Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 7th December 2021 Commons Chamber

[Rishi Sunak]

My right hon. Friend has rightly campaigned on this issue and she raises an excellent point. The good news on business rates is that, next year, thanks to the tax cut that we announced in the Budget, 90% of retail, hospitality and leisure businesses will see at least a 50% cut in their business rates bill. That is worth £1.7 billion; it is the biggest business rates tax cut since the system was created, other than during coronavirus. On her point about offline and online, she will know that we have helped to bring in an international tax treaty to tax large multinational digital companies, and we continue to consult on the pros and cons of an online sales tax.

[Gareth Davies (Grantham and Stamford) (Con)]

Does my right hon. Friend agree that one of the best ways in which we can reduce inequality is by ensuring that young people are equipped with the skills that they need to succeed, wherever they live? That is why the additional £126 million of funding for work placements and training is so important for young people in Grantham and Stamford.

[Rishi Sunak]

My hon. Friend is absolutely right; I know that he is a staunch supporter of skills and getting young people into work in his constituency. He mentions traineeships, which are fantastic initiatives with a 75% success rate in helping young people and a great example of our plan for jobs in action, spreading opportunity right across the country.

Dormant Assets Bill [Lords]

Gareth Davies Excerpts

2nd reading
Monday 6th December 2021 Commons Chamber

[Gareth Davies (Grantham and Stamford) (Con)]

Thank you Madam Deputy Speaker; I will keep my remarks brief.

This fantastic Bill will unlock literally hundreds of millions of pounds to support communities and community businesses throughout the country. The Bill is clear about where the money is coming from, so let me talk briefly about where the money could go to. The Dormant Bank and Building Society Accounts Act 2008 unlocked funding to support our UK social investment sector, and I very much hope that this Bill will do the same. The UK social investment market has tremendous potential to transform communities up and down the country, and to support businesses that have a social benefit and charities that have specific, targeted interventions. While discussing this Bill, it is important that we reflect on the time since the 2008 Bill. In the brief time that I have, I will highlight three points.

First, as has been mentioned by the hon. Member for Bethnal Green and Bow (Rushanara Ali), in 2012 £425 million was taken from the dormant assets pool to form Big Society Capital, which was the world’s first social investment organisation. As she quite rightly pointed out, it has done significant and brilliant work to mobilise social investment capital, and has helped to fund a lot of businesses and charities around the country. However, it is important to point out, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) did, that it is constrained by the very specific, ringfenced scope of the legislation at the time, to the extent that its mandate has almost become overtly philanthropic. If we are really going to unleash the potential of social investment, it is vital that we look at the organisation’s scope to be able to invest in businesses that have a social impact and make money. Their financial track record over the past eight years shows that they have a made a loss in six of those years. If we spoke to the organisations themselves, they would agree that if they were given more freedom to invest across the country in different types of business, they could do a lot better.

My next point is on what are commonly known as social outcome contracts, which were first launched in 2011. These are highly complex, very illiquid and somewhat risky arrangements. We have had 87 launched in this country since 2011. They were billed as a way of mobilising billions of private capital. Unfortunately, they have only mobilised £73 million. I therefore urge caution on the Government ahead of proceeding with allocations in future to make sure that they are not investing in social outcome contracts that may not deliver what they say they will.

However, there is one area that I would encourage the Government to look at as part of their consultation, and that is to bolster our liquid, tradeable social bond funds and the market that is out there. These are issued by corporates and charities to ringfence capital that has a social impact. We are a genuine world leader in this. Last year there was $59 billion of issuance that could multiply quite exponentially given what has happened with green bonds. I encourage the Government to look at that in more detail.

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 7th September 2021 Commons Chamber

[Rob Butler (Aylesbury) (Con)]

7. What fiscal steps he is taking to invest in new infrastructure.

[Gareth Davies (Grantham and Stamford) (Con)]

11. What fiscal steps he is taking to incentivise businesses to invest in new infrastructure and equipment.

[The Chancellor of the Exchequer (Rishi Sunak)]

The Prime Minister is rightly ushering in an infrastructure revolution because infrastructure drives growth and productivity and creates jobs. We are doing that with over £100 billion of investment this year and, thanks to the efforts of the Financial Secretary to the Treasury, a world-leading UK Infrastructure Bank created and set up in Leeds.

[Rishi Sunak]

My hon. Friend is absolutely right to focus on making sure that our investment reaches every part of the country, including his constituency. I am pleased to tell him that £760 million has been allocated by the Chief Secretary and the Transport Secretary to deliver East West Rail, and I understand that the Department for Transport is currently working with the East West Rail Company to figure out the best possible way to serve Aylesbury. I hope that my hon. Friend will engage with that process.

[Gareth Davies]

The Infrastructure Forum recently published a report that showed clearly that the super deduction is already having an impact, accelerating investment by businesses. Will my right hon. Friend join me in encouraging businesses across Grantham and Stamford to take up the relief, and does he agree that this is exactly the kind of investment that will boost jobs and level up our country?

[Rishi Sunak]

From the Office for Budget Responsibility to the Bank of England, many people have described the super deduction as doing exactly what my hon. Friend has said, and that is why we know it is working. I recently visited BT, for example, which, because of the super deduction, is now increasing the speed of its roll-out to millions more houses and creating thousands of new jobs in the process. My hon. Friend is absolutely right, and I encourage his businesses to take up the super deduction, and, indeed, we see that; a Deloitte survey recently showed that business intentions to invest in this country are the highest they have been in years.

Economy Update

Gareth Davies Excerpts

Wednesday 16th June 2021 Commons Chamber

[Steve Barclay]

The hon. Gentleman raises a perfectly legitimate point about how acutely that sector in particular has been affected, as I think everyone in government recognises, but I do not think it fair to say that the Government have not announced any measures that reflect those challenges. Indeed, on commercial rent, he will have heard in my statement today’s specific announcement that applies to the sector. There are also other things, such as the furlough going long, the restart grant and a number of things within the comprehensive package, that are obviously of benefit to nightclubs.

[Gareth Davies (Grantham and Stamford) (Con)]

This morning’s ONS inflation report highlights the risk we face of rising rates, given the amount of debt that we have incurred during the pandemic. Does my right hon. Friend agree that it is important we focus on sustainable public finances, and that one way we can help is by mobilising more private capital investment?

[Steve Barclay]

I absolutely agree, and I think that the importance of securing private investment is a very good note on which to end. My hon. Friend will know that in May, on the consumer prices index, inflation rose to 2.1% and the Monetary Policy Committee judged:

“Inflation expectations remained well anchored.”

However, with debt at nearly 100% of GDP, we need to pay close attention. To finish on a more sobering note, perhaps, a sustained increase in inflation by one percentage point would increase debt interest spending by £6.9 billion in ’25-26, so my hon. Friend raises—as did the hon. Member for Leeds West (Rachel Reeves)—an important point that the House needs to keep under review.

Oral Answers to Questions

Gareth Davies Excerpts

Tuesday 27th April 2021 Commons Chamber

[Rishi Sunak]

I am very sorry for the hon. Gentleman’s loss, and I know the whole House will join me in passing on those condolences. I am not aware of the particular proposal that he mentions, but if he writes to me, I will be happy to take a look at it.

[Gareth Davies (Grantham and Stamford) (Con)]

The Government’s commitment to the Task Force on Climate-related Financial Disclosures highlights the importance of transparency in investment portfolios. Does my hon. Friend agree that more can be done to improve transparency and prevent the exposure of investments by financial services companies to modern slavery?

[John Glen]

Yes, I agree with my hon. Friend. On modern slavery, the landmark provision in section 54 of the Modern Slavery Act 2015 includes institutional investors that fall within the scope of the requirement and meet the criteria requiring them to publish an annual statement.

Financial Services Bill

Gareth Davies Excerpts

Monday 26th April 2021 Commons Chamber

Finally, it would be nice if Opposition amendments were taken on board more often, or indeed at all, by this Government. There is so much that could be done in areas reserved to this Parliament, where the Scottish Parliament would also like to act but cannot do so. I hope very much that some day soon Scotland will not have to wait for a UK Treasury Minister to act, and that we will be able to do so ourselves, with the proper powers of an independent nation to protect our own people and to build a fairer, more inclusive, more prosperous nation.

[Gareth Davies (Grantham and Stamford) (Con)]

Mr Deputy Speaker, you will be pleased to know that I will keep my remarks incredibly focused and brief. They will be entirely on Lords amendment 8, which I am afraid I cannot support.

Let me first congratulate and thank the Economic Secretary for all his hard work in bringing the Bill through so eloquently and in such a detailed way. I thank him particularly for his remarks on Lords amendment 8, which I will re-emphasise for the House. He set out very clearly that there are 250,000 people with inactive lenders, of whom 120,000 are unable to switch. Of them, 70,000 are in arrears, which means that they are unable to meet the risk criteria of other lenders.

However, it is worth pointing out that the Government are taking action to help financially vulnerable people and people in financial difficulty with mortgages, for example through the breathing space scheme, which helps to enhance legal protection for borrowers, and the pre-action protocol, which essentially puts repossession at the end of the queue, as a last resort for borrowers.

The centrepiece of Lords amendment 8 is, of course, the cap on SVRs. I entirely agree with the Minister and many others in the market who suggest that that would be unfair to borrowers with active lenders, but most significantly, it would represent a significant and radical intervention in private markets. It would represent a serious risk to financial stability, as the Treasury and the Minister have outlined. Lenders’ ability to adjust SVRs according to market conditions is critical, to enable them to take a risk-based approach to market conditions. Taking that away would make those lenders more vulnerable to financial shocks, such as a future financial crisis, which none of us wants.

This is a significant issue. The Treasury has said that it does not support a cap on SVRs, as has the London School of Economics, as many speakers have already outlined. The right hon. Member for Wolverhampton South East (Mr McFadden) outlined that Martin Lewis backed the LSE report. Martin Lewis has also said that a cap on SVRs would be imperfect and a temporary “stopgap”. That is not a ringing endorsement. For the reasons I have outlined, I simply cannot support the amendment.

Government's Management of the Economy

Gareth Davies Excerpts

Tuesday 23rd February 2021 Commons Chamber

[Gareth Davies (Grantham and Stamford) (Con) [V]]

It is a great pleasure to speak in this debate about the Conservative economic track record over the last decade. I would like to focus on just one aspect of that record—jobs. I am very proud that, before covid-19, we had achieved the lowest level of unemployment since the 1970s, helping a 1,000 people, on average, into work every single day. We have known for so long that the surest way to tackle poverty in our country is to offer people the opportunity of work, and for the past decade we have done that. Employment does not just grow our national prosperity; it gives people the dignity of work and of providing for themselves and their families. It is why the Conservatives sought to make sure that work pays by consistently raising the minimum wage and the national living wage.

It is why the Conservatives sought to make sure that work pays by consistently raising the minimum wage and the national living wage.

To create jobs growth and bring people up the earnings ladder, we have to put in place an environment that is conducive to productive economic activity. That means appreciating the power of our businesses and the tax revenues that they generate to pay for our public services; taking tough—often, unpopular—decisions to reduce the deficit in good times, so that we are stronger in bad times; and providing a fiscal environment that encourages enterprise, innovation and ambition.

Put simply, those are the foundations of economic success that have enabled the Conservative Government to boost jobs, grow our economy over nine consecutive years and reduce inequality. That is why when crisis struck the Chancellor sought and acted to protect 12 million jobs with unprecedented financial support.

All of which, of course, contrasts with the fact that every recent Labour Government have left office with a higher unemployment rate than when they started. It turns out that Labour really didn’t work. That is why the electorate have consistently rejected Labour’s hostility to enterprise, unchecked spiralling debt and obsession with tax hikes and nationalisation.

Labour is busy looking backwards for answers in yesterday, so cannot see that, while this crisis has been awful, Britain’s greatest days are ahead of us—with the ingenuity of our scientists, the precision of our engineers, the might of our financial services and the belief that when we talk up our country, push new boundaries and work together, we can, and we will, recover, rebuild and resume our economic growth once again.

Financial Services Bill (Fifth sitting)

Gareth Davies Excerpts

Committee stage
Tuesday 24th November 2020 Public Bill Committees

[Mr McFadden]

Perhaps it is not her ambition to be here in 10 years’ time. Carbon capture and storage is back. There are more things that we will have to do, but all of those headings will need finance, capital and investment. That will not all come from the state. It has got to be a combination of public and private investment, if the country is serious about this goal.

This is not an ordinary piece of legislation or A. N. Other Bill that we want to tack on to the regulatory framework. It is an overarching piece of legislation that will inform investment patterns and work production in a whole range of areas. It is one of the most significant pieces of legislation in this country since the end of the war. Perhaps we do not always realise that, but it really is, if one thinks about the list that I have gone through.

All of those things will take finance. It seems to me not odd to add this to the regulatory framework, but very odd that it has not been added already, particularly because the Government have made so much of the country being an international leader in the area, including asking the former Governor of the Bank of England, Mark Carney, to play a leading role. We absolutely welcome that.

[Gareth Davies (Grantham and Stamford) (Con)]

The right hon. Gentleman sets out very well the problem that our generation faces. I say that as someone who has worked in financial services and has a family member who also works in the sector. The right hon. Gentleman is totally right that the key to unlocking progress towards 2050 is through private capital, but will he not concede that the Government have already made significant announcements such as those on the green gilts, the long-term asset fund and the green homes grant? Many announcements that have been made will help to mobilise capital towards the goals that he seeks.

[Mr McFadden]

The hon. Gentleman is right and he goes for pot 3 in terms of my reasons. I repeat: the problem about pot 3 is that the reason not to accept an amendment is that it concedes that it is absolutely heartless to do so. He is absolutely right. The Government have said that they want the UK to be a leading player and they appointed Mark Carney, who is a champion of green gilts, I believe. I was pleased to hear the Chancellor’s announcement, because green gilts have been issued by other countries in the past year or two. They have often been oversubscribed, which shows an investor appetite for products geared to that end.

Let me put the point back to the hon. Gentleman. If there are new financial innovations, such as green gilts, that Governments can issue to finance the list of things I mentioned from the Climate Change Committee and if there is investor appetite, as there seems to be, for the limited number of green gilts that have already been issued, why on earth would we not put at the heart of the regulator’s mission that they should have regard to these goals and use them as a guiding principle, particularly as we are going into a post-Brexit world where we will be asked on many fronts what we are for now given that we have left an existing framework? It is particularly appropriate to add this proposal to the Bill. This will require investment and it cannot all be done by the state. It will require innovation in finance. We have mentioned green gilts but other kinds of saving products, investment products, bonds, loans and all sorts of instruments will all have to be geared to the necessary changes to meet the net zero target.

The final reason for the proposal is to stress the ambition of the target. Any one of the things that I read out would require a lot of ambition and a lot of investment. It is pretty hard to see how this can all be achieved if it is not an explicit goal of financial regulation.

To recap, the amendment seeks to make these changes in the least possible contentious way. We have not added a syllable or comma to anything that the Government have not already legislated for. All we are asking for is that the Government signal that they are taking their own legislation seriously by adding the net zero commitment, which the House has already legislated for, to the mission of the financial regulators. That seems to be a most uncontroversial and reasonable thing we can do in the post-Brexit financial regulatory framework.

Financial Services Bill (Second sitting)

Gareth Davies Excerpts

Committee stage & Committee Debate: 2nd sitting: House of Commons
Tuesday 17th November 2020 Public Bill Committees

[Gareth Davies (Grantham and Stamford) (Con)]

Q First, Mr Cummings, thank you for your comments about the extended permissions and the overseas regime, which I would agree with. However, can I specifically ask about these 9,000 funds? My understanding is that around 75% of all EU-domiciled funds are a SICAV vehicle, and I have two questions on that. First, what is your assessment of the demand level from UK investors for the SICAV vehicle, given that typically, historically, they have been much more expensive than the UK-domiciled equivalent? Secondly, can you explain more about the complementary nature of these funds to our market, specifically as relates to money market funds?

Chris Cummings: You are right in saying around 75% are UCITS. UCITS have become a global brand. It is a high watermark, at least currently, in an investor-centric investment vehicle, and rightly recognised by jurisdictions across Europe and internationally. In thinking about how the UK develops its own UK fund regime, which is some work that the IA has put forward to the Treasury and the FCA, we have taken the UCITS regime as our benchmark to think about how it can be expanded upon; how can it be modernised given the experience with UCITS over the last few years.

One of the core issues that the industry takes very seriously is better governance of funds. That is one of the reasons why we supported our regulator, the Financial Conduct Authority, in stipulating that, at fund level—not at company level—there must be an independent, non-executive director who asks the big questions about governance of the fund, and ensures that there is a clear value for money assessment at least annually, to drive down costs for investors and to ensure that investors are getting a better deal out of those funds. In terms of modernisation, we think that a great deal is already happening in the industry, with more to come.

Although money market funds are used by some retail investors, they are seen more as a capital markets instrument. Given their brevity, they tend to attract a lot of overnight money. Their particular structures are perhaps for more sophisticated professional and institutional investors. They are a useful counter, but really for us UCITS are the gold standard at the moment. We are naturally keen to extend the UCITS regime, especially post Brexit.

That is why we brought forward our own proposals for a long-term asset fund, which we think will not only modernise the UK fund regime but draw together some of the more interesting parts from other fund regimes. It has the benefits of an open-ended fund, and some of the advantages of a closed-ended fund, with an extra layer of governance. It will allow UK savers and investors, institutional as well as retail, to invest more in infrastructure, taking a longer-term view, and in what traditionally have been higher-growth companies—technology companies, life sciences, biotech and so on—taking a much longer-term perspective. We think that the long-term asset fund will be a great complement to the existing UK and European fund family.

[The Chair]

Does anyone else on the Committee wish to catch my eye in the remaining four minutes? In that case, thank you very much, Mr Cummings, for your evidence.

Examination of Witnesses

Emma Reynolds and Catherine McGuinness gave evidence.

--- Later in debate ---

[Angela Richardson]

Thank you.

[Gareth Davies]

Q My understanding is that the British Government have so far filled out something like 2,500 pages of questions from the European Union, all of them to strict deadlines. What do you think has caused the delay in the EU granting equivalence or making any public statement on that? Clearly the UK is equivalent, so what is causing the delay?

Adam Farkas: I do not know. What I can say is that the equivalence determination process consists of two stages. One is a technical assessment that involves a detailed assessment of the rule book for the set of regulations, with questions and interactions. In every jurisdiction there is a second stage, which is the determination itself after the technical assessment. That stage is a much more political decision, or is a decision of a more political nature; it considers other aspects in addition to the interests of the jurisdiction making the determination. The answer probably lies there, but I have no information on why equivalence decisions have not yet been made on the EU side. It is not true to say that no equivalence decisions have been made; some have been determined and published, even if on a temporary basis.

[Gareth Davies]

Q But there is still the big question mark on overall equivalence for the United Kingdom. You hit the nail on the head when you referred to the potential for politicisation of the regulatory process. Looking at what happened recently with Switzerland, my understanding is that the Swiss stock market had its equivalence removed because the Swiss Government had the temerity to put Swiss citizens first in new Swiss labour laws. My fear is that the EU will politicise the process, and I would love your view on that.

Adam Farkas: I do not think I would like to express a view. One point of correction I would make is that there is no such thing as overall equivalence; unfortunately, the equivalence decisions are very technical and made bit by bit. There are equivalence provisions in different parts of the EU legislation, and there are equivalence decisions possible in parts of the UK legislation. Looking at the announcements from the Chancellor, it is very specific and is focused on certain activities or institutions that are deemed equivalent to the domestic regime. There is no overall equivalence, and there will probably not be.

On the Swiss equivalence case, I will refrain from commenting, if you will allow that.

[Gareth Davies]

Dr Huq, can I ask one more question?

[The Chair]

We have until 4 o’clock for the entire session, so you can ask a quick question.

[Gareth Davies]

Q Given that in your opening remarks you said the UK had played a significant part in the formation of regulation as a major financial centre, to what extent are you worried that the European Union will now take a more localised, protectionist stance?

Adam Farkas: As an association, we are very strongly advocating the openness of markets, both in the United Kingdom and in the EU. We are very strongly advocating maintaining the co-ordination of dialogue and the consistent implementation of global standards. Of course, it is very difficult to speculate which way the EU will go. What I can say is that our members have a very clear view on this issue, and we are—

[The Chair]

Adam, can you please speak into the microphone? For the recording, you need to be in the right place.

Adam Farkas: Yes, of course.

Our position on this issue is very clear, and we have been open and transparent about our members’ position on arguing for market openness, maintaining consistency and, on the basis of constituency, maximum market access and flow of capital and services between the UK and the EU.

Future of Financial Services

Gareth Davies Excerpts

Monday 9th November 2020 Commons Chamber

[Rishi Sunak]

The UK Government issue UK debt. Where spending has a Barnett implication, the money is provided to the Welsh Government. The sovereign bond is just a way of financing the expenditure of the United Kingdom. The Barnett consequentials will always be provided if and when the appropriate expenditure is made, for the Welsh Government to use as they see fit.

[Gareth Davies (Grantham and Stamford) (Con)]

I warmly welcome the statement today, particularly on the issuance of green gilts, which is a great idea. Does my right hon. Friend agree with me that the issuance of a green gilt marks a great opportunity to showcase Britain’s place in the world in terms of our financial services power to move towards net zero by 2050?

[Rishi Sunak]

I pay enormous tribute to my hon. Friend, who has campaigned tirelessly, written tirelessly and advocated tirelessly for many years for the UK to issue a sovereign green bond, and I know he will be heartened by the announcement today. He is absolutely right, and he knows better than most what a signal this will send across the world of our desire to be a global leader in green finance and to deliver on all our ambitions. I know he will pay a key part in making sure that we do.