Financial Markets and insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021

John Glen Excerpts

Thursday 24th June 2021 General Committees

[The Chair]

Before we begin, may I remind Members that we have moved to one metre-plus social distancing in general Committees, in line with the Chamber and Westminster Hall. Members should continue to sit only in places that are clearly marked. I also remind Members that Mr Speaker has stated that masks should be worn in Committee except when speaking and unless Members are exempt.

Hansard colleagues would be grateful if Members could send any speaking notes to [e-mail].

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

I beg to move,

That the Committee has considered the draft Financial Markets and Insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021.

It is a pleasure to serve under your chairmanship, Mr Roberston.

As the Committee will be aware, prior to the end of the transition period, the Treasury introduced more than 65 statutory instruments under the European Union (Withdrawal) Act 2018. This was a significant programme of legislation. These SIs covered all the essential legislative changes that needed to be in law to ensure we had an effective and coherent financial services regulatory regime at the end of the transition period. This SI amends a transitional regime created in an earlier financial services EU Exit instrument, to ensure that the transitional regime continues to provide continuity for UK firms, as was originally intended.

The original SI, which this instrument amends, onshored the insolvency-related protections that are provided to systems under the EU settlement finality directive—or SFD. These systems are financial market infrastructure such as central counterparties, central securities depositories and payment systems, which provide essential services and functions relied upon by the financial services sector. Prior to the end of the transition period, if an EEA-based system was designated under the SFD, it received specific protections from insolvency laws across all EEA states and the UK. This meant that, where a designated system had received funds or securities from a system user—for example, a UK bank—then those funds or securities could not be clawed back in the event of the UK bank being subject to insolvency proceedings. In treating transactions made through a designated system as final and irreversible, this framework ensured that these vital elements of the financial plumbing were not at risk where individual members were in insolvency procedures.

Without these protections set out in legislation, there would be an increased burden on members of these systems, given that they would have to provide further assurance that, in the event of insolvency, payments they had made to a system could not be reversed. This could result in increased costs or even loss of access to providers of financial market services who need to use these systems in the EEA.

In the SI that we are amending today, a UK framework was established to allow any non-UK system to apply to the Bank of England for designation, so that it could receive settlement finality protections under UK law. It also established a temporary designation regime to provide UK insolvency protections for a period of three years to existing designated EEA systems that intended to apply for permanent designation under the UK’s framework. The purpose of temporary designation is to allow time for applications to be processed by the Bank of England, while ensuring continuity of access for UK firms to relevant EEA systems.

However, there is a requirement for EEA systems in the transitional regime to submit an application by 30 June 2021—next Wednesday—otherwise they will immediately lose the protections provided for in the regime. This instrument amends the consequences of failing to apply by this deadline. Instead of immediately losing settlement finality protections under the temporary designation regime, EEA systems will retain protections for an additional two years. This ensures that UK firms which are using those EEA systems have sufficient time to put mitigants in place should access to those systems be impacted.

The Treasury has worked closely with the Bank of England and the Financial Conduct Authority to prepare this instrument. We have also engaged extensively with the financial services industry on the instrument to which this SI relates. I should also note that the Secondary Legislation Scrutiny Committee has reported on this SI as an instrument of interest. We have answered all questions pertaining to that, and the SI passed through the Lords a few weeks ago.

In conclusion, this SI is necessary to provide certainty for UK firms, and I commend these regulations to the Committee this morning.

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[John Glen]

As ever, I am grateful to the right hon. Gentleman for his contribution. I do not think he raised any substantive points and do not want to detain the Committee with a wider political discussion. All I would say is that the Government’s view is that this instrument is necessary to ensure that the transitional regime for the settlement finality protection of EEA systems continues to provide that continuity for UK firms. About 37 systems are in play, and we anticipate that the vast majority will have made applications by next week. I will continue to do whatever is necessary to protect the integrity of the system. I commend the regulations to the Committee.

Question put and agreed to.

Oral Answers to Questions

John Glen Excerpts

Tuesday 22nd June 2021 Commons Chamber

[Mr Toby Perkins (Chesterfield) (Lab)]

What assessment he has made of recent trends in personal credit availability for self-employed people.

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

The Government have put together an unprecedented package of support for the self-employed, including the self-employed income support scheme, the temporary £20 per week increase in the universal credit standard allowance, and temporarily suspending the minimum income floor. The self-employed are also able to access the restart grant, the recovery loan scheme and business rates relief.

[Mr Perkins]

I am grateful to the Minister for that answer. However, my experience with some self-employed people in my constituency is that, having been self-employed for several years and accepted support from the self-employed scheme, if they then try to get credit, they are told that because they were on that scheme they are no longer eligible for credit, even though there is no reason to suspect that they will not be able to carry on being a guitar teacher, or whatever it is that they do, after the crisis is over. What can he say to the banks to ensure that they take a sensible approach to these people, who have perfectly sustainable businesses that have been suspended temporarily because of the Government’s restrictions but are just as good a credit risk as they were three or four years ago?

[John Glen]

The hon. Gentleman makes a very sensible and worthwhile point on this matter. We are looking closely at the Financial Conduct Authority’s “Financial Lives” survey, which indicates the degree of liquidity that exists. I work closely with the lenders on affordability assessments for the self-employed. I am happy to commit to continue to keep this matter under review and to receive further representations from him.

[Sir Robert Neill (Bromley and Chislehurst) (Con)]

What assessment he has made of the adequacy of the support provided to the culture and arts sector during the covid-19 outbreak.

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

The Chancellor set out the Government’s strategy on financial services to the House in November—a vision of a sector that is more open, more technologically advanced and a world leader in the use of green finance, serving the communities and citizens of this country. Since then, we passed the Financial Services Act 2021 in April to begin the necessary reforms to our framework, and we have agreed text with the EU for a regulatory co-operation forum.

[Sarah Atherton]

There is no doubt that all should be done to support British businesses to export, no more so than in my constituency of Wrexham, which houses one of the largest trading estates in the UK. Businesses are keen to grasp these opportunities—none more so than Matclad, a specialist clay brick slip manufacturer, which is already reaping the benefits of exporting. Does my hon. Friend agree that schemes such as the parliamentary export programme, which I recently took part in, are an excellent opportunity?

[John Glen]

I am very happy to agree with my hon. Friend. I experienced that myself with my hon. Friend the Member for North Wiltshire (James Gray). The parliamentary export programme is an excellent way of getting that ambition to export out across the country, and it is just another example of this Government’s commitment to grow exports. My hon. Friend the Member for Wrexham (Sarah Atherton) may also be interested to know that I shall be visiting Cardiff tomorrow to meet the first cohort of FinTech Wales’s FinTech Foundry, a new accelerator programme that will support firms as they seek to build their footprint.

[Chris Grayling]

My hon. Friend knows of my concern about the protectionist attitude towards financial services that the European Union has shown over the past few months, and the risks to the City that result from it. We have President Macron hosting people from Wall Street next week, and we have the unlocking of travel in the European Union, which will help the financial services sector there. I hope that the Chancellor and the Minister will do everything they can to encourage ministerial colleagues to do the same here, but will the Minister take whatever responsible steps are necessary in modifying our regulations to ensure that the City and our financial services sector have a strong, competitive future regardless of the behaviour of the European Union?

[John Glen]

I thank my right hon. Friend for his representations on this matter, and I heartily agree with him. We are promoting the international role of the sector and developing ambitious trade and regulatory relationships with other jurisdictions. We keep all these matters under review. We have taken on board the work of the taskforce on innovation, growth and regulatory reform, and just after Question Time, the Chancellor and I will be meeting representatives of banks as we seek to work with them to make those interventions that our financial services sector needs.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Financial services were not even part of the Brexit agreement that the Government negotiated, because they never made them a priority. Equivalence arrangements are nowhere in sight, £1 trillion-worth of assets have been moved abroad, and now food and drink exports to the EU have fallen by 47% in the first three months of the year. The Government estimate their new trade deal will add just 0.02% to our GDP. Is the sight of Ministers doing a lap of honour for that trade deal not the equivalent of asking our export industries to give thanks for losing a pound and finding a penny? When will the Government actually help our industries with the red tape that is baked into the agreement that they negotiated?

[John Glen]

I do not accept the right hon. Gentleman’s characterisation of where we are. On financial services, as I hope he knows by now, we have deep dialogue across a number of jurisdictions. That is an ongoing process. If I think about the work we are doing with Brazil, India and China and the dialogues we are having with Switzerland, there is no end to this Government’s ambition to improve our financial services’ relationships and deepen the opportunities that Brexit has given us.

[Gavin Robinson (Belfast East) (DUP)]

What industries his Department is planning to include in the sector visions set out in the Plan for Growth.

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[Jack Lopresti (Filton and Bradley Stoke) (Con)]

What steps his Department is taking to encourage home ownership.

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

The Government are committed to helping people own their own home. Our new mortgage guarantee scheme is increasing the availability of mortgages for credit-worthy households who only have a 5% deposit, helping them realise their dream of home ownership. The lifetime ISA provides a bonus to those under 40 saving towards a home, worth up to £450,000.

[Dr Lewis]

I refer to my entry in the Register of Members’ Financial Interests. Last week, The Sunday Times detailed the colossal sums imposed on ordinary people by rapacious freeholders and reckless developers. Why should anyone risk purchasing a lease on a residential flat if we fail as a Government to protect innocent leaseholders from bearing the costs of defective extra storeys or defective extra cladding forced on them by those who are actually responsible for such terrible defects?

[John Glen]

I thank my right hon. Friend for his question. The Government are investing more than £5 billion in building safety, including an additional £3.5 billion announced this year for the remediation of unsafe cladding for all leaseholders living in high-rise residential buildings. We are also introducing a new tax on the UK residential property development sector and a new levy on developers of certain high-rise buildings to help pay for cladding remediation costs.

[Jack Lopresti]

Does my hon. Friend agree that the mortgage guarantee scheme has in a short time seen a dramatic increase in the availability of 95% mortgages, which will make home ownership a realistic goal for people aspiring to be homeowners?

[John Glen]

My hon. Friend is absolutely right. Since the scheme has been up and running—as he says, it has been a matter of only a few weeks—we have seen the provision of 95% mortgages expand from just five to 192. This is a significant change, and I am grateful to the industry for the moves that it has made, with Government support.

[Mohammad Yasin (Bedford) (Lab)]

What assessment he has made with the Secretary of State for Education of the (a) effectiveness, (b) value for money and (c) adequacy of the funding allocated to educational catch-up provision announced on 2 June 2021.

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[Ronnie Cowan (Inverclyde) (SNP)]

What steps his Department is taking to protect access to cash within local communities.

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

The Government recognise that cash is crucial to the daily lives of millions of individuals and businesses across the UK, and we have committed to legislate to protect access to cash. The Government made legislative changes to support the widespread offering of cashback without a purchase by shops and other businesses in the recent Financial Services Act 2021 and this summer we will consult on further legislative proposals for protecting cash for the long term.

[Ronnie Cowan [V]]

I welcome the announcement that there will be further consultation, but will the Minister confirm that any legislation introduced post consultation will include a requirement on banks to provide adequate access to cash withdrawals that are free at the point of service and meet the needs of local communities in both urban and rural areas?

[John Glen]

I can commit that we will look very carefully at the evidence on the best possible interventions to make. I am pleased that, as of March 2020, 98% of the population could access free cash within 3 km, but we have to come to terms with the fact that from 2009, when 56% of transactions were by cash, we were down to 17% by last year. We have to come up with appropriate legislation to meet that change.

[Mr Speaker]

We now come to the Chair of the Public Accounts Committee, Dame Meg Hillier.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Thank you, Mr Speaker.

More than 1 million people still use only cash, and approximately 4 million use cash regularly, so it is vital that they have access to it. This is now the second consultation that the Treasury is going through, but as the PAC has seen, all the distribution of cash is in the hands of private providers. Can the Economic Secretary give any indication of the type of legislation that he can introduce to ensure that if people are very poor, they can get cash? That does not mean going to the supermarket and getting it out when they do not even know what is in their own account.

[John Glen]

I congratulate the hon. Lady on her recent elevation. I take her points on board, but this is a complex area. There will need to be a range of interventions from industry, working with regulators. The LINK scheme already has a £5 million fund to help areas of great deprivation and provide extra access points for cash, but we need to recognise that technology will have to play a significant role. We will also use the extensive network of 11,500 post offices to make good on our pledge to ensure that access to cash remains available across the country.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

If he will make a statement on his departmental responsibilities.

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[Rosie Cooper (West Lancashire) (Lab) [V]]

Does the Chancellor have confidence in the Financial Conduct Authority’s ability to appropriately regulate and sanction companies that defraud their investors? Furthermore, does he believe that if it is found that the regulator has failed to prevent this fraudulent activity, the Government have a duty to compensate?

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

It is absolutely clear that there are significant lessons for the FCA to learn from the Gloster review, and I have regular conversations, including just last week, with the new chief executive on the transformation programme. He has employed five new senior executives to drive that programme forward urgently, and I look forward to seeing the results of that intervention.

[Sally-Ann Hart (Hastings and Rye) (Con)]

The role of regulation has been in the spotlight recently in an independent report by the taskforce on innovation, growth and regulatory reform, which was welcomed by the Prime Minister. The report highlights that as the EU has expanded, its internal processes and regulation have become slower and more bureaucratic, impacting on economic competitiveness. What steps is my hon. Friend taking to reduce onerous regulation as regards UK Treasury matters to ensure that all such regulation reflects our national interest and ensures that the UK maximises its economic agility and competitiveness?

[John Glen]

My hon. Friend rightly recognises the value of the TIGRR report, which we received last week, and we will be looking very carefully at those recommendations. In addition, my right hon. Friend the Chancellor chairs the better regulation committee, which has been established to drive forward a new strategy to deliver better regulation outside the EU. There is a lot of work to be done, but progress is being made.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab) [V]]

My constituent is a travel counsellor who established her home-based business nine years ago. She has been excluded from Government support because she is not registered for business rates, and when she tried to register for business rates in 2020, she missed the deadline by six days because of delays at the Valuation Office. What financial support can the Treasury give her and others like her, who remain excluded from support?

UK’s Financial Services Industry

John Glen Excerpts

Monday 21st June 2021 Commons Chamber

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

I congratulate my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) on securing this debate, and I thank him for the many insightful and constructive contributions he has made on financial services-related matters in this House. I welcome the opportunity to discuss the sector’s future. As he rightly noted, the financial services industry is incredibly important to the UK, and the huge support it has provided to the economy over the past 16 months is testimony to that. Its work with the Government has meant that businesses across the UK could borrow more than £75 billion to help them through the pandemic.

There is no doubt that the sector has an equally important role to play in our economic recovery and long-term future, by boosting our competitiveness and spreading opportunity and prosperity throughout the United Kingdom. As Members will recall, in November the Chancellor set out the Government’s vision for the future of financial services in a post-pandemic, post-Brexit world. The goal is simple: we want to help ensure that the sector is even more open, technologically advanced, and greener than ever before.

How will we do that? On openness, we are building new and deeper relationships with countries around the world. As my hon. Friend acknowledged, we have a clear opportunity to strengthen ties with markets beyond Europe, from the US to Japan, and ensure that we build new links with fast-growing markets in the east, including India and China. In particular, he mentioned the exciting possibilities from the ambitious mutual recognition agreement that we are pursuing with Switzerland. That will facilitate a broad range of wholesale financial services between the UK and Switzerland, on the basis of co-operation and high standards of regulation. It will also recognise that jurisdictions can achieve similarly high standards of regulation in different ways.

Our objective for the mutual recognition agreement is to improve cross-border financial services provision between the UK and Switzerland across insurance, banking, asset management, capital markets and market infrastructure. We now have the freedom to build new, deeper financial services relationships with like-minded global financial centres. The share trading obligation decision, which came into force earlier this year and allows UK shares to be traded on Swiss exchanges, is a good example of that freedom.

On the broader topic of international competitiveness, my hon. Friend asks for an update on the review of the level of the bank surcharge announced in the Budget earlier this year. It is critical that the UK’s bank taxes are set at a level that does not compromise our objective for a strong and competitive banking sector. That is precisely why, in the light of the changes to the headline rate of corporation tax, the Government will review the appropriate level of the bank surcharge with a view to making an announcement in the autumn on how we will ensure that the combined rate of taxes on banks’ profits does not increase substantially from its current level.

Let me stress that the Government recognise the value of certainty to financial services. The changes resulting from the review will therefore be legislated for in the Finance Bill 2021-22 and will have effect from the same time as the increase to the main rate of corporation tax. At no point will the banks be subject to a tax rate on their profits at or near 33%.

As well as working to ensure international competitiveness, we also have an extremely busy domestic agenda. Among our main areas of focus is getting the right regulation in place to take advantage of our new position outside the institutional frameworks of the EU. We are committed to upholding the UK’s high regulatory standards while ensuring that we maintain our position as a global financial hub, but we have an opportunity to do things differently. My hon. Friend rightly highlighted the importance of our future regulatory framework review; I welcome the important contribution of his all-party group and its recent report to this important debate. Let me remind the House of the details of the Government’s review: it explores the reforms needed to tailor our regulations to life outside the EU, and aims to establish an approach to financial services regulation that meets the specific needs of UK firms, markets and consumers.

I stress that Parliament will continue to have a vital role in shaping the financial services regulatory landscape. We believe that appropriate democratic accountability and scrutiny of the regulators is vital for an effective and legitimate regulatory framework. We agree that greater responsibility for regulators should be balanced with appropriate democratic policy input and oversight from Government and Parliament.

I turn to FinTech. When it comes to our vision for a more technologically advanced financial services sector, we are focused on helping our FinTech industry to stay at the cutting edge of global innovation. My hon. Friend asked about the implementation of the Kalifa review’s recommendations. As I outlined in my written ministerial statement in April, the Government and the regulators have confirmed a number of actions in response, including help for FinTech firms to recruit the best talent through our new scale-up visa scheme to attract global talent and boost the FinTech workforce; a regulatory scalebox that will enhance support for early-stage FinTech firms and allow them to grow as quickly as possible; the Treasury and the Bank of England’s new central bank digital currency taskforce to co-ordinate the exploration of a potential UK CBDC; Government support for an industry-led centre for finance, innovation and technology; and an initiative from the Department for International Trade to support UK FinTech firms to expand internationally and encourage overseas firms to establish a presence in the UK.

I fully recognise my hon. Friend’s interest in capital and wholesale markets. We want to help businesses to list and grow on stock markets in the UK when they are ready. We have therefore announced how we will take forward each of the recommendations addressed to the Treasury in Lord Hill’s recent listings review. I thank Jonathan Hill, my constituent, for the enormous amount of work that he put into that review.

We expect to consult on detailed policy proposals in the summer, including proposals to delete the share trading obligation and double volume cap, but rest assured, we will aim to deliver a rulebook that is fair, outcomes-based and supports competitiveness, while ensuring that the UK maintains the highest regulatory standards. Undoubtedly, the future of the UK financial services sector is linked to the future of our planet, and that connection is clearer than ever as we prepare to host COP26 in November.

I mentioned earlier that building a greener industry is a key element of our vision for financial services, and that is why a central focus of the COP26 finance campaign will be to ensure that every professional financial decision takes climate change into account. Furthermore, we believe that financial services have an important part to play in helping us to level up the country by generating jobs and growth, and we are focused on unlocking the hundreds of billions of pounds sitting with UK institutional investors to drive our country forward.

I thank my hon. Friend the Member for Hitchin and Harpenden and the hon. Member for Strangford (Jim Shannon) for contributing to a wide-ranging discussion of the issues facing this country’s financial services sector. Clearly, engagement will be crucial to help the UK financial services sector fulfil its full potential. I have been meeting industry actors very regularly and will continue to do so, so that I can understand how this Government can support them to achieve their goals, and I look forward to pursuing that work further. I am very grateful to my hon. Friend for raising the points that he has this evening.

Question put and agreed to.

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill (Second sitting)

John Glen Excerpts

Committee stage
Tuesday 15th June 2021 Public Bill Committees

[Mr McFadden]

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

[Mr McFadden]

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[Gareth Thomas]

[John Glen]

[Peter Grant]

[John Glen]

[Mr McFadden]

[John Glen]

[Mr McFadden]

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[The Chair]

[John Glen]

The letter has been published on the FCA’s website and sets out the comprehensive improvements that have already been delivered. The right hon. Member for Wolverhampton South East rightly referred to a number of those, and the hon. Member for Harrow West mentioned training and the empowerment of staff to make decisions and respond to those calls and representations from consumers. A further update will be provided in the FCA’s annual report, which will be published in July, and the FCA is committed to providing updates every six months until the programme is delivered. I would also note that the Treasury Committee intends to publish its report on the FCA’s regulation of LCF before the end of June, which the Government and the FAC will no doubt respond to as appropriate.

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[Mr McFadden]

[John Glen]

[The Chair]

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[Peter Grant]

[John Glen]

[Matt Rodda (Reading East) (Lab)]

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill (Second sitting)

John Glen Excerpts

Tuesday 15th June 2021 Public Bill Committees

[Mr McFadden]

My hon. Friend is right; the lacuna referred to in the report relates particularly to the allocation of ISA status. We asked Dame Elizabeth about that during the oral evidence session this morning. This is important because if there are two things that gave the mini-bonds the stamp of respectability, it would be that prominent in LCF’s advertising was the statement that it was regulated by the FCA, which at firm level was true but was not true of the mini-bonds being sold, and that they could be placed inside an ISA wrapper. Although it is, of course, true that people who invest in ISAs can lose money, for understandable reasons, the ISA wrapper has a certain cachet and a note of respectability.

Dame Elizabeth confirmed during oral evidence this morning that once the ISA wrapper status was allocated in 2017, the degree of investment in those mini-bonds rose markedly, because people would have thought they were investing in something safe. The adverts spoke, in fact, of a 100% record in paying out, when what we were really dealing with was a pyramid scheme where any pay-outs that did come came from other investors and not normal market returns. People thought they were investing in a safe bond. They did not think they were playing investment roulette.

The Economic Secretary also emphasised the uniqueness of the LCF case in his closing speech on Second Reading. He said:

“LCF is unique in that regard; indeed, it is the only mini-bond issuer that was authorised by the FCA and that sold bonds to on-lend to other companies.”—[Official Report, 8 June 2021; Vol. 696, c. 918.]

That is an exact replica, with both Ministers saying the same thing, and I suspect that that phrase has been very carefully honed inside the Treasury. A case had to be made for the uniqueness of this that could not be applied to other investment failures, so I think that form of words is very carefully chosen. However, the Minister may be able to tell us more when he responds.

The amendment is designed to tease out the following point, which I want to clarify with the Minister. Is it the case that even though a number of mini-bond issuers have collapsed in recent years, LCF is the only one that was authorised and regulated by the FCA? The Minister can intervene now or I am happy to wait. As I said to the Ministers on Second Reading, there must have been a discussion in the Treasury about developing a compensation scheme such as the one set out in clause 1. The question would have been asked: if we did this for LCF, what about investors in the Connaught fund or Blackmore Bond or any of the other investment schemes that were raised either on Second Reading or during the oral evidence session this morning? What was the nature of those discussions at the Treasury and what is it about LCF that makes the Government convinced that compensation is due in this case but not in the others? That is why our amendment calls for a report. Having taken the decision to compensate, we believe it would be in the public interest for the Treasury to set out the circumstances under which the taxpayer might be expected to pay when investors lose money. Is it about a firm being authorised by the FCA? Is it about commissioning a report by an eminent and independent figure such as Dame Elizabeth Gloster?

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

I am very happy to respond at length in my remarks at the end. The distinction we make is that LCF is the only FCA-authorised firm that was on-lending. That is the distinction; not so much the mini-bond issuance but the on-lending nature of it.

[Mr McFadden]

I am grateful to the Minister. I am just going through this series of things to try to clarify exactly what might place the taxpayer on the hook. Does it require the kind of report carried out by Dame Elizabeth Gloster and commissioned by the FCA into the collapse of LCF? Is there a clear threshold of regulatory failure to be passed? There was obviously regulatory failure in this case, but, as we saw from the witnesses this morning, people will argue that other regulatory failures have applied to other firms.

In this case, the regulatory failures were multiple. I do not want to go through them in detail because we will come on to other amendments in which they can be discussed, but I will mention a few of them briefly: misleading promotions by LCF using the halo effect have been regulated by the FCA yet not adequately dealt with by the financial promotions team at the FCA; a failure by the same financial promotions team to join the dots and alert other parts of the FCA, such as the supervisory team, on the implications of those misleading promotions; and multiple attempts to alert the FCA—more than 600 phone calls, according to annex 6 of Dame Elizabeth’s report. Yet, in the vast majority of cases nothing was passed up the line of pursuit, in large part because the mini-bonds were not regulated by the FCA, so the call-handlers’ instincts were, “You’re phoning us about something that we do not regulate, so we don’t have to pass it up the line”—even though the firm as a whole was regulated by the FCA.

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[John Glen]

It is a pleasure to serve under your chairmanship, Ms Ghani, and I thank all Committee members for their consideration of this important legislation.

As I set out on Second Reading, the Bill is a vital step in compensating LCF bondholders, and I will now turn directly to the consideration of amendments 1 and 7. As the right hon. Member for Wolverhampton South East set out, amendment 1 seeks to add a requirement for the Secretary of State to lay before Parliament a set of criteria for when the taxpayer should compensate investors for investment failures. In essence, it brings some clarity about when the mechanism that we are adopting, and hopefully funding, through the passage of the Bill would be used. Amendment 7 seeks to require the Secretary of State to lay before Parliament a report that assesses the impact of the Government’s compensating the customers of London Capital & Finance plc, as well as broader issues relevant to the mis-selling scandal.

I have listened very carefully to the speeches made during the passage of the Bill, on Second Reading and today, and to the evidence that we received this morning. I am particularly drawn to the remarks of my hon. Friend the Member for North East Bedfordshire, who acknowledged that a degree of risk is involved with any investment. With the right set of regulations and requirements, however, investors can be equipped with the right information to understand their risks and to make informed choices. The Government’s scheme appropriately balances the interests of both bondholders and the taxpayer, and it will ensure that all LCF bondholders receive a fair level of compensation for the financial loss they have suffered.

I turn now to compensation. I must reiterate that LCF’s failure was unique and exceptional. It is the only failed mini-bond issuer that was FCA-authorised and was selling bonds in order to on-lend to other companies. In conjunction with the FCA, the Treasury has looked at eight mini-bond firms that have failed in recent years, and LCF is unique in that respect. It is important to emphasise that the Government cannot and should not stand behind every investment loss. As I have probably said previously, LCF’s business model was highly unusual in both its scale and structure, and the extraordinary circumstances surrounding its collapse are unique.

[Peter Grant]

Has the Economic Secretary or any of his advisers actually read the promotional material that companies such as Blackmore Bond were giving out, to assess the number of times that words such as “guarantee” and “secure” were included in those documents? Does he not accept that something needs to be looked at there—maybe not for compensation this time, but certainly for tighter regulation in the future?

[John Glen]

I am grateful to the hon. Gentleman for his intervention because it takes me to the question of what the Government are doing to improve the efficacy of the financial promotions regime that he mentioned in respect of a different failure. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. Many of the promotions are obviously online. We will publish a response in the early summer to the consultation on a regulatory gateway for authorised firms approving the promotion of unauthorised firms. It is not an issue that we take lightly. Change, once in place, is designed to strengthen the regime by ensuring that firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be better able to identify when a financial promotion has breached the restrictions and take action accordingly, but that does not mean that the LCF failure is not unique and of a different scale and quality from some of the other failures.

[Mr McFadden]

I want to ask the Minister about the point he made about on-lending. What is the relationship between on-lending and the degree of regulatory failure? He is probably right that this was the only firm doing on-lending, but Dame Elizabeth’s report focuses on an egregious regulatory failure and she sets out all the different things that we will discuss. I suspect that the Government have found something about this case that is unique in order to insulate themselves from claims from other investment failures. I do not see the relationship between that uniqueness and the regulatory failures outlined in Dame Elizabeth’s report.

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[John Glen]

As the right hon. Gentleman set out, Dame Elizabeth’s report showed enormous failure in the way that the FCA discharged its responsibility for a regulated firm carrying out unauthorised activities. The point that he is making specifically is about the distinctiveness of the on-lending. There is a distinction between a firm, such as BrewDog or Hotel Chocolat, that raises funds for its own business activities and a firm that, although authorised, has not carried out regulated activities. Through the failure of the FCA’s oversight to look at the broader activities of the firm, it is impossible to verify whether those activities on lending bore any relationship to the raising of funds for that business. That is the distinctive difference. It is that failure of the FCA to execute its broader responsibility for an authorised firm carrying out an unauthorised activity in this distinct area that gives us licence to intervene.

On the specific issue of non-transferable debt securities, which are commonly known as mini-bonds, the Government are consulting on proposals to bring their issuance into FCA regulation. After listening to the evidence this morning, I would just make the point that Dame Elizabeth Gloster made 13 recommendations in her report. In the written ministerial statement of 17 December 2020 that was issued in my name all those recommendations were accepted—nine pertaining to the FCA and four to the Treasury. There has also been a subsequent undertaking by the FCA to report on progress against those actions and recommendations. The FCA is conducting a detailed piece of work to look at the issue of high-risk investments holistically, and that includes a discussion paper to get views on changes that can strengthen the FCA’s financial promotion rules for high-risk investments. This work follows the FCA’s ban on the mass marketing of speculative illiquid securities.

As the right hon. Gentleman rightly said, only three Government compensation schemes have been established in the past three decades: Barlow Clowes, Equitable Life and LCF. I acknowledge that, for some, they have not been complete and satisfactory. Despite many investment firms failing over that period, the fact that there have only been those three interventions on the scale that we are seeking to secure today demonstrates that this type of intervention is the exception and not the rule. Moreover, the particular circumstances of these three cases are quite different. For example, compensation was provided to Equitable Life investors, in most cases not because they had lost their original capital but because the firm had not met the expected returns on which many investors had based their future retirement plans. That contrasts starkly with LCF, where investors stood to lose their principal sum.

The common feature in each case is a degree of maladministration or misregulation—a major factor that the Government considered in deciding to launch the LCF compensation scheme—but the circumstances are idiosyncratic. It therefore would not be possible in any meaningful sense to set out the precise framework for Government to consider when establishing such schemes in future or to stipulate the threshold of misregulation ex ante.

That does not mean to say that as a Minister, and in my frequent engagement with the FCA, I do not look closely at all these matters. Indeed, I have done so throughout the process in getting to this point today. I believe that such a framework could create an unrealistic expectation among investors about the possibility of future Government compensation schemes and the misconception that Government will stand behind bad investments. That would create a moral hazard for investors and potentially lead individuals to choose unsuitable investments, thinking that the Government will provide compensation if things go wrong.

I want to address some of the points that the right hon. Gentleman made. He mentioned ISAs. As we announced in response to Dame Elizabeth’s report, HMRC and the FCA have now established an ISA intelligence working group to strengthen communication and information sharing between the two organisations. The group has met and agreed the structure and objectives, which is already resulting in information sharing between the two organisations.

In parallel, from this autumn, once recruitment of personnel is complete, HMRC will reinforce its ISA compliance regime with a programme of ISA manager audits. This will not focus on consumer protection, which does not fall within HMRC’s remit, but could detect technical breaches of the ISA regulations.

We are exploring steps to increase consumer understanding of the ISA wrapper. As the right hon. Gentleman rightly said, this has a large degree of consumer confidence vested in it. We need to tackle the misplaced perception that ISAs benefit from greater Government or regulatory assistance.

I have deep engagement with the FCA. I will speak later this week to the chief executive as part of my routine, regular engagement and I will relay the detailed comments of, in particular, the hon. Member for Harrow West on the degree of engagement of consumer groups versus the regulated firm’s representatives, and especially the case he is on at the moment.

We heard evidence this morning about the retention of one named individual. The chief executive has brought in five new people from outside the organisation in taking a balanced view on how to deliver a successful transformation programme. I urge him to continue successfully to implement the programme.

There are considerable principled and practical drawbacks to the amendment, which is why I ask that it be withdrawn.

[Mr McFadden]

I am grateful for the Minister’s response.

I am not entirely convinced about the relationship between on-lending and the decision to compensate. I am sure that the Minister is correct in the literal sense that this was the only regulated firm that was selling unregulated mini-bonds. I am not saying that the Minister is wrong, but from reading the report I believe that Dame Elizabeth would have made the same findings. The mini-bonds were not doing what it said on the tin: they were not on-lending but pyramid selling.

The degree of failure, the degree of investment loss and the degree of regulatory failure are not directly related to the point about on-lending: it is more substantial than that. I am not convinced that all the elements of the Government’s case add up. It looks to me as though they have had to find a unique element to insulate themselves from court action or other claims.

--- Later in debate ---

[The Chair]

Beautifully put, Mr Thomas. I now call the Minister to respond.

[John Glen]

I will obviously now move to consideration of amendment 2. I am grateful to the right hon. Member for Wolverhampton South East, who is an experienced and distinguished former Minister himself. He referred to the catastrophe word bingo. I do not want to address that particularly, but I will address the amendment, which seeks to add a requirement for the Secretary of State to publish a report setting out progress on the implementation of the 13 recommendations in the report by Dame Elizabeth Gloster.

I will also tell the right hon. Gentleman precisely what we have done, what I think the FCA has done, and where I think that takes us, and I will address his concerns, raised throughout this debate, on the perimeter, on the halo effect and some of the points that Dame Elizabeth Gloster made.

The Treasury accepted Dame Elizabeth’s four recommendations regarding the Treasury and we welcome the FCA’s commitment to implement all nine of her recommendations that apply to it. We are committed as a Government to act on Dame Elizabeth’s recommendations, to ensure that the regulatory system maintains the trust of consumers. I submit that progress has already been made in implementing the recommendations and I set that out during my evidence session for the Treasury Committee’s inquiry into the FCA’s regulation of London Capital & Finance on 21 April.

Regarding Dame Elizabeth’s recommendations for the FCA, I obviously welcome the FCA’s acceptance of them, and I am sure that the Committee will have noted its commitment to report publicly on its progress in implementing these recommendations and indeed on its wider transformation programme. I am sensitive to the criticism that this is an empty exercise where there is nothing specific that Parliament and Members can address. I would therefore draw attention to the fact that Charles Randell, the current chair of the FCA, provided a detailed update in his letter to me on 16 April.

--- Later in debate ---

[Mr McFadden]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[John Glen]

London Capital & Finance was an FCA-authorised firm that primarily offered an unregulated investment product, commonly known as mini-bonds, to retail consumers. It entered administration in January 2019, impacting 11,625 people who invested around £237 million. The Serious Fraud Office and FCA enforcement have launched an investigation into individuals associated with LCF. The Financial Reporting Council has also launched investigations into the audits of LCF. As the Committee will know, Dame Elizabeth Gloster led that independent investigation, which also revealed shortcomings in the FCA’s supervision of LCF. A complex range of interconnected factors contributed to the scale of losses for LCF bondholders, creating a situation that is unique and exceptional. While other mini-bond firms have failed, LCF is the only one that was authorised by the FCA and sold bonds in order to “on-lend” to other companies. As I have said before, LCF’s business model was highly unusual both in its scale and structure. In particular, it was authorised by the FCA despite generating no income from regulated activities. Bondholders were badly let down by LCF and the regulatory system designed to protect them, and I announced that the Treasury had set up a compensation scheme for bondholders who suffered losses after investing in LCF. The scheme will be available to all LCF bondholders who have not already received compensation from the FSCS and will provide 80% of the compensation that they would have received had they been eligible for FSCS protection up to the maximum cap of £68,000. The LCF scheme is expected to pay out £120 million in compensation to around 8,800 bondholders in total. Where bondholders have received interest payments from LCF or distributions from the administrators, Smith & Williamson, these will be deducted from the amount of compensation paid.

There are two main aspects of clause 1, which I shall explain in turn. First, legislation is required to establish the financial authority to enable the Treasury to incur expenditure in relation to the scheme. That will ensure that the Treasury complies with the 1932 Baldwin concordat and the principles of managing public money. Clause 1 provides the Treasury with the spending authority that will enable payments to be made to eligible bondholders. We are working on the details of that scheme but I hope that it will be possible to reimburse them within six months of Royal Assent.

Secondly, the Treasury intends to use the process set out in part 15A of the Financial Services and Markets Act 2000 to require the Financial Services Compensation Scheme to administer the scheme on behalf of the Treasury. Clause 1 disapplies the FCA’s rule-making requirement so that existing rules relating to the FSCS can be applied to the scheme without the need to undertake a lengthy consultation. That reflects the fact that existing rules have already been consulted on and avoids any further unnecessary delays to compensation payments. In addition, as the Treasury will pay for the scheme, there is not the same obligation to consult FSCS levy payers as there would be for rules that sought to make use of FSCS funds raised by the levy.

I submit that clause 1 is an essential step in the introduction of the LCF compensation scheme without which compensation payments cannot be made. I therefore recommend that the clause stand part of the Bill.

[The Chair]

I understand that the right hon. Member for Wolverhampton South East wishes to make a short contribution.

--- Later in debate ---

[Peter Grant]

The Minister referred to the fact that there are ongoing investigations in relation to LCF. Does he recognise that some of the individuals and intermediary businesses that are now under criminal investigation for their part in LCF also played a major part in other mini-bond scandals that I have written to him about separately? Although he made the point about the uniqueness of LCF, the aftershock of LCF is very definitely being felt in other mini-bond scandals that have happened since then.

[John Glen]

Out of courtesy, I am very happy to respond to my colleagues. The right hon. Member for Wolverhampton South East asked why the 80% figure was not 100%. As I have tried to explain through the submissions that I have made, the Government have been trying throughout to balance the interests of bondholders and the taxpayer to ensure that we have a fair level of compensation in respect of the financial losses incurred. The scheme is based on the FSCS level of compensation but, as he knows, it is 80% up to that cap of £68,000 to reflect the unregulated nature of the LCF product.

I emphasise that it is imperative to avoid creating the misconception that Government will stand behind bad investments in future, even where the FSCS does not apply. That would create a moral hazard for investors and potentially lead individuals to choose unsuitable investments thinking that the Government will provide compensation when things go wrong. To avoid creating that misconception, and to take into account the wide range of factors that contributed to the losses that the Government would not ordinarily compensate for, the Government will establish the scheme at the level of 80% of LCF bondholders’ initial investment up to the maximum of £68,000. With any investment, there is clearly a risk that sometimes investors will lose money, and the Government and taxpayer cannot and should not be expected to step in and compensate for every failure and every loss. It would not be right or fair for investors in non-regulated products to receive fuller compensation than those who have invested in regulated products, for which the maximum amount is capped at £85,000 under the FSCS.

On the remarks of the hon. Member for Glenrothes about the individuals involved in an ongoing serious fraud inquiry, I am not familiar with the detail, but obviously I am happy to receive any representations. I hope that brings satisfaction to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Loans to the Board of the Pension Protection Fund

[Matt Rodda (Reading East) (Lab)]

I beg to move amendment 3, in clause 2, page 2, line 7, at end insert—

“(3) No loan shall be made under this section until the Secretary of State has laid before Parliament an impact assessment of the means of repaying the loan, including specifically the impact on pension schemes from the Fraud Compensation Fund levy.”

This amendment would prevent the Secretary of State from making a loan to the Board of the Pension Protection Fund for the purpose of compensating eligible pension schemes until he or she has laid before Parliament an impact assessment of the Fraud Compensation Fund levy on different pension sectors.

United Kingdom Debt Management Office: Business Plan

John Glen Excerpts

Tuesday 15th June 2021 Written Statements

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

The United Kingdom Debt Management Office (DMO) has today published its business plan for the financial year 2021-22. Copies have been deposited in the Libraries of both Houses and are available on the DMO’s website, www.dmo.gov.uk.

[HCWS91]

Draft Payment and Electronic Money Institution Insolvency Regulations 2021

John Glen Excerpts

Wednesday 9th June 2021 General Committees

[The Chair]

Before we begin I would like to remind Members to observe social distancing, which is not a problem today. I remind Members that Mr Speaker has asked that masks should be worn in Committee except when speaking. Hansard colleagues would be most grateful if Members could send their speaking notes to [e-mail]. As people may have noticed, eagle-eyed, if Members wish to remove their jackets, given the inclement weather from a Yorkshireman’s point of view, they are very free to do so.

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

I beg to move,

That the Committee has considered the draft Payment and Electronic Money Institution Insolvency Regulations 2021.

A copy of the regulations was laid before the House on 26 April.

It is a pleasure to serve again under your chairmanship, Mr Davies.

The payments sector in the United Kingdom has seen rapid change over recent years, with people increasingly using card, mobile and electronic wallets to make payments. Firms today range from small remittance firms on the high street to FinTech giants with millions of customers. The growth of the payments sector has offered opportunities for UK businesses and consumers, with many using payment and electronic money institutions not only to make payments, but as their transactional banking provider to access their salaries and savings. Customers are now able to make payments that are faster, cheaper and more secure. However, as that sector has grown, so has the number of customers exposed to risk if those firms were to fail and enter insolvency.

There is evidence that existing insolvency processes for payment and electronic money institutions are not working effectively for customers. It is challenging for an administrator to start returning relevant funds until they have complete information on all claims to those funds. Gathering that information, potentially without key outsourced staff or access to the firms IT systems, can make insolvency a long and expensive task, during which time customers do not have access to their funds. They also face an increased chance of receiving a reduced claim at the end of the process as a result of high administration fees.

Recent administration cases have taken years to resolve, with customers left without access to their money for prolonged periods and receiving reduced monies as a result of high distribution costs. The regulations therefore propose to introduce a new special administration regime for payment and electronic money institutions and an extension of provisions under the Financial Services and Markets Act 2000 to those firms. The new regime is modelled on the 2011 special administration regime for investment banks.

The changes will help to make managing the insolvency of a firm a quicker and clearer process, ultimately leading to customers receiving their funds quicker and giving continuity and confidence to consumers and businesses in the event of a payments or electronic money firm being put into insolvency. The legislation also corrects a minor defect in recent legislation, which transposed and on-shored the bank recovery and resolution directive II.

The special administration regime for payment and electronic money firms is a new insolvency process that provides consumer protection objectives and a toolkit for insolvency practitioners to aid them in efficiently managing an insolvent payment or electronic money institution. The new regime includes bespoke objectives placed upon the administrator to ensure the return of customer funds as soon as reasonably practicable, to engage with relevant authorities and either to rescue or wind-up the institution in the best interests of creditors. It also contains useful provisions on matters such as continuity of supply, to ensure that key functions, such as the provision of IT services, are maintained and not lost at the point of insolvency, and provisions to ease transfers of business which would allow the administrator to move customers to a new provider. Importantly, it also provides bar date provisions, which, with appropriate consumer protections, set deadlines for customers to claim their money back. Once those deadlines have passed, administrators are able to begin making distribution of funds, rather than having to wait for everyone to claim in their own time.

I would like to note to the Committee that additional work is required in order to apply the special administration regime to firms located in Northern Ireland, and partnerships or limited liability partnerships located in Scotland. Around 1% of the 1,300 UK payments and electronic money firms are located in Northern Ireland, and there are no firms that are partnerships or LLPs based in Scotland. I have written to Ministers in the Northern Ireland Executive and Scottish Government and committed to rectify that as soon as is practicable in future legislation. In the interim, consumers will still benefit from the changes to the Financial Services and Markets Act 2000, and from the protections offered to the 99% of eligible firms, as it does not matter where in the UK the customer is located.

The instrument also provides for part 24 of the Financial Services and Markets Act to be applied to payment and electronic money institution insolvencies. The extension of those provisions will provide the Financial Conduct Authority with the same powers to participate and protect consumers in an insolvency process for those sectors as it does for other FCA-supervised firms. That includes the right for the FCA to speak at court hearings regarding the insolvency and a requirement for the administrator to work with the FCA during the insolvency process, ensuring that the FCA can work on behalf of consumers to get them their money back.

The regulations will protect consumers and inspire confidence in a modern and world-leading British financial services sub-sector, and I commend them to the Committee.

--- Later in debate ---

[John Glen]

I thank the right hon. Gentleman for his characteristically forensic but clear questions, and I am happy to try to respond. He raised a number of reasonable points about the nature of the provision for reimbursing customers who find themselves dealing with an insolvent provider. He also picked up on the fact that the institutions in question do not form part of the FSCS levy and the compensation scheme from that. However, they are subject to the Payment Services Regulations 2017, PSRs, and the Electronic Money Regulations 2011, EMRs. They impose a different regime, which is a safeguarding requirement to protect customer funds received for the provision of a payment service or e-money. That means that the firms dealt with under today’s SI must put a certain amount of capital aside or have an insurance provision for safeguarding. They are not completely without some provision, but it is just different from the levy pool that comes out of the FSCS, levy payment and membership of that pool.

The right hon. Gentleman asked about the cut-off process, the bar, and how reasonable that would be. Of course, that is underpinned by a court process and one of the provisions in the regulations is for the FCA to be a participant in that, to verify the exhaustive nature of steps taken to identify customers who will be subject to some of the pay-outs.

The right hon. Gentleman also asked about foreign exchange and the transfer of assets abroad. Those matters would ordinarily come under the provisions of the FCA, but I will look into those issues further and write to him on those two specific points. My instinct is that there is no distinction in terms of different treatment for different customers.

I am confident that the legislation will produce better outcomes for UK businesses and consumers in the payments and e-money sectors. The right hon. Gentleman rightly acknowledged the fast-evolving nature of the industry, and it is vital that we in the UK ensure that our financial services sub-sectors have appropriate consumer protection measures. I look forward to the full implementation of the regime. I think that it will provide greater assurance to consumers and a clearer pathway to resolution when firms go under. I commend the SI to the Committee.

Question put and agreed to.

PrivatBank (Recognition of Third-Country Resolution Action) Instrument 2021

John Glen Excerpts

Wednesday 19th May 2021 Written Statements

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

I wish to update the House on the steps that HM Treasury has taken in regard to public joint stock company commercial bank PrivatBank.

On 14 May 2021, I approved the Bank of England’s decision to recognise the bail-in by the National Bank of Ukraine and the Ukrainian authorities between 18 and 20 December 2016 of four English law governed loans made by UK SPV Credit Finance plc to PrivatBank, in accordance with section 89H of the Banking Act 2009. The Bank of England instrument which gave effect to the recognition decision will be laid before Parliament today and has been published on the Bank of England website.

The Bank of England and HM Treasury have independently reached the determination that the bail-in of the four loans was broadly comparable in anticipated results and objectives to an equivalent UK resolution, and that none of the conditions for refusal to recognise within section 89H(4) of the Banking Act 2009 was satisfied.

Decisions over whether to recognise a third-country resolution action are regarded by the Financial Stability Board as a key aspect of an effective cross-border resolution regime. Under UK law, the Bank of England is required to make a decision on whether or not to recognise resolution actions when requested to do so by a third-country resolution authority. That decision can only be made with the approval of HM Treasury.

[HCWS39]

Sale of Government-owned NWG Shares

John Glen Excerpts

Wednesday 12th May 2021 Written Statements

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

I can today inform the House of the disposal of £1.1 billion worth of Government-owned NatWest Group plc—NWG, formerly Royal Bank of Scotland, RBS—shares, representing 5% of the company, by way of an overnight sale via a competitive accelerated book build—ABB—to institutional investors. The Government’s remaining shareholding represents 54.8% of the company.

Rationale

It is Government policy that where a Government asset no longer serves a public policy purpose, the Government may choose to sell that asset, subject to being able to achieve value for money. This frees up public resource which can be deployed to achieve other public policy objectives.

The Government are committed to returning NWG to full private ownership, given that the original policy objective for the intervention in NWG—to preserve financial and economic stability at a time of crisis—has long been achieved. The Government only conducts sales of NWG shares when it represents value for money to do so and market conditions allow. This sale represents a further step forward for Government in exiting the assets acquired as a result of the 2007 to 2008 financial crisis.

Format and Timing

The Government, supported by advice from UK Government Investments (UKGI), concluded that selling shares by way of a competitive ABB process to institutional investors represented value for money for the taxpayer. The sale involved wall-crossing, an established market procedure designed to improve the chances of reaching the widest possible range of investors, executing successfully and achieving the best price for the taxpayer. Wall-crossing is commonly used in transactions of this sort and involves contacting a number of institutional investors hours before the transaction launch on a confidential basis to give them more time to consider participating in the sale and to provide UKGI with feedback which can be used to optimise the offering. The institutions were selected on the basis of objective criteria and do not receive preferential treatment in the allocation. UKGI intends to keep disposal options under review and will continue to consider further transaction options that achieve value for money for the taxpayer.

ABBs are a well-established method of returning Government-owned shares to private ownership, while protecting value for the taxpayer. The first two sales of NWG shares were completed by way of ABBs—in August 2015 and June 2018, and this method was also used in the sell-down of the Government’s stake in Lloyds Banking Group.

This is the fourth sale of NWG shares undertaken by the Government, following previous disposals in August 2015, June 2018 and March 2021.

The sale concluded on 11 May 2021, with institutional investors purchasing a limited number of Government owned shares. A total of 580 million shares—5% of the bank—were sold at the price of 190p per share. This represented a 3.6% discount to the 10 May 2021 closing price of 197.05p. A small discount to market price is necessary and expected in a market facing the sale of such a large volume of shares overnight. UKGI’s view, having taken advice from their privatisation adviser, Goldman Sachs, and their capital markets adviser, Rothschild & Co, is that the final price achieved in the transaction represents fair value, based on the current and future prospects of NWG, and that the transaction achieved value for money for the taxpayer. Following this transaction, the Government’s shareholding will stand at 54.8%.

Details of the sale are summarised below:

Oral Answers to Questions

John Glen Excerpts

Tuesday 27th April 2021 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

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

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

Throughout the pandemic, the Government have sought to support businesses across the UK. To do this, we have put in place a package of economic support for businesses and individuals worth £352 billion since the start of the pandemic. The Office for Budget Responsibility and the Bank of England have highlighted that without this intervention the UK economy would be significantly worse than it is today.

[Mrs Murray [V]]

What additional financial assistance can my hon. Friend give the all-important tourism sector in Cornwall to ensure that it is fully ready to greet the G7 in June?

[John Glen]

Cornwall hosting the G7 is a fantastic opportunity. I know that my hon. Friend has welcomed this chance to showcase all that Cornwall has to offer. Many organisations in the broader tourism sector have benefited from business grants of over £34 million provided to her constituency of South East Cornwall, as well as business rates holidays and a temporary reduction in the rate of VAT. The Ministry of Housing, Communities and Local Government has recently announced the £56 million welcome back fund to support safe local trade and tourism as economies reopen.

[David Simmonds [V]]

I thank my hon. Friend for that answer and particularly welcome the support being offered in the form of extended business rates relief. Looking to the future and with reform of business rates in the pipeline, what discussions have taken place with Department for Business, Energy and Industrial Strategy colleagues about the potential to balance the need to secure the correct revenue to support vital local government services and boosting high streets like mine in Ruislip, Northwood and Pinner through the reform of business rates?

[John Glen]

My hon. Friend brings a great deal of expertise and experience to this matter. The Government have committed to over £16 billion in business rates support for eligible retail, hospitality and leisure property since April last year. When combined with small business rates relief, this means that three quarters of a million retail, hospitality and leisure properties in England will pay no business rates for the 15 months from 1 April last year. The Government are, however, undertaking a fundamental review of the business rates system and have invited stakeholders to contribute their views and ideas for reform. I know that my hon. Friend will also be very pleased to see the £16.9 million of business grants that his constituents have received.

[Kevin Hollinrake]

Warren Buffett once said:

“What we learn from history is that people don’t learn from history.”

With a 50% rise in the number of companies in significant financial distress, to prevent repeating the historical mistakes of post the last financial crisis, inflicting all that scandalous treatment on SMEs, will my hon. Friend consider working with the banks to extend the very fair and sensible provisions of the pay as you grow scheme and bounce bank loans, and also transfer that into CBILS—coronavirus business interruption loan scheme—loans?

[John Glen]

The Treasury has, as my hon. Friend will know, amended the CBILS rules to allow lenders to extend loan terms from six to a maximum of 10 years, and that would assist borrowers in that repayment. CBILS term extension will be offered at the discretion of lenders, unlike pay as you grow options for bounce back loans, because they are different in terms of the guarantees that the Government have offered. Extensions are limited to those borrowers that lenders assess are in difficulty and will benefit from that extension, and only for the duration required. That customised approach, as I am sure he would understand given his vast business experience, is appropriate given the nature and scale of that different intervention.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

When Lex Greensill was given his No. 10 business card, he had no contract and no job description, and there have now been reports that during the pandemic, the financial empire that he built may have lent Government-backed money based on invoices to companies that had never done business with his client, GFG, some of which say they had no intention of doing so. Will the Minister look into the issue of how this financing was structured and ensure that hard-working British steelworkers do not pay the price for Greensill’s collapse?

[John Glen]

I thank the right hon. Gentleman for his question. I can assure him that this Government are fully committed to examining all those matters through the review process and complying with all requests for information in order to get to the bottom of this matter.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

What fiscal steps he is taking to support self-employed people as covid-19 restrictions are lifted.

--- Later in debate ---

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

What steps he is taking with the Secretary of State for Business, Energy and Industrial Strategy to ensure the equitable distribution of coronavirus business support schemes.

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

The Government have provided £25 billion in cash grants for businesses, and that includes the £5 billion of funding allocated at the March Budget for restart grants and the discretionary additional restrictions grant fund. My right hon. Friend the Business Secretary has been working closely with local authorities to ensure that these grants are delivered as swiftly as possible and directed towards the businesses that have been most impacted by the pandemic.

[Mrs Lewell-Buck [V]]

It is clear that equitable distribution of covid business schemes is not a priority. Only those on this Treasury Bench would have the gall to claim fairness when the Chancellor and his Ministers were consumed with pulling out all the stops to support their friend the former Prime Minister on behalf of Greensill, while 3 million people were excluded from support schemes, some so distraught that they took their own lives. So to clear this up once and for all, can the Minister explain what news did Treasury officials report at a meeting on 24 April that made Greensill representatives “very pleased”?

[John Glen]

As I have said previously, the Government are committed to co-operating fully with all reviews on these matters. I do not accept what the hon. Lady has said with respect to the schemes that the Government have put forward over the past 14 months. Her constituency has had £16.7 million in business grants and 1,206 bounce-back loans totalling £30 million. In addition, 12,700 of her constituents have benefited from the furlough scheme, and 2,000 have benefited from the self-employed income support scheme. That is a significant contribution to help her constituents.

[Dr Julian Lewis (New Forest East) (Con)]

How many promoters and operators of schemes subject to the loan charge have been prosecuted for promoting and operating those schemes.

--- Later in debate ---

[Bob Blackman (Harrow East) (Con) [V]]

On 31 January, in answer to the debate on justice for Equitable Life policyholders, this House was assured that all records were being retained and would be available in the event of their being needed. Equally, we were assured that there were no plans to destroy those records. I was therefore shocked that the Public Accounts Committee, in its hearing last week, was informed by Treasury officials that the records had been destroyed and would not be available. That makes getting justice for Equitable Life policyholders more expensive, so will my right hon. Friend agree to meet me and a small delegation of the all-party parliamentary group for justice for Equitable Life policyholders, so that we can get to the bottom of how we can move this long-running saga forward?

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

There has been no change in the Treasury’s position since I updated the House in January 2019. The relevant records—the data relating to all payments made under the scheme—are retained, and will continue to be so for as long as that is legal. Contrary to the press reports, there are no plans to destroy records. There is a complaints process provided by the scheme, and those who are not satisfied may take their case to the independent review panel which resolved such cases before closure. Further to the oral evidence session to which my hon. Friend referred, the permanent secretary to the Treasury will be writing to the PAC to provide similar reassurance and clarification. Since the scheme has now closed, there will be no further funding on this matter.

[Sarah Olney (Richmond Park) (LD) [V]]

The Association of Accounting Technicians has published its response to the consultation opened by the Treasury on its plans to reduce air passenger duty, in which it argues that a reduction would be wrong, as it “contradicts and greatly weakens government policy on seeking to reach ‘net zero’ by 2050”. Why does the Government’s tax policy not support their net zero goals?

--- Later in debate ---

[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.

[Patricia Gibson (North Ayrshire and Arran) (SNP) [V]]

With the Prime Minister apparently determined to keep the VIP tax-break hotline open, and as questions remain over the No. 10 refurbishment and concerns over Government procurement are still not addressed, will the Chancellor explain whether he thinks it is time for an independent inquiry into the misuse of public funds?