before the Planning and Infrastructure Bill, the OBR scored the first stage of the planning reforms as the largest increase in GDP by the end of the scorecard of any non-fiscal lever in its history.
Dame Harriett Baldwin (West Worcestershire) (Con)
The Economic Secretary may want to have a look at Hansard and make sure she got the right soundbite on the record about the 10 months of wage growth and the comparison. My understanding is that wage growth was indeed slow after the financial crash. We tried to compensate for that by increasing personal allowances, but wage growth has bounced back since the pandemic. She may want to correct the record if that is the case.
On the reforms, which have migrated from Edinburgh down to Leeds, the Treasury Committee will scrutinise the implementation. Is it her vision that they should be implemented over the next year, before the next Mansion House speech, rather than on the 10-year basis of the strategy as she outlined?
Emma Reynolds
I refer the hon. Lady to page 63 of the strategy, which is very useful. It sets out an ambitious timeline for implementing the reforms that the Chancellor set out at the Mansion House last night and in Leeds yesterday morning, and shows her that we have already taken action to implement some of the decisions we took in November last year, such as introducing the private intermittent securities and capital exchange system. PISCES is a new private intermittent securities market that is open for business, and for which we legislated in May. That demonstrates how we are working at pace. Other things will take a little longer, and her extensive experience in this place and in government means that she will understand that some of those things require primary legislation. However, she will see through the two-page summary at the back of the strategy how we plan to implement the reforms at pace to unleash the potential of the financial services sector.
Preet Kaur Gill (Birmingham Edgbaston) (Lab/Co-op)
Too many of my constituents are trapped in the rental market, paying off someone else’s mortgage instead of saving for a home of their own. Average rents in Birmingham have now passed £1,000 a month for the first time, driven sharply upwards since the mini-Budget. I strongly welcome the Chancellor’s Leeds reforms, which will help 36,000 first-time buyers on to the housing ladder. Will the Minister say more about what the Government are doing to boost housing supply so that home ownership can become a reality for more people in cities such as mine?
Emma Reynolds
As was said previously, the package that we announced yesterday, as well as the announcement by the Bank of England and the FCA’s discussion paper, go to the heart of making sure that we have the right balance between ensuring people have affordable mortgage products and ensuring that those products are accessible to more people up and down the country. As she will know—I am sure that she is referring to this—the Planning and Infrastructure Bill and some of the other planning reforms that we set forward are some of the most ambitious for a generation. They will unlock the potential for those homes to be built so that we can get more and more first-time buyers on to the housing ladder.
John Glen (Salisbury) (Con)
I warmly welcome the Leeds reforms; they build on many of the things that were done under the previous Administration and I acknowledge the consumer-facing changes on mortgages and ISAs and the aspiration to get more people investing. Those are positive things.
I will just say two things. First, on the listing review, we did one about four years ago and it is all just about implemented. I urge the Minister to look at culture and fiscal issues as much as at regulatory issues. Secondly, on the PRA and the scale of ambition on that side of the regulatory framework, in conversations with senior leaders at Mansion House last night, it was felt that the FCA’s level of ambition is high but that there must be wariness about a constant shifting of the goalposts and a lack of real change, particularly on the internal rating base and how banks can get their regulatory capital treated differently more quickly. It is taking too long and that needs to change urgently.
Emma Reynolds
I reassure the right hon. Gentleman that we have not announced a listing review; we have announced a listings taskforce—[Interruption.] It is different, if hon. Members will let me explain. It is a joint piece of work between the Office for Investment, His Majesty’s Treasury and other Government Departments to make sure that we attract the best and brightest companies to list here in the UK. He is correct, though: many reforms were undertaken by his Government on listings, taking forward the Jonathan Hill and Mark Austin reviews, and we welcomed and supported those.
The right hon. Gentleman will have seen that yesterday the FCA published its final prospectus rules. Of course, we have to get the regulatory side of the equation right, but he is correct that there are other factors at play, which we are looking at. On the FCA and the PRA, all I will say to reassure him is that, as he knows, I hold the relationship with both those regulators as the Economic Secretary. We will continue to push them to be ambitious in supporting our growth agenda.
Clive Lewis (Norwich South) (Lab)
I just want to confirm that my name is Clive, not Cassandra, Lewis—and yet, I feel like the Trojan princess, forever warning of things that will go wrong but being ignored. Will the Minister provide reassurance, given that the Bank of England has repeatedly warned that loosening mortgage lending standards and allowing more people to borrow larger sums relative to their income can push up house prices and increase financial instability? I appreciate that these are not the same deregulations that took place before the 2008 crash, but given the state of the global economy, surely she will understand that many of us on the Government Benches are cautious about deregulating at a time of such instability. I understand that we want to get more people on the housing ladder and to increase growth, but there is a risk. I wonder whether that risk has been duly appreciated.
Emma Reynolds
I reassure my hon. Friend that our agenda is to streamline regulation and make it more proportionate, and that there remain firm guardrails and affordability checks for mortgage providers. At the moment, the level of repossessions is very low and banks and other mortgage providers do all they can to avoid repossessing people’s homes. As I said before, we will not go back to the bad old days of 125% mortgages and no verification of affordability. This is about rebalancing the system to make sure that more people can afford to buy their own home, but it is also about striking the right balance between ensuring that we take more informed risk while ensuring financial stability. He is right to ask the question.
Bobby Dean (Carshalton and Wallington) (LD)
The Chancellor announced quite a list of reforms yesterday. I note that many were on the shopping list of industry, so the Committee will examine them closely to make sure they also work for the consumer and for the long-term stability of the economy. One change in particular, on ringfencing, will worry those with strong memories of the 2008 financial crash. The shadow Economic Secretary indicated that perhaps we need to look at removing the ringfencing entirely. That would be a big step backwards. These reforms were driven by the Liberal Democrat Vince Cable, and the idea was to separate everyday customer deposits from the risks of investment banking. Will the Minister give us assurances that the hard-earned savings of families across the country will not be put at risk by the speculative activity of people playing with other people’s money?
Emma Reynolds
It is always a great pleasure to come and give evidence to the hon. Gentleman’s Committee. I reassure him that the Government are upholding the ringfencing regime. We must strike the right balance between protecting financial stability and safeguarding depositors. Equally, we think that there are some flexibilities that should be explored within the ringfencing regime that will allow further growth and further capital to be deployed in the real economy.
Callum Anderson (Buckingham and Bletchley) (Lab)
I thank the Minister for her statement and commend the work that she and the Chancellor have done on the wider Leeds reforms. I want to pick up on the forthcoming campaign to promote retail investment, which has the potential to reshape public understanding of risk, reward and financial planning. The problem with many similar campaigns is that they have failed to reach the people who most need them, so can the Minister provide a bit more detail about how the Treasury intends to work with both the financial services industry and civil society to ensure that the campaign delivers measurable benefits and improvements in financial capability across the whole population?
Emma Reynolds
My hon. Friend is a great campaigner on this issue, and he is absolutely right: this is not an easy nut to crack. We will work closely with the industry-led campaign. We need to give people who want to invest and save for the longer term the confidence to consider whether they can secure better returns through investing, rather than just holding large amounts—if they have those large amounts—of money in cash.
Sir Julian Lewis (New Forest East) (Con)
Whenever I listen to the excellent Times Radio and other commercial broadcasters, I am always favourably impressed by the fact that at the end of every positive advertisement for a financial product, three words are said: “capital at risk”. Can the Minister assure the House that in the review of risk warnings that will be undertaken, that fundamental red flag, at the end of people pushing us to invest our money in some grand and profitable enterprise, will not be left out?
Emma Reynolds
I can reassure the right hon. Gentleman that we are not suggesting getting rid of risk warnings. I think that is what he was asking me most directly. One of the investment platforms did some research into the wording of risk warnings, and he will probably know that there is quite a gender gap. If we look at the figures from the Financial Conduct Authority’s financial lives survey, we see that more men have the confidence to invest than women, for example. There are other demographic factors, too. We want to give people the option and the confidence to invest, but of course there will always be risk warnings. However, there is also a risk if someone holds all their savings in cash over the long term, due to inflation.
Dame Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)
The Science, Innovation and Technology Committee’s inquiry into regional innovation and growth has repeatedly heard that access to capital outside London and the south-east is the biggest barrier to start-ups scaling up and delivering growth and jobs. The reforms that the Minister has set out to reintroduce informed risk taking, which I am sure will be prudently implemented, should realise capital to catalyse growth. Can she say a little about how this will deliver more capital investment into the productive economy of the north-east?
Emma Reynolds
I might not be able to give my hon. Friend the specifics about her region right now, but I will say that my colleague the Pensions Minister, my hon. Friend the Member for Swansea West (Torsten Bell), has secured an ambitious industry-led accord—the Mansion House accord—that commits 17 pension funds, representing 90% of active defined-contribution savers, to invest 10% of their funds in private assets, half of which are to be in the UK. They will be on the hunt for good firms that could be successful in the future and that need capital to start up and scale up. We are also working closely with the British Business Bank on these issues, as my hon. Friend will know.
Rupert Lowe (Great Yarmouth) (Ind)
After 20 years in the City of London, over the last year I have had to endure a stream of what I would call financially illiterate verbal baby food. Today I hear the Chancellor talk about regulating for growth. You do not regulate for growth; you deregulate for growth. The genesis of our problems are the Financial Conduct Authority and the Prudential Regulation Authority, which sprung from the Financial Services and Markets Act 2000. This was a Labour Act that created the Financial Services Authority, which turned into the PRA and the FCA. Those two organisations have shut the City of London down. We are now a shadow of our former selves in terms of raising global capital, and I heard you say the opposite—
Madam Deputy Speaker
Order. You meant, “as the Minister hollows out”, not me. Minister—a swift response.
Emma Reynolds
Well, what do I say to that? I think there is, with the exception of the hon. Member, cross-party support for the twin peaks financial services regulation that we have. Of course, we need proportionate regulation to ensure that there are protections in place for consumers. He seems to be suggesting that we get rid of the regulators altogether, which I think most Members of this House would be opposed to. I have heard of the concept of caveat emptor, and I am suitably patronised by him.
Andrew Pakes (Peterborough) (Lab)
One of the first visits I undertook after the election was to my local branch of Nationwide, which for generations has been providing good financial advice and advice to first-time buyers in my seat, as have many other mutuals. In one of the previous periods of financial deregulation by the Conservative party, we saw a movement that led to the demutualisation of the building society movement, creating uncertainty for thousands upon thousands of potential homeowners and people looking for financial support. Can the Minister reassure the House today that the co-operative and mutual sector will remain absolutely essential to the everyday financial services that working people need?
Emma Reynolds
Absolutely. This is something that the Chancellor and I—and indeed the Business Secretary and the Business Minister—are passionate about, and we are making sure that we deliver on our manifesto commitment to double the size of the sector. We have asked the financial services regulators to report by the end of the year on what more they can do to support the growth of the sector. We are supporting the industry-led Mutual and Co-operatives Business Council, which is chaired by the chair of Nationwide, Kevin Parry, and we have recently concluded a call for evidence on the credit union common bond, which is another form of mutual. We will be setting out our response on that issue in due course.
Dr Kieran Mullan (Bexhill and Battle) (Con)
Given the news on inflation today, along with the ongoing increases in unemployment and the downgrading of growth forecasts, it is quite right that this Government are looking for other ways to stimulate growth. One of the reasons being put forward for these reforms is the poor rates of return on ordinary bank accounts and savings accounts, but what my constituents want are just decent rates of return on ordinary savings accounts. Martin Lewis and others have pointed out that that market remains stubbornly resistant to passing on interest rate savings and offering competitive rates. I understand why the Government want to encourage people to invest in other types of savings, but what plans do they have to tackle the poor rates of return that people are getting from their ordinary savings and bank accounts?
Emma Reynolds
I am engaging with Martin Lewis, who is a doughty champion of consumers across the country. I say to the hon. Member that, due to the consumer duty, banks and other providers have a duty to ensure that they deliver the best outcomes for their consumers, but I note what he has said.
James Naish (Rushcliffe) (Lab)
I thank the Minister for her statement, and I note especially the new concierge service within the Office for Investment that will both court international development and act as a one-stop shop to promote the UK. What regional dimension might be considered within that for places such as the east midlands—the region for which I am an MP—where there is significant potential for jobs and investment?
Emma Reynolds
I can reassure my hon. Friend that the concierge service will be working across the country. This is about ensuring that the UK has a single shop window for international firms looking to either set up or invest further in the UK. As we set out in the Leeds reforms, the benefits of that investment and of unleashing the potential of the financial services industry should be felt across the country, in the east midlands and beyond.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
The grim truth is that people’s living standards in Wales have still not recovered from the 2008 crash, which resulted in a Labour Prime Minister bailing out the banks and the Tory austerity experiment, so why are the Government risking a repeat of the mistakes of the past when all the evidence shows—this is important—that growth will not trickle down from poorly regulated bankers?
Emma Reynolds
I gently say to the right hon. Member that we are not talking about going back to 2007—we have come a long way since then. Of course, after the crash, financial services regulations and a new system of financial services regulation in terms of the twin peaks of the FCA and the PRA—conduct and prudential—were introduced. We are not talking about going back to then. We are not bringing back 125% mortgages, as I have repeatedly said. We are simply saying that we need to reassess where we are and that the pendulum has swung too far the other way. We need to rebalance the system so that both consumers and firms can take informed risks to drive growth across the country. That will make people better off and give them the opportunity to secure better returns on their savings. I encourage her to look at the detail of this. We are looking to rebalance the system, not go back to where we were.
Samantha Niblett (South Derbyshire) (Lab)
As the co-chair of the all-party parliamentary group on financial technology and a mother to a 17-year-old daughter who turns 18 this year and is considering how she can best save for and secure her future, I welcome this news with real joy as we try to bring more wealth to more people. I suspect this joy is shared by Ayesha Ofori, the founder of Propelle, a platform that encourages women into retail investing, which can start with some very small sums indeed; Nina Mohanty, who founded Bloom Money, which supports people from ethnic minority communities to build generational wealth through group savings and budgets; and Georgia Stewart, founder of Tumelo, which has a mission to bring shareholder democracy to the digital age, giving everybody a seat at the table, whether that is an institution managing billions or everyday savers. Does the Minister agree that this Government’s approach of encouraging investing should in turn give confidence to those who are considering investing in these female-founded fintech companies, so they can scale and reach more people to help them become wealthier and more secure?
Emma Reynolds
I could not agree more with my hon. Friend, who is a fantastic champion of fintech. We already have a thriving fintech sector, which is the second largest in the world—second only to the US—and we are determined to ensure that those companies access the capital and the authorisations and licences that they need from the regulators. Obviously, that is a decision for the regulators, but it should be done at pace so that these companies can get off the ground and start to scale, providing the opportunities for retail investment and, critically, providing innovative products for consumers across the country.
Chris Vince (Harlow) (Lab/Co-op)
I thank the Minister for her statement. The No. 1 thing that my constituents raise with me is the soaring cost of the private rented sector. Does she agree that these reforms will help first-time buyers in Harlow get on the housing ladder? Working alongside the £39 billion of investment in social housing, that can only be good for my residents.
Emma Reynolds
I could not agree more with my hon. Friend. We want to ensure that the dream of home ownership is expanded across the country, including to his constituency of Harlow. Because of the reforms we are taking forward, and there will be more to come, the estimate is that 36,000 new first-time buyers will be able to buy their homes in the first year of this reform being in place.
Mr Gregory Campbell (East Londonderry) (DUP)
In her statement, the Economic Secretary was right when she alluded to the FTSE being at a record high yesterday, though many international indices, whether in the US, the far east or Europe, are also at record highs since the April low. She also alluded to the cash ISA problem. What will be done to instil confidence among the wider public who hold money and cash assets but are reluctant and fearful of investing, even in lower-risk collective investments that, over the longer term, would produce much better returns than cash ISAs, which are subject, as she rightly says, to inflation?
Emma Reynolds
I thank the hon. Member for his thoughtful question. We are doing a number of things. First, we are working at pace with the FCA to ensure that targeted support is in place by the end of the tax year and in time for the new ISA season in April next year. We are looking at the risk warnings and at the industry-led campaign on advertising the opportunities of investing. We are doing all that we can. It is good that hon. Members on different sides of the House are supporting us.
Obviously, different people will be at different stages in their journey through life. People who are retired may not want to invest in the stock market. I can understand that, from their perspective, they need more readily available cash, but if people who are younger or middle aged—I do not know where I fall in those categories—[Interruption.] Thank you. If people can even put a small amount away, they can invest in their future. It concerned me recently when a report suggested that many people did not know that their pensions were invested in the stock market and that that is how they get better returns in their retirement. We need to run a huge campaign with the private sector to educate people about the opportunities and to give people the confidence to invest. At the end of the day, it will obviously be down to people about how they choose to invest.
Josh Fenton-Glynn (Calder Valley) (Lab)
I welcome the Leeds reforms today. Like many of the best things, they started in West Yorkshire—[Interruption.] I see Conservative Members are still chuntering from a sedentary position. The reforms underline the important point that financial services are not just the preserve of the City of London, but of communities around the country, including many of my Calder Valley constituents who work for Lloyds Bank. Does the Minister agree that one of the most important things we can do to grow the economy is to focus on things that this country does well, including our financial services?
Emma Reynolds
That is absolutely right. We were at Lloyds Banking Group yesterday in Leeds, and Lloyds employs thousands of people in Leeds and the wider region. There are some great opportunities in not only the establishment firms, but, as my hon. Friend the Member for Mid Derbyshire (Jonathan Davies) said, some of these new firms outside of London that are growing and providing innovative products. I was recently in Scotland talking to a group of fintechs about the support they are getting to work closely with some of the banks in Scotland to drive further investment into fintechs. That collaboration between the more established players and new players is positive to see.
Chris Bloore (Redditch) (Lab)
I commend the Minister for her statement. Listening to my neighbour on the Front Bench, the hon. Member for Wyre Forest (Mark Garnier), as charismatic as he is, he did not convince me that 11% inflation, a £200 increase in my mortgage payments and a revolving door of Prime Ministers and Chancellors is a record to be particularly proud of.
My question is about the 29 million people in this country who have deposits in low-yielding current accounts, while people who invested in the stock exchange over the last 10 years saw yields of 9%. How do we convince and educate those customers to give them the confidence to be able to reveal much better outcomes from their investments?
Emma Reynolds
That is similar to what the hon. Member for East Londonderry (Mr Campbell) asked. There has been lots of different research, but AJ Bell recently found that if people had put £100 a year into ISAs for the past 25 years, they would be better off if they invested in a stocks and shares ISA than a cash ISA, so it is perhaps about showing people that sort of evidence. Obviously, the stock market ebbs and flows and can fluctuate, but if people are saving for the longer term, they should certainly consider investing. The industry-led campaign will look at how we can advertise the benefits. Of course, there still will be risk warnings, but we need to ensure that we get the balance right between telling people that there are risks and telling them that there are great benefits of investing, too.
Oral Answers to Questions
Emma Reynolds Excerpts(1 month ago)
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Max Wilkinson (Cheltenham) (LD)
The Economic Secretary to the Treasury (Emma Reynolds)
Kick-starting economic growth in every region and nation is the No. 1 mission of our Government. As part of our new infrastructure strategy, we have allocated £725 billion to building and rebuilding bridges, roads, schools and hospitals across the country. Also, the £2.3 billion for local government transport will benefit places such as Eastleigh and Gloucestershire. In Wales, key rail routes will benefit from £445 million of investment.
Liz Jarvis
Small to medium-sized businesses are the backbone of the local economy in Eastleigh, creating jobs and driving innovation. However, local businesses, including the precision manufacturing firm G. W. Martin, have told me that the increased costs as a result of the changes to employer national insurance contributions have left them with no choice but to pass those costs on to customers, making UK manufacturing less competitive globally. What concrete steps will the Government take to help businesses in Eastleigh?
Emma Reynolds
Half of small businesses will not be affected by the employer national insurance increase, as the hon. Member will know. We will also be setting out a small business strategy in the Government’s plan to support those businesses across the UK later this year.
Catherine Fookes
As the Minister knows, I am delighted with the spending review’s investment in Welsh rail of £445 million. It shows the power of two Labour Governments working together and corrects years of underfunding from the Tories. This investment in Welsh communities and Welsh business is extremely welcome and it will be a brilliant driver of our Government’s mission for economic growth. Will she outline what steps she is taking with other Departments to ensure that rural economies and market towns such as Monmouth, Abergavenny, Caldicot and Chepstow, and small businesses across Monmouthshire, can be helped to thrive and contribute to that growth mission?
Emma Reynolds
I welcome what my hon. Friend said. The Government are supporting the rural economy with over £2.7 billion a year for sustainable farming and nature recovery. We are investing £1.9 billion to improve digital connectivity, which will be important to the small businesses and others that she mentioned. As I said to the previous question, we will set out a small business strategy later this year.
Cameron Thomas
North Gloucestershire is ready to jump-start economic growth, with its existing advanced engineering and defence industries ready to drive the UK toward economic and defence objectives. Babcock, GE Aerospace, Moog and Safran are already developing world-leading technologies, and the Garden Town project includes a further 100 hectares of employment area. Will the Minister join me in Gloucestershire so we can demonstrate this expertise and the potential for growth on the ground?
Emma Reynolds
Defence companies are an incredibly important part of the economy, and the hon. Member will know that we are increasing defence spending to up to 2.6% by the end of this Parliament. It has only ever reached those levels before under a Labour Government.
Max Wilkinson
The industrial strategy was right to highlight the potential for the National Cyber Innovation Centre in my constituency. If we are going to deliver that, we will need to make sure that junction 10 of the M5 is also done to enable the traffic to get around that development. This is a development of national importance. The strategic sites accelerator has also been cited by the Government. Can the Minister advise me on how areas like Liberal Democrat-run Cheltenham and Gloucestershire can access that fund?
Emma Reynolds
I will ensure that the hon. Member gets a meeting with the relevant Transport Minister, but I hope that he is as excited as I am about the £1 billion that we are investing in the state-of-the-art Golden Valley development, which will create 12,000 high-skilled jobs and 3,700 new homes, and is close to the GCHQ headquarters in Cheltenham. I am sure that that is something he will welcome.
Jo White (Bassetlaw) (Lab)
Does the Minister agree that the new Green Book with its proposals on place-based analysis will mean that left-behind places like mine will start to get the infrastructure investment that they so desperately need?
Emma Reynolds
We pledged to reform the Green Book, and we are doing precisely that, alongside the spending review. We recognise the strategic importance of investment in every part of the country. We want to realise the growth potential of places like the one my hon. Friend represents—she is a doughty champion for her constituency.
Paul Waugh (Rochdale) (Lab/Co-op)
After years of unfunded and undelivered promises from the Conservatives on levelling up, places like Rochdale are finally getting the fairer share of money that they really deserve. The Minister expanded a little on the Green Book, but could she outline how its place-based approach will help places like mine and advanced manufacturing in the Atom Valley?
Emma Reynolds
As my hon. Friend will know, we launched funding of £15.6 billion for transport for city regions in his constituency. I am pleased that this Government recognise the potential of places like the one he represents. We are going to unlock that regional growth across the north and in other parts of the country.
Mr Speaker
I will just make the point again that we are a long way from Eastleigh; I do not understand how the questions are grouped in this way. Other people listed on the Order Paper are being left behind and are missing out as a result.
Rachel Gilmour (Tiverton and Minehead) (LD)
The Economic Secretary to the Treasury (Emma Reynolds)
The Government have committed £2.7 billion per year to support sustainable farming and nature recovery, supporting the rural economy. We have also confirmed investment of £1.9 billion over four years into digital connectivity as well as £2.3 billion of local government transport funding for smaller cities, towns and rural areas.
Rachel Gilmour
While I welcome the Government’s rural growth plans, I am concerned about the persistent poverty in many rural areas. The additional costs of living in these communities—known as the rural premium—exacerbate hardship. What specific steps will the Chancellor take to support those in, or near, poverty in rural areas, and will the Treasury commit to revising the indices of multiple deprivation to more accurately reflect deprivation in rural and coastal communities, such as west Somerset and mid Devon?
Emma Reynolds
The Ministry of Housing, Communities and Local Government will be coming forward with further details of funding for the 350 most deprived communities across the country, including rural areas.
Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)
As one of the most deprived regions of northern Europe, Cornwall benefited from objective 1 structural and sustained prosperity fund funding. Can the Minister confirm that, under this Government, Cornwall will not lose out on funding for economic growth and the investment that our communities deserve?
Emma Reynolds
We are supporting growth across the country, and we will publish further details of how we will do that in the coming weeks.
Jessica Toale (Bournemouth West) (Lab)
Joe Morris (Hexham) (Lab)
The Economic Secretary to the Treasury (Emma Reynolds)
We understand the importance of in-person banking, in my hon. Friend’s constituency and elsewhere, which is why we secured a commitment from the industry to roll out 350 banking hubs across the United Kingdom. I am leading the work on a financial inclusion strategy, which we will publish later in the year and which emphasises the importance of access to banking, and I am always happy to meet my hon. Friend.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
The Economic Secretary is reviewing the work of the Financial Ombudsman Service. We on the Treasury Committee recognise that there have been challenges with the service, but how will she make sure that the consumer voice is central to her review?
Emma Reynolds
I have had meetings with Which? and other consumer representatives. I reassure my hon. Friend that we are reviewing FOS. We want to make sure that it is a simple, impartial dispute resolution service that quickly and effectively deals with complainants so that consumers can get a fair deal, but that financial services firms are not subject to a quasi-regulator in the way they are at the moment.
Susan Murray (Mid Dunbartonshire) (LD)
Callum Anderson (Buckingham and Bletchley) (Lab)
As people are living longer, they face more complex financial choices. The new, simplified advice regime announced by the Government and the Financial Conduct Authority yesterday is hugely welcome and will help more people make better informed investment decisions. Will the Minister provide more detail on the steps the Government will be taking to help firms deliver better advice at scale, especially to young people and the self-employed?
Emma Reynolds
We are really excited about targeted support, because it means that firms will be able to make suggestions to consumers with similarities, so that they have the confidence to invest in the long term and can get better support—not advice—on their pensions.
John Glen (Salisbury) (Con)
Further to that answer, will the Minister confirm that one of the regulatory barriers in that area are privacy and electronic communications regulations, which prevent firms from proactively reaching out to customers to offer targeted support? As part of the review, will she ensure that that specific regulatory change is made, so that that can happen?
Emma Reynolds
I assure the right hon. Gentleman that we are looking at that. We will make sure that firms can take advantage of suggesting targeted support to their consumers so that they are better off, can make more of their money and get a better pension, too.
Sonia Kumar (Dudley) (Lab)
Some 58% of investors think it is important that stocks and shares ISAs are invested in UK companies. Currently, it is estimated that £100 billion is held in the cash ISAs of people who do not have stocks and shares ISAs. What steps is my right hon. Friend taking to encourage further investment in UK stocks and shares, and investment in UK companies?
Emma Reynolds
As we set out at the spring statement, we are looking at the balance between investments in cash and investments in stocks and shares in ISAs. We want to get that balance right. We understand the importance of a rainy day buffer in cash, but we need to give people the confidence to invest. That is a win-win: it is a win for them and a win for British companies listed on our stock exchange.
Sarah Dyke (Glastonbury and Somerton) (LD)
Jackie from Street suffers with Crohn’s disease, fibromyalgia and mental health issues. She worked for most of her life until ill health made it impossible. Under the reforms, she will lose her entitlement to personal independence payment and employment and support allowance, plunging her into poverty. Can the Chancellor give Jackie the reassurance she needs that she will not be left in poverty?
Sarah Olney (Richmond Park) (LD)
Last week, ahead of the launch of its ethnicity code, the Lending Standards Board announced it would be closing, following the withdrawal of support from major high street banks. This was going to be a groundbreaking step towards tackling the barriers that ethnic minority business owners face in accessing finance. What steps will the Government take to ensure that the ethnicity code is implemented, supported and scaled, so that its principles are embedded across the financial sector?
Emma Reynolds
I am aware of the situation. I reassure the hon. Lady that the Government are committed to ensuring that firms continue to deliver good customer outcomes, now and in the future, with proportionate regulation and oversight. I am happy to engage with her in more detail on the subject she mentions.
Access to Banking Hubs: Hertfordshire
Emma Reynolds Excerpts(1 month, 1 week ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
It is a great pleasure to serve under your excellent chairmanship, Sir Desmond. I congratulate the hon. Member for South West Hertfordshire (Mr Mohindra); this may be his first Westminster Hall debate, but I am sure it will be the first of many. Can I just say how much I enjoy the debates in Westminster Hall? We often get a bit more time to express opinions, and the Government can give a greater degree of detail than I certainly could in the Backbench Business debate on the Floor of the House a few weeks ago.
I thank all the hon. Members present, who have come from beyond Hertfordshire, if my geography is good. I know the beautiful rural areas of Shropshire extremely well because I have family there. When the hon. Member for South Shropshire (Stuart Anderson) was talking, I could not suppress a smile at his description of the beautiful hills of Shropshire, which is where I spend many of my recesses with my children. My parents live in his constituency, in the beautiful town of Ludlow. I could go on, but I had better stop there.
From Shropshire to Strangford and beyond, we have heard perspectives from different parts of the country. I have met many hon. Members who have championed their constituencies and campaigned for banking hubs. It was good to hear from the hon. Member for Broxbourne (Lewis Cocking), who is a doughty champion. We have had a number of discussions in private and in the House, as well as in written questions. I know he has real concerns, and is campaigning, particularly, for the banking hub in Cheshunt. It was good to hear from the hon. Member for Mid Dunbartonshire (Susan Murray), who stressed the importance of rural areas, which I will come back to. The hon. Member for South Shropshire also mentioned that, referring to his 700 miles of beautiful countryside. He also asked about the criteria for the Link assessment, as did other hon. Members.
It is always a pleasure to hear from the hon. Member for Strangford (Jim Shannon). He often asks difficult questions on a variety of subjects. The way in which he is able to range across different subjects in the House is really quite impressive. He talked about digital inclusion and exclusion, as did other hon. Members, and I will come back to that. I thank the hon. Member for St Albans (Daisy Cooper); I met her constituent Derek French, who is a doughty campaigner for access to cash and banking. I pay tribute to his work.
Daisy Cooper
Derek French is a constituent in my neighbouring constituency of Harpenden and Berkhamsted —I just want to put that on the record. Harpenden very proudly defends its independence from St Albans and I do not want anybody to be inadvertently offended by my trying to secure some recognition from the Minister in the House, but I thank her for her congratulations.
Emma Reynolds
I am grateful for the correction. I would not like to get in trouble with the hon. Members that represent different parts of Hertfordshire, not least our Parliamentary Private Secretary, my hon. Friend the Member for Hitchin (Alistair Strathern), who also represents a constituency there. I have better knowledge of Buckinghamshire, which is nearby, but I thank her for that correction to the record. I do not want to get in trouble with the hon. Lady’s colleague, the hon. Member for Harpenden and Berkhamsted (Victoria Collins), who was very active in our previous debate on this issue.
I thank the shadow Minister, the hon. Member for Wyre Forest (Mark Garnier), for his speech. I will come back to the points that he made in a moment. I also thank, for their interventions, my hon. Friends the Members for Hexham (Joe Morris) and for Reading Central (Matt Rodda), the right hon. Member for South Holland and The Deepings (Sir John Hayes), and the hon. Members for Keighley and Ilkley (Robbie Moore) and for Berwickshire, Roxburgh and Selkirk (John Lamont). I have met some of them separately to this debate.
I thank again the hon. Member for South West Hertfordshire—I was going to call him my hon. Friend; the debate feels very friendly. I have looked in detail at his constituency, thanks to his calling this debate, which is always a benefit of having such Westminster Hall debates, as he will attest to. I have had a look at Abbots Langley and Rickmansworth. I often go through his constituency on the way home, particularly the Rickmansworth area. They are very different parts of the constituency, from what I can see, in terms of the scale of the population and the number of shops in those areas. In Abbots Langley, I am told—he can correct me if this is not true—that there has been no community access request, as of our information. So if he does want to campaign for a banking hub there, it is open to him and his colleagues on the council he mentioned to request such a thing. Equally, I know he has an enhanced post office in Rickmansworth. Again, it is open to him or others in the community to make the application so that Link would assess the criteria.
Mr Mohindra
I thank the Minister for her summing up. In terms of Abbots Langley, she is correct that the post office has not yet put in an application. It was first establishing the criteria and trying to learn lessons from others. The postmaster is now in a position to actively pursue that, and part of my local campaign is to support that. I hope the Minister will give her blessing and potentially a letter of support, if that is within reason, to ensure that Link and others think that is practical. In terms of the Rickmansworth one, she is correct. It is an enhanced banking hub rather than a full banking hub, as the debate suggests.
Emma Reynolds
The hon. Gentleman will have to excuse me; I cannot offer letters of support. If I were to do that, there would be a number of letters that I would be writing. The Link assessment is independent and is what the previous Government set up and legislated for, in terms of access to cash. I will come on to that in a moment, if that is okay, and give him some more clarification on that.
We need to recognise that the landscape for retail banking has changed significantly in recent years, turbo-charged by the pandemic. For example, last year we had 93% of people with current accounts access their bank online or via a mobile app. That obviously does not include the nan of the hon. Member for Broxbourne, who I have heard about on numerous occasions, but there are lots of people who access their banking in that manner. There has also been a shift among older customers, with 83% of those aged over 75 now using online or mobile banking, compared with just 27% in 2017. That is a marked shift.
We know, however, that there are vulnerable groups, such as the elderly and people with disabilities, who very much appreciate and value in-person banking. Branches can act as anchors in a local community and are very important to small businesses, as several hon. Members mentioned, not least the hon. Member for South West Hertfordshire. When a high street branch closes, particularly the last branch on the high street, it can be a real blow to an area, especially where the alternatives are limited.
That is why the Government, when we were in opposition and formulating our manifesto, secured the industry’s commitment to roll out 350 banking hubs—that is in totality. I say to the hon. Member for St Albans that that is not a limit, and actually, we are quite far along that journey. We have 230 that have already been agreed, and more than 170 are open. That includes 108 that have been open since the general election, and we are not even a year into our Government. We promised 350 by the end of the Parliament, but we are running much more quickly than that. I hope that we will surpass 350 by the end of the Parliament.
Robbie Moore
I would like to put on record my thanks to the Minister for her interaction with me in my endeavours to get a banking hub in Ilkley. Could I ask the Minister about the assessment criteria that Link and Cash Access UK are using? Is it the right course to get to the point where we are relying on the final bank to close before we start looking at applications? Secondly, does the Minister not feel it is right that when we do manage to secure a banking hub, an ATM could be located on the outside of that banking hub so that people could access cash out of hours?
Emma Reynolds
The hon. Gentleman brings me to the meat of my speech, which I must move on to, as I do not have very long left. I always get lulled into a false sense of security in Westminster Hall, where I think I have quite a long time to speak. I made the position very clear on the Floor of the House a couple of weeks ago, when we had a similar debate. The hon. Gentleman will know that under the previous Government’s Financial Services and Markets Act 2023, Parliament legislated to protect reasonable access to cash. Specifically, Parliament gave the Financial Conduct Authority new powers to ensure that communities could both withdraw and deposit cash, but that governs only access to cash; it did not include access to in-person banking.
The hon. Member asked about the Link criteria, an issue that has been raised in previous debates. The Government do not have the power to amend the assessment criteria. Any decisions on changes to Link’s criteria for access to banking services are an independent matter for Link. As he will know, the set-up of banking hubs is a voluntary initiative by the banks. I visited a very good banking hub in Buckingham that has different community bankers coming in every day of the week, which works extremely well.
The hon. Member for South West Hertfordshire and others asked whether we are minded to change this situation. We continue to monitor it, and we have heard lots of concerns expressed today. I continue to meet hon. Members, and I have another session next week for those who, if they have not met with me, would like to. Currently, however, the Government are not minded to change the legislation. I am soon to meet John Howells, the chief executive of Link, and I have listened to the concerns of hon. Members, particularly those with rural constituencies, including the hon. Member for Berwickshire, Roxburgh and Selkirk. I think that Link should take into account his point about the different rules for what is rural and what is urban.
I am running very low on time, and I am conscious that the hon. Member for South West Hertfordshire should be allowed a brief wind-up. I promise to respond in writing to some of the questions asked about the Post Office in the debate.
London Coalition on Sustainable Sovereign Debt
Emma Reynolds Excerpts(1 month, 1 week ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
Today marks the launch of the London Coalition on Sustainable Sovereign Debt. The coalition, convened by the Sustainable Sovereign Debt Hub and funded by the Children’s investment Fund Foundation, will bring together private sector stakeholders and Government to find pragmatic solutions to more sustainable sovereign debt financing in developing economies. This will include progressing work on debt contract innovations for bonds and loans to promote transparency, orderly restructurings and more resilient borrowing. Jose Vinals and I will be co-chairs for the coalition. Jose, who will serve in his personal capacity, will be able to draw on his vast experience in both the public and private sectors, most recently as chairperson of Standard Chartered.
The coalition seeks to provide a more formal avenue to engage with private lenders on issues affecting both bonded and non-bonded lending, in order to develop and implement solutions that will ensure that developing economies can access steady, long-term investment from the private sector.
Recognising that the various industry bodies that represent private lenders are not mandated by their memberships to take forward many issues that arise on the global policy agenda, the London coalition seeks to bring together new collaborations among high-ambition private sector market participants to achieve its mission. It has been pleasing to see such interest from our private sector colleagues thus far.
The coalition’s main priorities include making debt contracts clearer and more transparent, improving the way loan terms respond to natural disasters, and addressing problems with group lending practices. In bringing together a wide range of private sector stakeholders, the coalition will tackle broader co-ordination challenges that often arise when restructuring non-bonded debt, with the aim of delivering better outcomes for both borrowers and lenders.
Encouraging fair and open debt restructuring, alongside more resilient borrowing practices, will enable emerging economies to make meaningful progress towards their climate and development goals. The coalition leverages the UK’s strengths in financial services, helping to reinforce its status as a global hub for development finance and supporting economic activity and investment across the country. Direct investment in emerging markets can also drive UK growth by opening new opportunities for British businesses—particularly in financial services—and strengthening trade relationships with rapidly expanding economies in an increasingly uncertain global landscape.
Tackling international sovereign debt challenges is aligned with the UK Government’s plan for change, driving global financial stability while fuelling economic growth and safeguarding national security. By supporting developing countries in managing their debts more sustainably, the UK helps unlock new opportunities for trade, innovation and investment—benefiting British businesses. This leadership not only opens doors to new markets, but helps prevent the kinds of crises that threaten peace and prosperity worldwide, reinforcing the UK’s standing as a champion of responsible finance and a trusted partner.
Looking ahead, the coalition will continue to work collaboratively to develop practical solutions and drive meaningful reform in how countries manage their debts. To achieve this, it will engage closely with a wide range of stakeholders across the official sector, the private sector and the third sector, ensuring that diverse perspectives are represented.
Through ongoing dialogue and partnership, the coalition aims to deliver tangible progress on sustainable sovereign debt financing and support the broader development and climate ambitions of emerging economies.
[HCWS728]
Public Sector Pensions: McCloud Remedy
Emma Reynolds Excerpts(1 month, 2 weeks ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
I congratulate the hon. Member for Edinburgh West (Christine Jardine) on securing this debate. I am grateful for her speech, and agree that the people we are talking about keep us safe and well, and show true dedication to public service. I absolutely understand the point that she is making.
I will talk a little bit about the background to McCloud, before talking about the progress that has been made to date and what further steps the scheme managers still need to take, as the hon. Lady outlined. The McCloud remedy is, by its nature, a complex undertaking, as I am sure she will appreciate. It applies to 20 public service pension schemes in the UK, and the scheme managers for those schemes are responsible for ensuring that the remedy is administered properly and in accordance with their statutory provisions.
This issue, as the hon. Lady said, arises out of the introduction of new pension schemes for public sector workers in 2014-15. When introducing those pension schemes, the Government at the time gave what is called a transitional protection to older workers, but as she set out, in 2018 the Court of Appeal found that those protections gave rise to unlawful discrimination on the grounds of age, race and sex. In 2019, the Government announced that they would address that discrimination through the McCloud remedy.
There are two main elements to the remedy. The ongoing difference in treatment between older and younger workers was removed by closing the older pre-2015 pension schemes and moving all active members into the new pension schemes in relation to employment after 31 March 2022. However, addressing the discrimination that occurred between 2014 and 2022 is considerably more complex, as hon. Members will appreciate, because whether individual members are better off under the older legacy schemes or newer reform schemes will depend on their individual employment histories and circumstances, and in some cases will not be certain until they retire. The remedy therefore gives a choice over legacy or reform scheme benefits, which is given at the point of retirement for active and deferred members, and is in the process of being rolled out for members who have already retired.
Delivering the remedy to more than 3 million affected scheme members is also an intensive administrative challenge. There are many different elements to it, but the most crucial is that all those affected must be provided with individualised information about their pension entitlements during the 2015 to 2022 remedy period, through what is known as a remediable service statement or RSS.
In addition, a smaller group of members, whose tax position during the remedy period may have changed, need to be provided with a remediable pension savings statement—an RPSS. Given the complexity of the McCloud remedy, schemes are also providing significant levels of guidance and online resources to help members understand the information they receive and the decision they need to make. That information is often very complex, as hon. Members know because many have been in the position of receiving it. There is also a dedicated HMRC digital service to allow members receiving an RPSS to understand their tax position. There are processes in place to allow members to pay additional tax or, as will be the case for the majority of members, to claim either a tax refund or compensation from the scheme where a refund is not possible.
Providing these statements to members, together with the other aspects of implementing the remedy, is the responsibility, as the hon. Lady will know, of pension scheme managers. For the largest public service schemes, including the NHS scheme in England and Wales, the teachers’ scheme in England and Wales, and the civil service scheme across the UK, the scheme manager is the relevant Secretary of State. The local government, police and fire schemes are administered locally, which means each responsible authority, force or brigade has its own scheme manager, who is responsible for the operation of the scheme in that area.
The devolved Administrations—this is pertinent to the concerns raised by the hon. Lady, the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Dunfermline and Dollar (Graeme Downie)—have responsibility for administering their schemes. The Scottish Government, through the Scottish Public Pensions Agency, have responsibility for the police, fire, NHS and teachers’ schemes in Scotland. The Welsh Government are responsible for the firefighters’ scheme in Wales. Pension schemes in Northern Ireland are established under a separate legal framework and are the responsibility of the Northern Ireland Government.
This means that the picture on implementing the remedy across the different schemes is complex and may be subject to particular factors that affect one scheme but not necessarily another. The remedy itself varies across the schemes, reflecting the fact that the schemes themselves are specific to each workforce and have different benefit designs. This can be seen in the differing levels of progress that schemes have so far made.
I am aware that across the police scheme in England and Wales, around 90% of the total number of RSSs have so far been issued, and I understand that the picture is similar in the police scheme in Scotland, with 97% of deferred choice and over three quarters of immediate choice RSSs already issued. Although that is not yet matched by other schemes, significant progress is being made elsewhere. For example, the civil service scheme in England and Wales has issued around 45% of immediate choice RSSs and the teachers’ scheme around 47%.
It was always anticipated that providing RSSs to members would be challenging, and that is specifically recognised in the legislation governing the remedy. In particular, the Public Service Pensions and Judicial Offices Act 2022 sets out that for the provision of RSSs, there is a deadline of 31 March 2025, or—here comes the qualification—
“such later day as the scheme manager considers reasonable in all the circumstances in the case of a particular member or a particular class of member”.
Given that I was asked about delays, I think it is worth reflecting that hon. Members have raised concerns about their constituents who are experiencing delays in receiving the remedy. I am standing in for the Pensions Minister, my hon. Friend the Member for Swansea West (Torsten Bell), but I used to be the Pensions Minister myself, so I have some knowledge of the issue, and I encourage scheme managers to take every step possible to resolve those cases as quickly as possible and to prioritise cases where individuals may be in particular need. The hon. Member for Edinburgh West reflected on a number of such cases in her excellent contribution.
I assure anybody in this position that where there is an uplift in interest on pension payments, interest will be paid on arrears, so they will not lose out financially as a result of the delays, but I do understand that the delays are frustrating. As the hon. Lady will be aware, the overarching principle of the McCloud remedy is to put people back in the situation they would have been in if the discrimination had not occurred. In order to do that, it is necessary to apply interest where payments should have been made at an earlier date, whether by the scheme or the member. In this debate, we have heard more about the delays of the scheme towards the member. Interest is applied at 8% when the scheme owes money to the member. Where the member owes money to the scheme, interest is applied at the NS&I direct saver rate, which is currently 3.5%. I hope that reassures the hon. Lady to a certain extent.
We think it is right that these decisions are made by scheme managers, as they are the only ones with full possession of all the relevant information. As I have said, with that information and the variety of different factors, the situation is complex. Having said that, the Government are committed to ensuring that all affected members are provided with the remedy they deserve as quickly as possible, including ensuring that members already in receipt of pension benefits or approaching their retirement are prioritised.
Where scheme managers have exercised their statutory discretion to extend the deadline for providing some members with an RSS, it is therefore important that appropriate new deadlines are set out and that robust plans are in place to ensure the new deadlines are met. Scheme managers must ensure that the plans are properly communicated to pension scheme members to provide them with certainty. The Pensions Regulator must also be kept informed of plans and progress, and I know that schemes have been having these discussions with the regulator.
Similarly, there have been delays in other aspects of the remedy, such as the provision of the RPSSs to those who need them. As I set out earlier, that affects a smaller number of people. However, it is difficult for those people if they are kept waiting. It is important that schemes keep members informed and provide them with appropriate resources and support. Although I am pleased to say that the process of sending out RPSSs in England and Wales is 90% complete and that some schemes have sent them to all affected members, I know that there are issues in other parts of the country. As I said, this is a very complex area. If I have not answered all of the hon. Lady’s questions, I am happy to write to her.
Given the importance of delivering the McCloud remedy effectively, the Pensions Minister has recently written to responsible Departments, requesting details of their plans to issue remaining RSSs and RPSSs to all affected members. All those affected by the McCloud remedy can be assured that a robust and complete statutory remedy has been put in place and that schemes are working to ensure that members receive the information and support they need. I do, though, note the points that the hon. Lady has made about the impact of the delays on her constituents. They will have the opportunity to decide whether to receive legacy or reform scheme benefits in relation to their service. I again thank the hon. Lady for bringing this matter to the House.
Question put and agreed to.
Wholesale Cash Firms: Oversight Regime
Emma Reynolds Excerpts(1 month, 3 weeks ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
Wholesale cash distribution is the mechanism that supplies physical cash—specifically banknotes and coins—to retail banks, cash machines and the wider retail market. This is a vital mechanism for ensuring the sustainable provision of and reliable public access to cash.
Under part 5A of the Banking Act 2009, the Bank of England is responsible for managing risks to the effectiveness, resilience, and sustainability of the WCD system. Specifically, the Act gives the Bank of England powers to “oversee” firms recognised by the Treasury in wholesale cash oversight orders as performing relevant WCD activities and as being market significant. The Bank of England can give directions, issue codes of practice, and supervise firms’ compliance. Further detail on the Bank of England’s supervisory approach can be found in its statement of policy. 1
His Majesty’s Treasury’s decision on recognition
Today I am announcing which firms the Treasury has specified as recognised persons in wholesale cash oversight orders. As required under the Act, in making this decision the Treasury has: notified firms it considered for recognition; sought and considered any representations from these firms; and consulted relevant regulators, including the Bank of England.
Following this extensive process, I am announcing today that HM Treasury has made wholesale cash oversight orders to the following firms:
Barclays Bank UK PLC;
Barclays Bank PLC;
G4S Cash Centres (UK) Limited;
HSBC UK Bank PLC;
HSBC Bank PLC;
Lloyds Bank PLC;
Bank of Scotland PLC;
National Westminster Bank Public Limited Company;
The Royal Bank of Scotland Public Limited Company;
Post Office Limited;
Santander UK PLC;
Vaultex UK Limited.
These wholesale cash oversight orders have been made on 5 June 2025 and will come into force today, 12 June 2025.
In making these orders I have considered the requirements under section 28 of the Small Business, Enterprise, and Employment Act 2015. This requires Minsters to include in certain secondary legislation that regulates businesses and other bodies a provision for review or a statement as to why this is not appropriate.
I consider a provision for review inappropriate as it would be disproportionate relative to the economic impact. The impact on business is expected to be de minimis with annual fees that the Bank of England can charge recognised firms effectively capped by the Treasury, detailed in the Banking Act 2009 (Wholesale Cash Oversight Fees) Regulations 2024. The Bank of England can charge a maximum of £400,000 per firm per year for supervision fees and £150,000 for “special projects”. The current aggregate impact of making these orders is de minimis as defined in the better regulation framework.
Further, including a provision for review would be undesirable for particular policy reasons. The legislation contains provisions which necessitate ongoing review, meaning further provisions would be duplicative. Under section 206J of the Banking Act 2009, HM Treasury must revoke an order if it is no longer satisfied that the firm meets the relevant criteria. Section 206Z2 also requires the Bank of England to produce an annual report on the discharge of its functions and the extent to which risks in the WCD system have been managed. That report will subsequently be laid in Parliament. HM Treasury also plans routine engagement with the Bank of England that will monitor the implementation and impact of the regime.
1 https://www.bankofengland.co.uk/paper/2023/sop/sop-on-the-banks-supervisory-approach-to-market-oversight-for-wholesale-cash-distribution
[HCWS698]
Mortgage Guarantee Scheme: Contingent Liability
Emma Reynolds Excerpts(1 month, 3 weeks ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
Supporting first-time buyers is at the heart of this Government’s housing strategy as we aim to build 1.5 million new homes this Parliament. The Government recognise the difficulties that many aspiring homeowners face in getting on the housing ladder—in particular, the challenge of raising a sufficient deposit for a home. To tackle this problem head on, we committed to introduce a permanent mortgage guarantee scheme in our election manifesto to ensure buyers with smaller deposits can get a mortgage and fulfil their home ownership ambitions.
Today, I can confirm that the Government will be launching a new mortgage guarantee scheme in July 2025, delivering on our manifesto commitment to support homebuyers with smaller deposits across the UK. This Government are committed to home ownership, and we will continue to explore ways to help more prospective first-time buyers own their own homes. The scheme will be permanently available, helping to incentivise and sustain availability of 91% to 95% loan-to-value mortgages through the economic cycle by providing lenders with a Government-backed guarantee—this will insure lenders against a portion of their potential losses on those mortgages. Mortgages offered through the scheme will enable eligible first-time buyers and home movers to buy a home with a deposit as small as 5%.
Guarantees issued under the new, permanent scheme will be valid for up to seven years after the mortgage is originated. Participating lenders will pay HM Treasury a fee for each mortgage entered into the scheme. This will be set and regularly reviewed so that expected claims against the guarantee should be covered by revenue from the fee. To limit the Government’s exposure from the scheme, there will be a cap on the size of the Government’s contingent liability of £3.2 billion. HM Treasury judges the risk of incurring losses through the scheme to be low, which would only materialise if the sum of fees was not sufficient to cover calls on the guarantee.
Authority for any expenditure required under this liability will be sought through the normal procedure. HM Treasury has approved this proposal in principle. A departmental minute has been laid in Parliament today. If, during the period of 14 parliamentary sitting days, a member signifies an objection by giving notice of a parliamentary question or by otherwise raising the matter in Parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.
[HCWS694]
Bank Closures and Banking Hubs
Emma Reynolds Excerpts(1 month, 4 weeks ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
It is a great pleasure to speak in this debate. I want to thank and to congratulate my hon. Friend the Member for Blyth and Ashington (Ian Lavery) on bringing forward this important debate, which was heavily subscribed across the House. He highlighted the needs of his constituents, particularly the elderly, the vulnerable and the disabled. My hon. Friends the Members for Weston-super-Mare (Dan Aldridge), for Bolton South and Walkden (Yasmin Qureshi) and for Leigh and Atherton (Jo Platt), and the hon. Members for Bromsgrove (Bradley Thomas), for Farnham and Bordon (Gregory Stafford) and for Chesham and Amersham (Sarah Green) all stressed the importance of in-person services, particularly for vulnerable constituents.
I congratulate my hon. Friends the Members for Isle of Wight West (Mr Quigley), for Derbyshire Dales (John Whitby) and for Gillingham and Rainham (Naushabah Khan), the right hon. Member for Wetherby and Easingwold (Sir Alec Shelbrooke) and the hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick) on securing banking hubs in their constituencies— in the case of my hon. Friend the Member for Derbyshire Dales, two banking hubs are soon to open, as I understand it.
Other Members spoke about their campaigns to secure banking hubs, including my hon. Friend the Member for Southampton Itchen (Darren Paffey), my hon. Friend the Member for Welwyn Hatfield (Andrew Lewin)—who is apparently expecting a call from one such bank— and the hon. Member for Broxbourne (Lewis Cocking). My hon. Friend the Member for South Norfolk (Ben Goldsborough) and the hon. Members for North Shropshire (Helen Morgan), for Dumfries and Galloway (John Cooper) and for Strangford (Jim Shannon) talked about the importance of access to cash and banking services in rural areas.
Alex Mayer (Dunstable and Leighton Buzzard) (Lab)
Will the Minister give way?
Emma Reynolds
I do not have very long left, I am afraid.
The hon. Member for Aberdeen North (Kirsty Blackman) and my hon. Friend the Member for Weston-super-Mare rightly stressed the importance of these services in urban areas as well. I will not go through all of them, but we heard lots of really good speeches on both sides of the House and a surprising degree of consensus, which is not always the case. It is interesting to see the right hon. Member for Tatton (Esther McVey) and my hon. Friend the Member for Blyth and Ashington so closely aligned, which is not something I expected.
Through the Financial Services and Markets Act 2023, the last Government legislated to protect reasonable access to cash, giving the Financial Conduct Authority new powers to ensure that communities could both withdraw and deposit cash. The Government recognise that the ability to access cash and in-person banking support remains essential for many, particularly in rural areas and for vulnerable people, which is why we have secured the industry’s commitment to roll out 350 banking hubs by the end of this Parliament, ensuring that access to face-to-face banking is protected. Over 220 have been agreed, and more than 160 are open.
Banking hubs are a voluntary initiative by banks as part of meeting their access to cash obligations, as legislated for in FSMA. Many Members have asked the Government to demand that Link reviews its assessment procedure, but it is worth reminding colleagues that the process for deciding where hubs are needed is independently determined by Link, the operator of the UK’s largest ATM network. The Government are not minded to review the legislation passed by the previous Government.
A number of Members—including the hon. Member for Dumfries and Galloway, who mentioned this to me yesterday as well—talked about ATMs’ lack of reliability. I have done a little bit of work on that, and Link assures me that it takes a hard line with its members over the functionality of ATMs. However, I urge Members to raise these issues with me, so that I can raise them with Link. I am soon to meet John Howells, the chief executive of Link, and I will feed back the concerns that Members have raised today about how Link applies its criteria.
I know that this is not necessarily the conclusion to the speech that Members were hoping for, but we think it is important that local communities have access to cash and banking services, which is why our Government are committed to rolling out 350 banking hubs across the country.
Madam Deputy Speaker (Caroline Nokes)
I call Ian Lavery to wind up very briefly.
Draft Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025
Emma Reynolds Excerpts(1 month, 4 weeks ago)
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The Economic Secretary to the Treasury (Emma Reynolds)
I beg to move,
That the Committee has considered the draft Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025.
As ever, it is a pleasure to serve under your chairmanship, Mr Mundell. I am grateful for the Committee’s time this afternoon. Financial services fulfil a vital role for people and businesses across the UK. The Government are committed to ensuring high standards of both consumer protection and financial inclusion. The regulations form part of that commitment by strengthening protections for customers, including individual consumers, businesses and charities, when their bank accounts or other payment services are terminated by their provider.
While terminations of services are generally considered commercial decisions, customers must be treated fairly. Concerns have been raised in that area over recent years, including concerns about services being terminated on the basis of customers’ lawful beliefs and political opinions. The Government are unequivocal that customers should not see payment services terminated on grounds relating to their lawful freedom of expression.
There are clear protections in law that already prohibit providers from discriminating against UK consumers based on protected characteristics and their lawful beliefs and political opinions. However, in other areas, existing legislation does not always provide appropriate protection and is not sufficiently clear. Currently, payments legislation contains no obligation on providers to explain why they are terminating services, and the existing two-month notice period is not always long enough, meaning that customers do not have the information and time they need to understand providers’ decisions, rectify issues or make a complaint.
The statutory instrument before us today addresses those issues. It would increase the amount of notice that providers must give to at least 90 days and introduce a new requirement that customers be given an explanation that is sufficiently detailed and specific for them to understand why the contract for their payment service is being terminated. Providers would also be required to advise customers on how they can make a complaint to their provider and on any right they may have to take their complaint to the Financial Ombudsman Service.
The SI clarifies ambiguities in existing legislation to ensure that the new rules are applied consistently. There are some exceptions to the new requirements in the SI, as Members will see, mainly so that providers can continue to meet their other legal requirements. The strengthened rules would take effect from 28 April 2026 and apply to the termination of payment services contracts that are concluded for an indefinite period and entered into on or after that date.
The regulations would make crucial changes that would ensure that customers are treated fairly while respecting providers’ rights to make commercial decisions. The reforms will increase transparency, ensuring that customers understand providers’ decisions and have the time and information they need to bring a complaint or find an alternative provider. I thank the Committee for its attention and welcome any questions from the shadow Minister or other Members.
Emma Reynolds
It started so well—I am slightly confused by the hon. Gentleman. On one hand he says it is as though nothing changed, and did we need a general election to get to this point? On the other hand he calls into question the provisions of the SI and what impact they might have. I will come to his questions in turn. First, there has been a big change since the election. I was not here in the last Parliament, so there has been a welcome change from my point of view and on the Labour side of the House, where we have a quite hefty majority, in case he had not noticed.
The reforms were consulted on and thought about in the last Government—the hon. Gentleman was right to make that point. We consider, as did the previous incumbents in my role and the Conservatives in government, that the current notice period of 60 days is simply not adequate for customers who have their accounts closed to either make a complaint or seek an alternative provision, and that is bad for individual customers, but particularly bad for businesses. As he set out, it is crucial that businesses and individual customers have access to bank accounts.
We do not think, although I can write to him with more evidence, that this measure will make banks more reluctant to open bank accounts in the first place. The balance that we are striking in this statutory instrument is on the one hand enhanced consumer protection and on the other hand ensuring that we do not place unnecessary and disproportionate burdens on banks and other providers—it is not just about banks; it is about other payment providers, too. We have not included a statutory review clause, but that does not mean that we cannot review the legislation. We do not judge that this provision will make banks more reluctant to open bank accounts for people in the first place.
The shadow Minister asked more broadly about access to banking services, which is something that we are monitoring. As he said, that is crucial to both the operation of a business and customers. In our financial inclusion strategy, we are looking at access to banking and the relationship between financial exclusion and digital exclusion. We are doing broader work in this area to understand not only the root causes from providers but why individuals have perhaps had their accounts closed and not sought alternative provision.
We are doing broader work on financial provision, as the hon. Gentleman knows, and we will produce a strategy by the end of the year on this vital issue. I know that many of my hon. Friends will welcome that, as well as other Members across the House, because financial inclusion is something that we all care about and this Government are very committed to. I believe that I have answered all the questions.
Mark Garnier
It was to do with the assessment being done of the impact on politically exposed persons. When can we expect that report to come out?
Emma Reynolds
I thank the shadow Minister for that question. As he will know, changes were brought into force in January 2024 under the previous Government that ensured that domestic PEPs, as they are called, were not deemed to be on the same level of risk as non-domestic PEPs. That SI was introduced under the last Government and FSMA—the Financial Services and Markets Act 2023—committed to bringing forward that legislation.
It also committed the FCA to doing a review of so-called PEPs and debanking. That review concluded that banks were not necessarily taking the wrong approach, but it said that there needs to be more proportionate application of rules. Therefore, the FCA will bring forward updated guidance on this issue, and I am happy to write to the shadow Minister in more detail on the timing of that and what will be included.
Question put and agreed to.