Future of UK Capital Markets

Debate between Jim Shannon and Alun Cairns

Tuesday 30th January 2024 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

I congratulate the right hon. Member for Vale of Glamorgan on securing this debate, and I am pretty sure he will agree with what I am going to ask. Does he not agree that we cannot live up to the potential in the City market without implementing the necessary changes to promote safeguarding and safety? Those are critical. Does he believe that the Government and the Minister must be more proactive in that matter?

[Alun Cairns]

The hon. Member makes an extremely important point, and I will come on to it as I progress. He is right about the importance of standards. London’s reputation on standards is essential not only to London, but to every part of the United Kingdom and well beyond.

I was highlighting the challenges we have had in the UK. If there are challenges here in London, there are even greater challenges elsewhere. London still dominates the European market. However, the market is always evolving and we need to react. That being the case, I am pleased that the Government are already alive to change and, along with others, have launched a series of initiatives to analyse and act on what the UK needs to do to secure London’s important international role. We have seen the wholesale markets review, the UK listings review, the Kalifa review, the UK secondary capital raising review and the London stock exchange UK capital markets industry taskforce. Those are just some examples of what has been going on in recent times.

The influence of some of the reviews led to the Edinburgh reforms and the Chancellor’s Mansion House speech last year. Those are positive steps but, 12 months on from the Edinburgh reforms and six months on from the Mansion House compact, this is a good time to take stock. There is a need for co-ordination and assessment of developments. I am concerned that there has been a series of reviews, including those I mentioned earlier, but securing outcomes for the benefit of companies and investors must be our focus.

There is clearly a balance to be struck between evolution and revolution. The Chancellor is on record as saying that he favours evolution, which is fair enough, but we do need to see progression, too. We also need to consider the freedom that Brexit provides, against the diversion from standards in our closest markets. I am not saying that is easy, but regular review of progress is a positive step. There are wins available for the United Kingdom, and I look to the Government to respond.

The central piece of the Mansion House speech was an agreement with the largest UK defined contribution fund managers to invest at least 5% in private equities by 2030. There are also clear ambitions for defined benefits schemes, and I hope the Minister can provide a further update on that in his response. After all, when we consider that just 1% of the UK’s near £5 trillion assets are in private companies, the 5% target is a major step. I press the Minister by saying it is a good start but we need to go even further, and monitor progress towards that 2030 target. I also look to the Minister to provide further details on the defined benefits reforms and ambitions.

I recognise that the Chancellor announced plans to consolidate the local government scheme. As he said, when it comes to pension pots, big is beautiful. I get that, and the wider benefits that consolidation will bring. I would, however, add a note of caution. Large funds need large investments, which in general is a good thing, but we could end up squeezing small and mid-sized companies out of the equation. Guidance to secure the role of smaller private equity funds, which usually focus on smaller firms, would be helpful. I am concerned that large pension funds will have few places to go, other than to large private equity firms in the US, defeating much of the Government’s objectives.

The London stock exchange plans for an intermittent trading venue also offer new opportunities to bridge the gap, but it would be helpful to gain feedback on the timing of the regulatory approval. I also welcome the Treasury’s commitment to the replacement of the EU prospectus regulation with the Public Offers and Admissions to Trading Regulations 2023 that stem from Lord Hill’s listings review. That is welcome and will streamline the process significantly.

We obviously await detailed Financial Conduct Authority rules, and look to it to act swiftly in that respect. To credit the FCA, it has streamlined the listings process and loosened the rules for related party transactions. These reforms and others are very welcome, and I pay tribute to the Minister and his colleague for the part they have played. The scale of the reforms should be recognised and will have effect. However, the speed of change and the scale of reform need to increase. The capacity of the regulator will be a challenge, but we need to do whatever possible to support it to make the necessary changes we are asking of it, at pace.

In this technical debate, however, we need to remember why we are doing it, and what else can be done. We need to make it easier to raise capital in London, and the process of listing less clunky, while also focusing on attracting capital from domestic and foreign investors to provide the liquidity and funds for growth. London’s reputation for high standards is a good thing, and something we need to work with. We should continue the momentum to review the access for early stage business finance, to expand the scope and remove the potential cliff edge.

Tax incentives and greater digitalisation of capital markets processes can help too. Enterprise management incentives could play a part in widening the opportunity for staff to take a stake. Stamp duty changes are also relevant. We need a new approach to investing at both fund manager and retail level. Current regulations force fund managers towards bonds and Government debt to de-risk, which almost came back to bite us just a little over 12 months ago. Savers have also been encouraged to remove risk. The classification of investments needs to be reviewed, and better research needs to be available, akin to Rachel Kent’s report.

We need to re-engage the retail market in the opportunities of equities. I can recall—as I am sure you can, Ms Nokes—the privatisation of public services in the 1980s and 1990s, and the opportunities that provided for the public to invest. I have already mentioned, “If you see Sid tell him.” Regulations aimed at protecting the public from risk have removed legitimate opportunities like those. It is almost impossible for an adviser to facilitate investments directly into equities, in spite of today’s reduced costs and swifter processes. Proportionate regulations are required, along with further ISA reform. I can well recall the personal equity plans of the ’90s, which had a specific allowance for a single company PEP. That made capital investment accessible and relevant to the masses.

In closing, I want to recognise the changes and reforms that have taken place but to suggest that we need regular—at least annual—reviews of progress and of the impact of change, with all stakeholders involved. That would show the world that we are determined to get it right and to continue to evolve to ever-changing needs. We must always remember that gaining and accessing new capital is essential to growing business and the economy. By getting this right, we can offer greater returns for the public through better pension and investment returns, while maintaining the UK’s prominence in this vital industry.

I started off by talking about Arm, and I want to highlight a quote from Craig Coben, a prominent journalist in the field. He wrote that

“Arm should float in the US not because London has any particular flaws as a listing location, but rather because the scale, scope and depth of American capital markets make it a more compelling venue… Nasdaq-only flotation offers the broadest access to investors without the complications of two primary listings.”

That is just one example of the sort of change that can be brought about. I look to the Minister to continue his positive agenda.

Levelling Up Barry, Vale of Glamorgan

Debate between Jim Shannon and Alun Cairns

Wednesday 26th October 2022 Westminster Hall

[Alun Cairns (Vale of Glamorgan) (Con)]

I beg to move,

That this House has considered levelling up Barry, Vale of Glamorgan.

Thank you, Mr Pritchard, for calling me to propose this debate on levelling up in Barry. It is a privilege to serve under your chairmanship, and I am grateful for the opportunity to highlight the fantastic opportunities for Barry and the background to why it needs UK Government support.

I recognise that economic development is devolved and that the primary responsibility for supporting investment in Wales falls to the Welsh Government, but the levelling-up agenda is central to the UK Government’s plans. I am delighted that my long-standing calls to change the law to allow the UK Government to invest directly in communities in Wales, Scotland and Northern Ireland has now passed. We no longer have to wait for the Welsh Government to act.

Barry has been ignored for far too long by the Welsh Government. This is our chance. Our Barry Making Waves project provides the next step in the development of Wales’s largest town. It is a hugely exciting project, supported far and wide, and meets the aspirations that community groups and I have held for many years. Barry is a fantastic place to live, work and visit. Most recently, it has become best known to many from the BBC comedy “Gavin and Stacey”, but the town has a long, proud history steeped in coal exports, built on the back of the Barry Dock and Railways Act 1884. The Act was passed to develop a railway line from the valleys, to create a coal-exporting facility in town, and to break the monopoly of neighbouring Tiger bay.

The railway line also provided the connection for millions of tourists to visit the fantastic coastline every year, notably Whitmore bay, and, since the post-war period, the Butlin’s holiday camp, which has long since closed. That highlights the economic activity and relative prosperity that existed throughout much of the previous century. However, with the closure of the south Wales coalmines, changes to larger ships and ports, and overseas holidays becoming commonplace, Barry was left looking for a new focus.

I also want to point out that, although coalmining communities have rightly received significant sums of public money over decades to support their transition to new industries, Barry was left without, because it exported rather than mined coal. Furthermore, as west Wales and the valleys received more than £5 billion in new aid since 2000, the quirks of the map and EU regulations meant that Barry, with some of the most deprived communities in Wales, did not qualify as a priority area. As a result, very small sums were available for community programmes, rather than for significant infrastructure development.

The point I am making to the Minister is that other areas in need have been supported in their economic transition, but Barry has missed out. In spite of that, Barry has made huge strides in its regeneration over the past 15 years or so, with Barry Island, supported by the “Gavin and Stacey” phenomenon, which provided confidence and a renewed interest. The waterfront development has modernised the town and brought new housing. Campaigning groups, such as Pride in Barry, notably led by Paul Haley, and FocusBarry, led by Dennis Harkus, galvanised the community’s ambition, and local developers such as Simon Baston, took significant risks with their own investments in developing Goodsheds and former pumping station projects.

It is a town, however, that needs support to move to the next step of development. The data speaks for itself. The Welsh indices of multiple deprivation show that the most deprived communities in Wales over decades have persistently been in Barry. Five areas were among the 10% most deprived wards in Wales in 2011. That is in spite of being just a short distance from the relative affluence of Cardiff and the relative prosperity of the rural Vale. Three areas in Barry remain at the bottom of the league table. Levels of productivity are much lower than the UK average, at £14,706. The town has relatively few employment sites, and most employees commute to Cardiff to work every day.

We need to recognise, however, the positive changes that have taken place. Barry Island has been transformed to a year-round resort enjoyed by locals and visitors alike. The docks area, now referred to as the Waterfront, has been refreshed and regenerated, and a new Cardiff and Vale College campus is to be developed to support new skills.

With the help of the levelling-up bid, the town’s redevelopment will move to the next level. The Barry Making Waves project will put rocket boosters under the regeneration ambitions. It is a bid for £19.9 million of levelling-up funds to release a £32 million project. The central feature of the levelling-up bid is a 400-berth marina, which will make the most of the docks area; attract more visitors and increase spend to the community; create jobs, from engineering to hospitality; transform the image of the town; and complete the western side of the Waterfront development. It will have a new flexible 30,000 square feet hot-desking workspace to enable many of the professionals who have moved into the town to the new housing to work locally, rather than travel to Cardiff.

The proposal builds on a small-scale model elsewhere in the town, where demand is strong and the business and environmental outcomes meet local, Welsh and UK aspirations. The plan includes a 2-acre park with an events space, ensuring it remains an open, public area for everyone to enjoy, from Barry and beyond, rather than just the immediate local residents.

[Jim Shannon (Strangford) (DUP)]

I congratulate the right hon. Gentleman on bringing forward this proposal and on his assiduous efforts as an MP on behalf of his constituency. He mentioned Barry and beyond. Beyond Barry, there is my constituency of Strangford. When it comes to levelling up—I welcome the Minister to her place and I look forward to her contribution—the Government have committed to levelling up the whole of the United Kingdom of Great Britain and Northern Ireland, and I want to ensure that we in Strangford and Northern Ireland also have the same opportunities to level up. Does the right hon. Gentleman agree? Barry is great, and he should be doing that, but it is important for us, too.

[Alun Cairns]

I am grateful to the hon. Gentleman for making those points, which allows me to underline some points that I touched on earlier. Economic development has generally been a devolved function. Therefore, investing in communities and attracting new jobs and companies has been a devolved, rather than a reserved, responsibility. I am a former Secretary of State and the representative of Barry, but I have also seen communities in Wales, Scotland and Northern Ireland that the devolved Administrations did not have the capacity to focus on because there were more deprived areas elsewhere. Therefore, the UK Government needed to step in.

There is also politics at play. I am concerned that the Vale of Glamorgan does not receive the Welsh Government’s support because they choose to prioritise the valley heartlands, where their party is strongly represented. This is an opportunity for the UK Government to reset that balance and invest in needy projects across the whole of the United Kingdom, whether in Northern Ireland or Wales, so that communities that have been left behind have the chance to shine in the sun.

As well as the central feature of the marina, the 30,000 square feet hot-desk workspace and open parkland, the eastern side of the dock will also have a watersports facility that will allow local residents of all backgrounds to access the water. That is hugely popular with community groups. I declare an interest: I am a trustee of the Ocean Watersports Trust Vale of Glamorgan, which will occupy that building. Importantly, that project will be in partnership with Cardiff and Vale College to further support tourism and skills development. That also complements the new college building that is being constructed just a short walk away.

The whole scheme, the whole Barry Making Waves project, is low risk—low risk to the Treasury, to the Department for Levelling Up, Housing and Communities, and to the local authority—because it has only two central partners: the local authority and Associated British Ports. It also has a high cost-benefit ratio that will meet the deep-rooted structural challenges in Barry, provide opportunities to many who have been left behind, and correct a deficiency in public funding support that has existed for decades. It is understandable that the Welsh Government have prioritised west Wales and the valleys, but it is regrettable that Barry has been left to reinvent itself without support compared with other areas, as the hon. Member for Strangford (Jim Shannon) mentioned.

The levelling-up fund and shared prosperity fund were designed to meet these types of challenges in communities such as these, across the whole of the United Kingdom. I played a part in planning the policy and sought to ensure that communities across the whole of the UK that have been overlooked because of quirks of maps, EU regulations or devolution, or simply because political will has driven investment elsewhere—communities that did not fall into those favoured categories—could benefit. Such is the interest in the Barry Making Waves scheme that the Westminster-based think-tank Onward has conducted a study on Barry’s challenges and ambitions. Although the report is not yet published, I am confident that it will underline many of the points I have made, and I hope the Minister will look at that report when Onward publishes it, so strong is the interest in that regeneration project.

Finally, I want to recognise that Barry Making Waves is a springboard project that will attract other development opportunities to Barry. I am in discussions with private developers that are prepared to spend tens of millions of pounds on developing other employment sites on the back of that transformation. As well as the merits of the project in its own right, it stands as a catalyst for other private development opportunities, which include ambitions for a hotel—again, building on the strengths of the Barry Making Waves project and the renewed tourism offer.

In closing, I draw the Minister’s attention to the capacity issues. The Vale of Glamorgan is a small local authority, particularly by UK standards, and as I have stated, it does not have experience in submitting bids for large-scale capital projects because we simply did not qualify. The project has therefore taken a huge amount of effort and focus, and I pay tribute to Marcus Goldsworthy and Philip Chappell and their team from the local authority for their work in bringing those strands together and working closely with me and others to ensure that such a strong, credible bid has been made. I urge the Minister to look closely at the quality of that bid, but also to look at it in the context of a community that has not received the support it deserves from the Welsh Government or the European Union. This is Barry’s time to shine.

Alcohol Taxation

Debate between Jim Shannon and Alun Cairns

Thursday 7th July 2022 Commons Chamber

[Alun Cairns (Vale of Glamorgan) (Con)]

I beg to move,

“That this House has considered Alcohol Duty and tax on alcohol.”

I am grateful to the hon. Member for Gateshead (Ian Mearns) and the Backbench Business Committee for selecting this important topic for consideration, and to all Members across the House who supported the case that it should be considered. This debate is hugely important to a large number of businesses across the country—the hospitality sector in general, brewers, vineyards, distillers and retailers, employing hundreds of thousands of people. A disproportionate amount of them will be small businesses with younger employees, so getting this policy right really matters.

I start by paying tribute to the Government for recognising this Brexit opportunity. Taxation and alcohol duty has been needlessly complicated for too long, yet the UK was tied to EU restrictions preventing change. The Government set out their intentions to review the structures in March 2020, followed by a consultation on their proposals in October last year. The Government’s stated aims are to make the system simpler, more economically rational and less distortive, and to reduce the administrative burden. It is fair to say that these positive intentions are included in the thrust of the proposals. The consultation is welcome because it creates the opportunity for hon. and right hon. Members, and the industry, to respond and to further develop the plans. My comments are aimed at encouraging the Minister to refine the proposals further now that the industry, consumers and officials have considered how they would work in practice.

On beer duty, there has rightly been a warm welcome for the lower duty on draught beer. There has also been a recognition that the proposed 5% reduction should also apply to kegs and casks of 20 litres rather than the 40 litres set out. There has been a strong indication from the Treasury that this may happen, and I ask the Minister to confirm her intentions. I would also press for a greater reduction than 5% a pint in order to further support the industry, and pubs in particular. New research published this week highlighted that England and Wales have 7,000 fewer pubs than just 10 years ago. We all recognise the important role pubs play in our community and society at large, and also in providing a watching influence on people who enjoy having a drink rather than their being encouraged by the cost incentive to drink at home.

The plan to widen the reduced rate from 2.8% to 3.4% ABV is also a positive move, but a minor adjustment to 3.5% would resonate much better, and enable the industry to innovate further. To help to protect smaller brewers from the larger operators who may simply adjust their recipes to take advantage, it is important that the relief that they currently receive under the small brewers relief fully applies at this level. It would also make this element competitive with EU directives, and provide further support to small businesses within the industry.

[Jim Shannon (Strangford) (DUP)]

I commend the right hon. Member on bringing forward this debate on an important issue. The past few years have impacted greatly on local pubs, bars and restaurants—they are the ones who have suffered. At the same time, Tesco and Asda, to take just two examples, can sell exorbitant amounts of alcohol with low tax while others are left suffering. Does he feel that with the Government’s proposed steps, which he will speak about later—lowering alcohol taxation and encouraging people to support local—pubs can pick up the business they once had and have lost? Does he agree that that is a positive way forward?

[Alun Cairns]

The hon. Member makes an extremely important point. As I said, some people are encouraged to drink more at home by the discounted prices offered by the large retailers. I would add that in Scotland and Wales—I am not so familiar with the position in Northern Ireland—the retailers receive the extra differential with minimum alcohol pricing, in comparison with what is available in England. That gives some room for the Treasury to react positively to support the pubs and brewers, as he and I seek to underline.

The small brewers relief has been proven to deliver major benefits. It enables small brewers to compete with larger operators and to innovate and generate new options for consumers. It will be replaced by the small producers relief to offer similar or common benefits to the wider sector and to prevent the current cliff edge. Again, the Government’s objectives are positive, but I am concerned that the proposed changes introduce significant complexity to the process. Moving from 5,000 hectolitres at a 50% discount, to a maximum of 2,500 hectolitres at a 50% discount, tapering up to a 100,000 hectolitre maximum at up to 8.5% ABV, along with a cash limit and an average ABV measure, is much more complex than it needs to be. It is hard enough to say, let alone follow the process. It also makes it much more unpredictable for the businesses we are seeking to encourage to innovate, to invest and to create wealth at the smaller end of the scale.