Economic Crime Plan: Action 19

John Glen Excerpts

Wednesday 11th November 2020 Written Statements

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

As part of the Government’s July 2019 Economic Crime Plan^[1], the Treasury undertook to consider the case for a Government power to block listings^[2] on UK financial markets on the grounds of national security. This work has concluded and indicates that there are possible scenarios in which a proposed listing may potentially give rise to national security concerns. Therefore, alongside today’s introduction of the National Security and Investment (NS&I) Bill, the Government are announcing their intention to bring forward a precautionary power to block listings on national security grounds.

In designing this power, the Government will take full account of the fact that companies from all over the world come to the UK, as a world-leading financial centre, in order to raise capital. They are attracted by the depth, breadth and openness of our markets as well as London’s reputation for clean and transparent markets. This power will reinforce that reputation and help us maintain London’s status as a world-class listings destination. The Treasury will publish a full consultation to inform the design of the power, which we expect to launch in early 2021. Further information will be set out in the consultation document.



^[1] https://www.gov.uk/government/publications/economic-crime-plan-2019-to-2022/economiccrime-plan-2019-to-2022-accessible-version.

^[2] When a company wants to raise capital, it can do this through “listing” its securities on a public market, such as the London Stock Exchange (LSE).

[HCWS570]

Financial Services for the EEA: Ministerial Equivalence and Exemption Directions

John Glen Excerpts

Tuesday 10th November 2020 Written Statements

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

The Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 (S.I. 2019/541) provides powers for the Treasury to make equivalence directions and exemption directions for the European Economic Area (“EEA”) states, including the member states of the European Union (“EU”), before the end of the transition period.

I have today laid before Parliament eight directions which exercise the powers across an extensive range of areas. The directions cover 16 equivalence decisions in total, which serve to maintain the stability and openness of the UK financial services sector beyond the end of the transition period.

For the decisions below, it is both the legally binding requirements, and the effectiveness of the regulation and supervision of adherence to these requirements in the EEA states, which have been deemed equivalent on an outcomes basis.

The European Market Infrastructure Regulation (Article 13) Equivalence Directions 2020 determine that, for the purposes of paragraphs 1 and 2(a) and (d), of article 3 of the European market infrastructure regulation (intragroup transactions), the legal, supervisory and enforcement arrangements of EEA states are equivalent to articles 4 and 11 of the European market infrastructure regulation, as it will form part of UK law at the end of the transition period (“EMIR”). This decision paves the way for UK firms to seek or apply an exemption from the requirement to clear through a CCP or meet margin requirements for transactions with an EEA entity in the same group. The granting of this decision means these exposures can qualify as intragroup exposures in the credit valuation adjustment (“CVA”) calculation, ensuring that UK firms will in many cases not have to capitalise CVA on over the counter (“OTC”) exposures to EEA affiliates.

The Capital Requirements Regulation Equivalence Directions 2020 determine that each EEA state (i) applies prudential, supervisory and regulatory requirements equivalent to those applied in the UK, for the purposes of article 107(3) and 391 of the capital requirements regulation as it will form part of UK law at the end of the transition period (“CRR”); and (ii) applies supervisory and regulatory arrangements equivalent to those applied in the UK, for the purposes of articles 114(7), 115(4), 116(5), 132(3) and 142(2) of CRR. For UK firms, equivalence here ensures they will not be subject to increased capital requirements as a result of their EEA exposures.

The Solvency 2 Regulation Equivalence Directions 2020 determine that for the purposes of Commission Delegated Regulation (EU) 2015/35 (supplementing the solvency II directive on the taking-up and pursuit of the business of insurance and reinsurance): (i) the solvency regime of each EEA state that applies to certain reinsurance activities is equivalent to that laid down in the relevant UK law; (ii) the solo prudential regime of each EEA state is equivalent to that laid down in the relevant UK law; and (iii) the groups prudential regime of each EEA state is equivalent to that laid down in the relevant UK law. In doing so, The Solvency 2 Regulation Equivalence Directions 2020 cover all three solvency II equivalence decisions, i.e. articles 378, 379 and 380 of the solvency II regulation. Solvency II is an EU regime which will form part of retained EU law in the UK from 11pm on 31 December 2020 (in accordance with the European Union (Withdrawal) Act 2018) so that it continues to apply in the UK.

The European Market Infrastructure Regulation (Article 2A) Equivalence Directions 2020 determine that, for the purposes of article 2A of the EMIR, markets in each EEA state comply with legally binding requirements which are equivalent to the requirements laid down in UK law, and are subject to effective supervision and enforcement in each such EEA state. This will enable UK firms to continue to treat derivatives traded on EEA regulated markets as exchange traded derivatives rather than OTC derivatives. Facilitating this continuity for firms minimises the disruption they will experience following the end of the transition period.

The Central Securities Depositories Regulation Equivalence Directions 2020 determine that central securities depositories (“CSDs”) in each EEA state comply with legal requirements which are equivalent to the central securities depositories regulation as it will form part of UK law at the end of the transition period (“CSDR”) and are appropriately supervised in the relevant EEA state. With equivalence granted, the Bank of England can then assess CSDs in the EEA for recognition (subject to establishing co-operation arrangements with the relevant EEA authorities), allowing those CSDs, once recognised, to continue to service UK securities and to exit the transitional regime contained in onshored article 69 CSDR and part 5 of The Central Securities Depositories (Amendment) (EU Exit) Regulations 2018.

The Benchmarks Regulation Equivalence Directions 2020 determine that benchmark administrators in each EEA state comply with legal requirements which are equivalent to the benchmarks regulation as it will apply in UK law at the end of the transition period (“BMR”), and are appropriately supervised in the relevant EEA state. This equivalence decision acts as a mechanism to enable such administrators to be added to the FCA’s benchmarks register, and to enable them to provide benchmarks to supervised entities in the UK.

The Credit Rating Agencies Regulation Equivalence Directions 2020 determine that, for the purposes of article 5 of the credit rating agencies regulation as it will form part of UK law at the end of the transition period (“CRAR”), the legal and supervisory framework of each EEA state ensures that credit rating agencies (“CRAs”) authorised or registered in each EEA state (i) comply with legally binding requirements which are equivalent to the requirements resulting from CRAR; and (ii) are subject to effective supervision and enforcement in each such EEA state. This means non-systemic credit rating agencies authorised or registered in the EEA can apply to be certified in the UK.

The Short Selling Regulation Equivalence Directions 2020 determine that EU markets are subject to the appropriate law and supervision for the purposes of article 17 the short selling regulation as it will form part of UK law at the end of the transition period (“SSR”). This means that EEA market makers will be eligible to make use of the exemption in article 17 of SSR (which disapplies certain short selling restrictions and reporting requirements) subject to complying with certain regulatory requirements.

Alongside the above directions, today I am also laying before Parliament The Central Counterparties (Equivalence) Regulations 2020 pursuant to regulation 14(1) of the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (S.I. 2018/1184). The former statutory instrument specifies that the regulatory framework for central counterparties in EEA states is equivalent to the UK’s framework. After the end of the transition period, these regulations will have effect as if made under article 25(6) of EMIR. Therefore, subject to entry into an appropriate co-operation arrangement between the Bank of England and the relevant national competent authority in that EEA state, and a CCP-specific recognition determination by the Bank of England, after the end of the transition period UK firms will be able to continue using EEA CCPs and to exit the transitional regime contained in part 6 of The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (S.I. 2018/1184).

The Department for Business, Energy and Industrial Strategy will be laying The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) (No. 2) Regulations 2020 to grant audit equivalence to the EEA states and approve as adequate their audit competent authorities.

To provide clarity and stability to industry, we are announcing as many decisions as we can in favour of openness, and where it makes sense to do so. The granting of these equivalence decisions provides a broad range of benefits in terms of having open markets that are well regulated, facilitating firms’ ability to pool and manage risks effectively, and supporting UK and EU clients’ access to financial services and market liquidity.

[HCWS567]

Online Scams

John Glen Excerpts

Tuesday 10th November 2020 Westminster Hall

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

May I say what a pleasure it is to serve under your chairmanship, Mr Dowd? I thank the hon. Member for Makerfield (Yvonne Fovargue) for securing a debate on this important topic. I pay tribute to her general competence and knowledge on consumer issues. I have engaged with her a number of times as a Minister, and I always appreciate the constructive way she approaches this topic. She has demonstrated again this afternoon her comprehensive awareness of the complexity of this subject, and how it impacts so many of our constituents.

I know very well how this issue matters to many colleagues across the House, because it has impacted so many across our constituencies. As a constituency MP, I have encountered the financial and mental impact, and the anguish it causes individuals in my surgery.

I assure Members that the Government are committed to tackling this complex problem. I will set out the context. There have been rapid changes to modern payments, which bring great benefits and opportunities to many, but with new opportunities come new risks, such as the type of scams the hon. Lady set out. More people and businesses are buying and selling online. People are using a range of innovative ways to make payments via card, mobile and electronic wallets. In 2019, over two-thirds of UK adults used online banking, half used mobile banking, and for the first time cards accounted for more than half of UK payments. Those new technologies and products have helped to make payments faster and cheaper, and provided exciting opportunities for UK businesses and consumers.

Alongside those innovations, as the hon. Lady rightly said, criminals are becoming increasingly devious and sophisticated, and are ruthlessly exploiting these new technologies and the digitisation of commerce to perpetrate scams. The truth is that there is no silver bullet. I wish there was. Success in the matter depends on quite sophisticated collaboration between Government, the regulators, banks and online platforms, and between customers and the services they use. The Government are committed to playing their part to facilitate that better collaboration.

Turning to the current situation and what is already being done, authorised push payment scams—APP scams—have become a major problem in recent years. Fraudsters use sophisticated techniques to trick people, often, as the hon. Lady said, by forming phony relationships and defrauding people into authorising payments to criminal-controlled accounts. According to UK Finance, £456 million was lost to these scams in 2019, up from £354 million the year before.

Last week, I met with the managing director of the Payment Systems Regulator and raised concerns like those we have heard today. We agreed that more needs to be done to ensure victims are protected. To that end, the Payment Systems Regulator and industry are working together to improve the level of protection provided to consumers through the existing voluntary code, known as the contingent reimbursement model code, which the hon. Lady referenced.

Banks that have signed up to that code have agreed to reimburse victims of APP scams, so long as they took a reasonable level of care when making the relevant payment. As the hon. Lady will know, the code has been operating since May 2019, and its effectiveness is currently being reviewed by the lending standards board, the body responsible for governing it. I look forward to the conclusions of that review. The hon. Lady cited statistics, which I recognise require thorough examination.

When it comes to fraud, prevention is just as important as any cure. That is why the authorities are taking steps to ensure that fewer people fall foul of the scams in the first place, notwithstanding the sophisticated nature of the interactions that lead to them. At the request of the Payment Systems Regulator, the six biggest UK banking groups have introduced a process known as confirmation of payee. Under that process, the bank account and sort code numbers are checked against account names, to ensure that payments are going to the intended recipients. It is early days, but we are confident that this innovation is an important step forward in preventing scams from succeeding in the first place.

The challenge is that for a number of those measures—we are probably all familiar with them from doing payments ourselves—it comes down to where culpability lies. The hon. Lady made observations about the sophisticated relationship and the conditioning that has sometimes taken place. That is what we are dealing with and what we have to get to grips with.

The financial services sector is just one part of the equation in combatting fraud. Other industries, including online platforms, which have been mentioned, have a role to play. The National Cyber Security Centre has been leading the way in ensuring that online scams are taken down as quickly as possible, and this year it launched a new suspicious email reporting service, making it easier for the public to highlight suspicious emails and websites. The service has already led to more than 3.6 million reports and more than 18,000 scams being removed, but I recognise that more needs to be done.

The Financial Conduct Authority’s ScamSmart website, which is not limited to online scams, also aims to help consumers protect themselves against investment scams. It does that by allowing users to search a warning list to check an investment opportunity and report scams or unauthorised firms. Anybody who falls victim to such scams should contact Action Fraud UK to help us catch the criminals. As the hon. Member for Upper Bann (Carla Lockhart) mentioned in her contribution, this is a universal problem, and I recognise her anxiety about the sufficiency of the measures. As I say, I am happy to continue the discussion about what more can be done.

The private sector has its own responsibility to protect customers online. We have been working with online platforms and industry to take down fraudulent materials and websites. The specialist Dedicated Card and Payment Crime Unit is a great example of that partnership at work: it is a proactive police unit and involves UK Finance, the City of London police, the Metropolitan police and the Home Office. It continues to develop new partnerships with social media companies to take down accounts being used for various fraudulent ends and to stop the recruitment of people as money mules.

As well as working to prevent scams, we need to look after those who fall victim to them. We need to consider the emotional, as well as financial, harm that victims experience. That is why we are working with national and local policing, including police and crime commissioners, to support the victims of these terrible crimes. Even where it is not possible to investigate a case further, the Action Fraud economic crime victim care unit supports victims by helping them to recover and better protect themselves in future. What about the next steps? A lot of good work is being done, but we cannot rest on our laurels. This is a sophisticated problem: just as the wider banking, online and commercial landscapes continue to evolve, so the methods used by criminals to defraud customers evolve. In June 2019, the Treasury announced a review of the payments landscape, and we recently held a call for evidence as the first stage. That call for evidence reflected on the success of the Faster Payments Service as a 24/7 real-time payments system, but it also noted that Faster Payments currently lacks scheme rules to resolve disputes and assign liability when payments go wrong, including—crucially—in the case of APP scams. The Government have concluded that a set of comprehensive rules in the Faster Payments Service could make a real difference to tackling that problem. We have sought views on the issue and will outline our next steps in due course.

[Yvonne Fovargue]

Will the Minister also look into the fact that many criminals, particularly in romance-type frauds, have moved on to asking for Amazon vouchers? What can be done in cases such as that of my constituent, who bought thousands of pounds-worth of Amazon vouchers and sent them abroad?

[John Glen]

I thank the hon. Lady for her intervention. Although I have not personally experienced that, through either my constituency or ministerial work, she makes a sensible point about the evolving nature of those frauds. In that particular example, it would be reasonable to expect the platform to observe the obvious unusual nature of such a purchase. This is not territory with which I am directly familiar, but I will take it back to my colleagues in Government, including at the Department for Digital, Culture, Media and Sport.

More of us are transacting online than ever before, opting for the speed and convenience of new forms of banking and payments, but sadly fraudsters are taking advantage and developing ever more sophisticated ways of scamming people. We cannot row back on digital innovation and, given the immense benefits, nor should we, but it is crucial that people have confidence in how they transact online.

[Carla Lockhart]

The Minister mentioned Action Fraud and the police. The problem is that Action Fraud does not seem to have the capacity to deal with the volume. It then passes cases to the London police, who cannot investigate them. Action Fraud needs to be bolstered—it needs support to investigate what is going on beneath the surface.

[John Glen]

I am grateful to the hon. Lady. The challenge is that there are multiple streams of activity because of the sophisticated nature of this problem. I certainly understand the risk of confusion about who to go to, but Action Fraud is the first port of call. I accept that there needs to be clarity over what happens subsequently.

Government regulators in a wide range of industries are already taking action to ensure that there is progress. For our part in the Treasury, along with other Whitehall partners, we will continue to actively explore what more can be done. I feel very uncomfortable with this situation not being resolved and I am not complacent in the least about it. I will continue to engage with industry partners on this and I am very grateful—sincerely—to the hon. Member for Makerfield for raising this matter.

Question put and agreed to.

Support for SMEs: Covid-19

John Glen Excerpts

Tuesday 10th November 2020 Westminster Hall

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

May I say what pleasure it is to serve under your chairmanship, Sir Edward? I join the other Members who have congratulated my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) on securing this important debate. I have listened extremely carefully to every speech, and we have had a wide-ranging discussion of a range of industries that have, obviously, been adversely affected by the experience of covid up and down the country, including the wedding industry and the retail sector in particular, with the impact on the high street. I listened carefully to what the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) said about the coach industry. I will seek to address as many points as I can. I thank colleagues for their insightful and constructive contributions.

Like everyone in the Chamber this afternoon I share the concerns that hon. Members have expressed for the financial wellbeing of the UK’s SMEs. It is difficult to overstate their place in and contribution to the UK economy. In 2019, the number of SMEs in the UK reached 1.4 million—a 31% increase in five years. As constituency MPs, we all know the contribution that SMEs make to our communities, and they now employ over half of the UK workforce. Given that, it is no wonder that helping them endure and adapt to these trying times has been a cornerstone of the Government’s response to the pandemic. They are at the front and centre of our thinking and, as hon. Members know, our strategy has been to protect jobs, crucially including those in small and medium-sized businesses. Much of the support we have provided has been with them in mind, including our generous wage support schemes; access to finance through millions of Government-backed loans and billions of pounds of grant funding; and targeted measures to help with fixed costs, such as statutory sick pay rebates and tax deferrals.

We have already helped keep millions of people in employment through the coronavirus job retention scheme. As of 18 October, we had helped 1.2 million employers furlough 9.6 million jobs, and paid £41.4 billion in grants. However, importantly, we understand that the economic effects of restrictions to tackle the pandemic outlast the restrictions themselves. That is why, last week, the Chancellor announced that he was extending the coronavirus job retention scheme until the end of March 2021. I respect the point that some have made about the changing nature of the support, but I suggest that is because of the changing nature of covid, which has driven the response of this Government. The Chancellor has moved very quickly when new health interventions have been made. This scheme will help protect millions of jobs in the coming months, and will allow smaller businesses to get back on their feet quicker when the time comes.

We have also supported workers through the self-employment income support scheme, one of the most comprehensive and generous support packages for self-employed people anywhere in the world. On top of the £13.7 billion already claimed by 2.7 million self-employed people through that scheme, a third grant will be available until January, covering 80% of trading profits. A fourth grant will be available from February to April next year, with further details to be provided in due course.

However, the practical issues that prevented us from including company owner-managers—namely, not being able to verify the source of their dividend income—without introducing unacceptable fraud risks still remain. Further, the issues around the newly self-employed in 2019-20—namely, that HMRC will not have access to their self-assessment returns in time to verify their eligible income—also remain. The latest year for which HMRC has tax returns is 2018-19, and the 2019-20 returns are not due until 31 January 2021. Of course, Government and the Treasury continue to look carefully at all the representations made on these matters to seek a way forward, but we have to be cognisant of those facts and how we would meaningfully deal with them. However, we have pulled out the stops to provide businesses with the credit they need at this difficult time.

I will now address some of the points that have been made about the bounce back loans and the coronavirus business interruption loan scheme. As of 20 September, SMEs and other businesses had applied for and received over £50 billion worth of CBILs and bounce back loans. As ever, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) is very well informed on these matters, and made a number of suggestions about the challenges that some businesses face when securing loans. We have 28 providers that are accredited for bounce back loans, and 100 that are accredited for CBILs, but in this situation, we have non-bank lenders who are seeking to be part of that scheme and are struggling to access the finance. As he well knows, access to the term funding from the Bank of England is a matter for the Bank of England, and we have tried to look at those matters and see if more can be done.

The bigger issue that we have to learn from during this experience is that we have differentiated regulation between different banks and different entities that are providing finance. It is a challenge both to provide consumer protection universally and to have the right level of capital requirements for different entities, and in extreme times, these are very challenging things to come up with a neat intervention on. However, I will continue to work with my hon. Friend and others across the House to seek ways forward.

The Opposition spokesman, the right hon. Member for Wolverhampton South East (Mr McFadden), asked about the fraud risk. There is a big distinction to be made between fraud in applications and default risk. When we designed those schemes, and the bounce back loans in particular, that self-certification form—where businesses were obliged to make estimates of their turnover and could access a percentage of that—was designed to be as accessible as possible. However, businesses also had to state clearly what the facts were around their situation. The Cabinet Office is leading a piece of work across Whitehall to look at fraud risk and even more collaboration between the banks, sharing data about duplicate applications, and we will continue to work very carefully on that. We are also allowing businesses who have borrowed less than their maximum to top up their bounce back loans and extend their repayment period.

I appreciate that it must sometimes feel as if Government statements in our response to the pandemic are just a long list of measures we have taken or are taking, but this is a consequence of the range of things we are doing. Forgive me, Sir Edward, but I will list a few more ways we are helping businesses, which my hon. Friend the Member for Carshalton and Wallington is right to be concerned about. They include £11.5 billion of grant funding to more than 900,000 business premises, with new grants to come through the winter months, and an additional £1.1 billion of discretionary grant funding for English councils—that is cash grants of up to £3,000 for every four weeks of closure for English businesses forced to close. Backdated grants provide up to £2,100 per month of support in arrears for eligible businesses that have suffered from reduced demand in recent months. Those schemes are available nationwide. As the Chancellor announced last week, the up-front guarantee of funding for the devolved Administrations is increasing from £14 billion to £16 billion.

[Emma Hardy]

Will the Minister give way?

[John Glen]

In the interests of time, I will not. It is for the devolved Administrations to decide how to use that guaranteed funding, irrespective of how the UK Government provide support. However, this uplift will support businesses across the United Kingdom. We are also protecting businesses with extensive tax breaks, deferrals, and repayment flexibility through the time-to-pay scheme. Further Government support mechanisms enjoyed by SMEs include the statutory sick pay rebates and eviction protection for commercial tenants until the end of this year.

I hope I have illustrated that SMEs are at the forefront of our minds through this crisis. Support measures available to those businesses represent a significant part of the £200 billion package of support that the Government have put forward. The IMF recently described the UK’s economic plan as “aggressive”, successful in “holding down unemployment” and business failures, and

“one of the best examples of coordinated action globally”.

However, I accept that it is never going to save every business and every job, and we will continue to engage with colleagues across the House. To the hon. Member for Midlothian (Owen Thompson), I will look into the meeting that has not happened yet and ensure that it does. [Interruption.] I will also engage with the hon. Member for Kingston upon Hull West and Hessle, but I must give my hon. Friend the Member for Carshalton and Wallington a few minutes to respond.

We will continue to listen carefully and we will maintain a flexible approach. As the Chancellor said in the House last week, things need to change when circumstances change. What that means for SME business owners up and down the country is simply this: where and when necessary, we will take swift action to provide the support they need. We will continue to do so as we work through this awful crisis that has befallen our country.

Financial Services Bill

John Glen Excerpts

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

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

Earlier today, we heard the Chancellor describe the UK’s financial services industry as fundamental to our economic strength. I wholeheartedly agree with that statement. This is an extraordinary industry: it drives growth and generates millions of jobs in every corner of our country, it has secured our reputation as a dynamic and world-leading financial centre, and it contributes vast sums to the public purse—money that has helped this Government to support millions of individuals and business through the pandemic. Now, however, as we leave the European Union and start our recovery from coronavirus, we commence a new chapter in the sector’s story.

We have set out a vision to create an industry that is even more open, more technologically advanced and greener than before; an industry that serves the people of this country and drives our economic recovery. That is underpinned by an unwavering commitment to high quality, agile and responsive regulation, and safe and stable markets. Through this Bill, I am laying the legislative foundations on which we will build to achieve those goals. I will speak briefly about the context in which the Government are bringing forward the Bill.

Until now, most of our recent financial services regulation was introduced through EU legislation. Having left the EU, we now have the opportunity to take back control of decisions governing the sector and, guided by what is right for the United Kingdom, to regulate differently and regulate better. That is why the Government are also undertaking a more fundamental review of our financial services regulatory framework, which will allow us to consider how the way in which we make our future rules might change to reflect the UK’s position outside the EU. The review will take time, however; the Government are consulting on it and there are changes that need to be made now. The Bill is therefore an important first step in taking control of our financial services legislation, which will support our position as a global hub for the sector in line with international standards.

In many parts, the Bill is consistent with the approach we took while this country was still part of the EU, but there are areas where it will better suit us to choose our own path, and this Bill marks the start of a process of evolution towards our goals. The Bill has three objectives: first, to enhance the UK’s world-leading prudential standards and protect financial stability; secondly, to promote openness between the UK and international markets; and thirdly, to maintain the effectiveness of the financial services regulatory framework, along with sound capital markets. I will speak about each of those objectives, starting with the first.



Clauses 1 and 2, along with schedule 2, require the Financial Conduct Authority to create a tailored prudential regime for investment firms—businesses that provide a range of services that allow investors to access financial markets. At present, investment firms are part of the same prudential regime as banks, even though their services are quite different and they do not pose the same risks to financial stability. The Bill will therefore require the UK’s independent regulator, the Financial Conduct Authority, to set more proportionate prudential requirements, which better reflect these firms’ risks. These measures will drive healthy competition across the sector, while allowing the UK investment industry to thrive outside the EU.

The UK’s regulators are globally respected, in large part as a result of the expertise of leaders such as Nikhil Rathil of the Financial Conduct Authority, Sam Woods at the Prudential Regulation Authority, and, of course, Andrew Bailey as Governor of the Bank of England. That is why it is appropriate to delegate responsibility to them for this complex and technical area of financial regulation. However, I can assure the House that the Bill also introduces an accountability framework to ensure greater scrutiny and transparency of the FCA’s decision making when implementing this regime.

This framework will sit alongside the prudential regime for banks and the largest investment firms, whose failure would impact the wider economy. They will remain subject to internationally agreed prudential standards. That is why clauses 3 to 7, along with schedule 3, will enhance the prudential regulatory regime in line with the latest global Basel banking standards endorsed by the G20. That will increase the UK’s resilience to economic shocks, while meeting our international commitments to protecting the global financial system. The Bill will enable the PRA to implement the standards in its rulebook. It, like the FCA, will be subject to an accountability framework. These measures illustrate this Government’s commitment to global financial stability.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

Is there any chance, therefore, that, as part of this process, some of the commitments the UK has signed up to, such as those under Basel III, will be watered down?

[John Glen]

I am grateful to the hon. Gentleman for his intervention. The driving principle guiding the Government in bringing forward the Bill is to maintain the highest possible standards; indeed, our reputation globally relies on the maintenance of such standards. However, it will be in the role of our regulators, with their technical expertise, to determine how those standards are implemented.

Let me move on to the next part of the Bill.

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

My hon. Friend mentioned the word “banks”, which obviously stimulated my interest as the co-chair of the all-parliamentary parliamentary group on fair business banking. He mentioned prudential risk around banks. Currently, the capital adequacy requirements for banks are all pretty much treated the same, which can deter competition from new entrants, such as regional mutual banks. Is he interested in looking at that issue in this legislation or in a future piece of legislation?

[John Glen]

My hon. Friend has unrivalled expertise and tenacity in bringing these matters before the House. He is right that there is a challenge to examine the relative regimes for different sized banks and institutions. That is something that regulators, subsequent to this Bill, will need to look at—indeed, they are keen to look at it—and I would welcome my hon. Friend’s further interventions in discussions in this place as we move forward on that legitimate question.

Eight years ago, the world was shocked by the LIBOR scandal. As the House will recall, traders at multiple banks attempted to manipulate that crucial benchmark, which contributes to interest rates for everything from complex derivatives to mortgages. Since then, significant improvements have been made to the benchmark’s administration. However, the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, has stated that continued use of LIBOR and other major interest rate benchmarks poses a serious source of systemic risk. That is because the decline in the inter-bank lending market has meant that such benchmarks depend increasingly on the judgments of panel banks rather than actual transactions. UK regulators have been encouraging firms to gradually shift away from LIBOR and are at the forefront of the global response to the transition, so to ensure that that transition was orderly, the FCA agreed with the LIBOR panel banks that they would continue to contribute to the benchmark for a temporary period. However, that temporary period will expire at the end of 2021, and after that point there is a risk that the benchmark will become unrepresentative of the market that it measures, potentially leading to disruption.

While we want firms to take the initiative in migrating from LIBOR, we recognise that there are some contracts that cannot be realistically amended to achieve that goal, so clauses 8 to 19, along with schedule 5, will give the FCA the powers that it needs to oversee the orderly wind-down of critical benchmarks, including LIBOR, and clause 20 will extend the transitional period for benchmarks with non-UK administrators from the end of 2022 until the end of 2025. This will avoid difficulties for our firms while the Government consider any changes required to our third country benchmarks regime to ensure that it is appropriate for the United Kingdom.

I will move on to the second objective of the Bill: to promote openness to overseas markets. I am delighted that clauses 22 and 23, along with schedules 6 to 8, establish a framework to provide long-term market access between the UK and Gibraltar for financial services firms. As many will know, Gibraltar boasts an array of thriving businesses in the sector, many of which are UK household names, including Admiral and Hastings, to name just two. The new Gibraltar authorisation regime in this Bill delivers on an earlier ministerial commitment and recognises our long-standing special relationship.

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

I refer to my entry in the Register of Members’ Financial Interests. May I say, as chair of the all-party group on Gibraltar, how delighted I am to see this in the Bill? I know that that is echoed by Her Majesty’s Government of Gibraltar and the whole Gibraltar community. The Government have made good on a promise and it is very welcome. The Minister is right to set out that some 20% of UK insurance contracts are written by Gibraltar-based insurers. Will he undertake that, as well as this important piece of legislation, we will now build on it with his colleagues in other Departments to develop a full free market—a free-trade area effectively—between the UK and Gibraltar in services and goods?

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[John Glen]

My hon. Friend is absolutely right with that 20% statistic and to point to the extensive orientation of the Gibraltarian insurance industry towards the UK. Ninety per cent. of the business that it writes comes to the UK. He is right to say that this is foundational to a deepening relationship, and I will ensure that Gibraltarian firms can continue to access the UK market on the basis of aligned regulation and supervision. I look forward to listening to him, as we move forward, on further steps that he thinks would be appropriate.

The proposals will guarantee close co-operation between our regulators, and this measure highlights the spirit of openness that underpins our approach. The same can be said of clauses 24 to 26 and schedule 9, which make up the overseas funds regime. These measures will simplify the process under which overseas investment funds are marketed in the UK. Under the present system, the FCA has to assess the protection standards of every individual fund before allowing it to be offered to UK consumers. However, the Bill will allow the Treasury to give market access to entire categories of funds from other countries that have so-called equivalent regulatory standards to those in the UK. Funds in this group can then undergo a simpler application process, due to the confidence provided by their home regime, which will allow overseas investment funds to be marketed in the UK, maintaining the UK’s position as a global centre of asset management. There are currently over 9,000 funds that passport into the UK from the EU, and let me stress that the existing process will remain for funds that have not been declared equivalent.

[Sir Robert Neill]

I am grateful to the Minister for correcting me. Of course, my figure of 20% related purely to motor insurance policies; it is 90% for all Gibraltar-based insurance. Can he help me on the specific point of the overseas funds regime? It is widely welcomed in the sector that he will allow access for overseas funds that have not yet achieved equivalence, but can he help give some clarity on a matter that is of concern to some providers? What is the position if people have invested in the fund and for some reason equivalency is withdrawn? What would then happen in practical terms if, for example, additional money is invested in the fund after suspension? Can he help as far as that is concerned? It is important for many people.

[John Glen]

It would not be for me at this point to set out the deductions to be made on individual funds, but I would like to follow up with my hon. Friend formally on that matter, because a process is under way for that to be examined, and I am happy to engage with him further in due course.

I will move on to the importance of ensuring that the FCA has an appropriate degree of oversight over firms that could register under the regime. To my hon. Friend’s point, there is a tension between the objectives set in Parliament and the regulators’ judgment on the ground. We need to ensure not only that they are accountable, but that we have set the right prescription for the outcomes we wish to see.

[Richard Fuller (North East Bedfordshire) (Con)]

Will my hon. Friend spend a moment putting the Bill in context? Earlier today, we heard the Chancellor outline the bold initiatives on green finance and on making the UK a leader in transparency internationally and financial technology. As we leave the European Union, we are keen to accelerate away from a sclerotic, introspective set of financial markets. The Bill looks very worthy, but can he put it in the context of those broader ambitions for financial services? Is this the first of a series of Bills we will see, or is it clearing things up so that afterwards we are in a position where we can move forward to capture that opportunity?

[John Glen]

This is a portfolio Bill of 17 measures, some of which I have been wanting to introduce for some while. It is the first step on a journey, and there will, if the authorities allow me, be further financial services legislation that we will need to make following the consultation on the future regulatory framework. We need to be ambitious for financial services. We live in a dynamic world where financial services are evolving all the time, and we need to have regulators that are nimble in developing world-class regulation that allows us to continue to grow, and that is reflected in our appetite for FinTechs, stablecoins, digital currencies and the right regulatory framework for firms of different sizes, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) referred to earlier.

The third objective of the Bill is to maintain the effectiveness of the financial services regulatory framework and ensure sound capital markets. Clause 28 introduces a streamlined process for the FCA to remove an inactive firm’s authorisation and position on the public register. That will improve accuracy, while reducing opportunities for fraudsters.

Clause 29 makes small changes to the market abuse regulation, making the regime more effective, while reducing some of the administrative burden facing firms. I draw attention to clause 30, which raises the maximum sentence for two kinds of financial market abuse from seven to 10 years in prison, bringing the penalties for those offences in line with other forms of economic crime, such as fraud. Clause 31 will ensure we can enforce the rules that apply to trusts. The Government are also taking proportionate and effective action elsewhere to prevent the misuse of these trusts, collecting a range of ownership information on those that have a connection to the UK.

[Kevin Hollinrake]

My hon. Friend mentions economic crime, the prevention of fraud and the penalties for fraud, but one of the things the Government are committed to doing is bringing forward a corporate offence for the failure to prevent economic crime. It is not within this Bill. Is there any reason why not? What timescale might we see around that kind of legislation?

[John Glen]

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

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

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

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

[John Glen]

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

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

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

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

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

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

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

[Alison Thewliss (Glasgow Central) (SNP)]

I thank the Minister for making that point, because I was not going to make a great deal of it in my remarks. Does he appreciate the fears on the SNP Benches that by the time the Government get around to legislating on this, there will be no banks left?

[John Glen]

I understand the hon. Lady’s anxiety—it is one she has expressed to me a number of times over the past nearly three years.

We asked Natalie Ceeney to do a review last spring. Immediately the review was completed, we put together the JACS process—the joint authorities cash strategy—and brought together the Payment Systems Regulator, the FCA, the Bank of England and the Treasury. We are working closely with LINK and the banks to look at a new way of making cash available. The cashpoint network in this country is not fit for purpose and urgent work is going on behind the scenes to bring forward a cohesive solution.

The prospect of legislation remains, and the call for evidence a week or so ago is another step in moving this forward as rapidly as possible. This problem has been extended and made worse by our recent experience of covid. I assure the hon. Lady that I am committed to getting to the end of this in a positive way.

To conclude, the Bill marks an important moment in the history of the UK’s financial services sector. It is the next step of an ambitious programme of regulatory reform that will be guided by what is right for UK industry. In short, the Bill will support financial stability and high regulatory standards, promote openness between the UK and international markets, and maintain the effectiveness of this country’s financial regulatory framework. I commend it to the House.

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

My colleague from the Treasury Committee, the hon. Member for West Worcestershire (Harriett Baldwin), mentioned earlier that some of the Benches in this place are a little empty this evening. I am sure that that is not because this is not a wonderfully exciting Bill—well, perhaps. But we have to look at the reality of the situation that we are in. We are here in London in lockdown and people are being advised not to travel. So I do not hold a grudge against any Member who has decided not to travel today, for their safety or the safety of their constituents and their families. It is important that we consider each other in this place as well as those out there in every street in the country as coronavirus continues to spread.

I thank the Minister for his briefing on Thursday evening. It was a very good distraction from all the events in the United States. I also thank all the organisations that have provided such helpful briefings in advance of the Bill. The financial services are a significant part of the economy in Scotland in terms of the number of businesses, the number of employees and their contribution to the wider Scottish economy, particularly in the growing area of FinTech, where we have much innovation coming out of our universities.

The Bill is, relatively speaking, a wee bit dull and a wee bit functional. Some bits have been taken out of the back of the drawer at the Treasury and presented in the Bill tonight.

[John Glen]

Harsh.

[Alison Thewliss]

The Minister says that is harsh, but he said himself that there are things here that he has wanted to do for quite a wee while and has not found the mechanism to do. It is a portfolio Bill, as he called it generously, of some things that hang together and some things that are a wee bit tacked on.

The regulations are important, and they affect us all in some way or another. The purpose of financial regulations is to protect us as citizens from the worst extremes of the financial inclinations of those who wish to grab the cash a wee bit quicker. We would all live with the consequences of deregulating to an extreme, so we need to be very careful of the regulations that we make.

The Bill’s objective is to enhance

“the UK’s world-leading prudential standards and promote financial stability”,

to promote openness

“between the UK and international markets”

and to maintain

“an effective financial services regulatory framework and sound capital markets”.

I am sure that that is all very laudable. It is what we had as a member state of the EU. Who could really object to any of those aims? We on the SNP Benches will not be opposing this Bill on Second Reading tonight, but we do hope to put together some constructive amendments for the Government to ignore in Committee. If they would like to surprise me and take them on I would be absolutely made up, but we shall see. I shall go ahead and hope rather than look at experience.

I hope that we can have some good discussions on the things that should be put into the Bill to give people greater protection, and where things should be that wee bit tighter. Despite what the Chancellor said earlier about unilateral equivalence, the reality is much more complex and many firms do not yet know what they are preparing for. Whether it is the worst or not quite the worst, it will still cost money, time and resource, at a time when covid affects us all, and it will still be significantly less advantageous than it was under EU membership or even single market membership.

I am nervous, as are many others, about Parliament’s role in the regulatory framework and where that ends up. CityUK has expressed concerns, as has Barclays, about taking back these powers to hand them straight over to the PRA and the FCA. This is hardly taking back control. I worry that with the safeguards that we have, we will not find out that something has gone terribly wrong until it is far too late, and far too far down the line. I worry that Parliament will find out about these things when it is too late, because that has been the experience of the banking crisis and other things. We need to be careful that we do not end up going down those same roads. A statutory limit on the term of the FCA chief executive is not quite taking back control in the same way. This is giving a whole lot of power to these institutions and cutting out Parliament.

I have some questions and I would be grateful if the Minister picked them up. For example, the Bill will allow Her Majesty’s Treasury to revoke the capital regulation in favour of PRA rules, so what happens to those who are already working to the CRR2 EU regulations and what do they now need to do? Will regulatory decisions and implementation be in line with broader public policy objectives and is there a safeguard within that, because Parliament should be satisfied that existing appeals mechanisms are sufficient and, as Barclays says, that they are commensurate with the increased level of autonomy and rule making for those regulators?

The ABI is also concerned about a number of areas. It talks about the need for the Gibraltar authorisation regime, saying:

“We welcome that Government will work with the FCA to ensure that, once the GAR comes into force, individuals and eligible small businesses using financial services sold in the UK by Gibraltar-based firms can refer disputes to the UK Financial Ombudsman Service”.

That protection ought to be there in black and white but it does not appear quite yet to be at that stage. People need to have that protection—that recourse—if something goes wrong.

It is of huge concern to us that the UK regulators have threatened to deviate from EU rules on share trading if Brussels does not deliver market access permissions to the City of London. The ABI has said that the equivalence process has occasionally been used as a political weapon to wield against third countries. It is concerned about where the overseas funds regime sits within this, particularly because it does not know what might happen should there be a negotiating advantage for one side or another when the cost is borne by companies and consumers.

There are further questions on what this means for existing investors if equivalence is withdrawn. What happens if someone has money in a particular fund and then it goes? What are the practicalities there? What do they need to do as an investor in those circumstances? We need urgent clarity for people so that they know where they stand on these issues. Perhaps the Minister cannot give us those answers yet. That is part of the wider problem that people do not know exactly what is going to happen and how they can prepare for it. There could be a risk that people will withdraw from these funds altogether rather than keeping their money there, which would have further knock-on effects.

We support the increased sentences for insider dealing and market abuse. It is quite right that those should be increased. However, as I have said many times in this House, enforcement is key—having the tools in the box to make sure that we can find these frauds, market abuses and insider dealings and then punish those responsible. That is crucial, because if people are felt to get away with these things, then having the rules is really not enough.

On people exploiting rules and general misbehaviour, I want to talk about money laundering. I was on the Committee that considered the Bill that became the Sanctions and Anti-Money Laundering Act 2018 and I worked on it in this House. Clause 31 amends schedule 2 of SAML to ensure that regulations can be made in respect of trustees with links to the UK. Without it, any powers that HMRC sought to exercise to access information on such trusts are at risk of being held invalid under legal challenge. The Government say that this technical change

“will reaffirm the UK’s global leadership in the use of public registers of beneficial ownership, as identified by the Financial Action Taskforce’s Mutual Evaluation of the UK in 2018. This will further support the public and private sectors to efficiently and effectively target their resources towards potential criminal activity using trusts, maintaining the resilience of the UK’s defences against economic crime.”

That does not stack up to me because there have been opportunities to deal with this.

I was on the Committee on the Registration of Overseas Entities Bill, which sought to look at trusts as well. We took lots of evidence on how trusts are an open door for people to move money around, yet the Government are not really acting to deal with that. The Registration of Overseas Entities Bill went through the whole pre-legislative scrutiny process and then just disappeared. The difficulty is that people are moving money around and buying properties, largely in the city of London, where they can launder that money. There are huge buildings sitting empty in the city because people are using that as a means of moving money about. There is a huge homelessness problem as well, so this is a really pernicious problem that the Government need to get their head around.

I do not understand why there is not more to deal with the issue of trusts, or with the issue, as I have mentioned ad nauseum, about Scottish limited partnerships and proper reform of Companies House. The Chancellor mentioned the consultation on that earlier. That consultation has been going on for ever, it feels like, and nothing has yet changed. The Government have this huge, big, wide, gaping loophole in Companies House that allows people to move money around. If they want to do something properly, I would suggest that they deal with that, and do a lot more to take action on trusts and other means of shunting money about. Not doing that makes this country a home for dirty money. Lots of research has been done on this issue by Transparency International and others. The evidence is there; the action, unfortunately, is not.

The debt respite scheme in clause 32 can be enhanced further. I know the Minister is committed to doing this and wants to act on it. I would be curious to find out a bit more about what he has learned from what Scotland has done so far and how the schemes will work together, because we have had the debt arrangement scheme in Scotland since 2004 and the statutory moratorium since 2011. There are always improvements that Scotland can make and the UK can make as well. I would be very interested to hear what more can be done to improve upon that.

I have been contacted, as many other Members might have been, by Macmillan’s duty of care campaign. What conversations has the Minister had with the Financial Conduct Authority on that campaign? Macmillan fears that many people—people with cancer who are struggling —are finding things incredibly difficult. Can he say with certainty that the guidance put out by the FCA is enough? Could more be done to protect people in the most vulnerable of circumstances?

Help to Save customers have enough on their plate at the moment without having to navigate myriad changes to their saving products. We firmly believe that the accounts should continue to earn interest until this crisis is over. Savers who do not withdraw the funds after maturity and whose balance remains in the account do not seem to be eligible for further bonuses and they are also not earning interest. It seems very unfair to expect low-income savers, who are potentially dealing with the risk of redundancy and are worried about the risk of covid, to change financial products at this time to avoid losing interest. Some of this is the UK Government’s fault for not having set an end date when the scheme was introduced. We argue that they should extend the active period of these accounts at least until the end of this pandemic, so that nobody loses that all-important interest.

What is the communications strategy from the UK Government to make sure that nobody loses out? Since the launch of the scheme, more than 222,000 people have opened Help to Save accounts, with some £85 million deposited, I understand. So this is not a small amount of money for people at the very lowest end of our economy and they need to have some certainty that the scheme will not be rolled up and that they will not lose out because of the changes the Government seek to make in this Bill.

I wish to close by discussing a briefing I received from the Finance Innovation Lab, which makes three well made points about the Bill. First, it says that the Bill threatens to introduce a democratic accountability deficit in financial sector policymaking, and I made that point earlier. We cannot be in the situation where we take all these powers back from Brussels and hand them straight over to unaccountable, arm’s length organisations. They might come before the Treasury Committee once every six months or so, when we will ask them some questions, and that is the extent of the scrutiny they get from this House. We do the best job we can to ask them questions—I see some colleagues from the Committee on the Government Benches tonight—but that is not the same.

Secondly, the FIL also argues, as the right hon. Member for Wolverhampton South East (Mr McFadden) did, that the purposes of the Bill should be broadened to economic, social and environmental outcomes. The Chancellor talked a lot earlier about how important those environmental outcomes are, but they are missing from this Bill. I do not know whether that is because one part of the Treasury is not speaking to the other or how else that has come about, but if the Government are now saying today that these environmental aspects are incredibly important and they should be a key part of COP26, as the former Governor of the Bank of England has also argued, they need to be in the Bill. If they are that important, the Government need to put them in the Bill.

Lastly, the FIL suggests that the Bill should help the UK to be a leader in financial regulation that sets high standards. There should be no backsliding on the standards we have built up as part of being in the EU. It is an area in which we had huge and significant influence as a member state in making a lot of these rules. Now if we want to have equivalence and have access, we are going to have to abide by some rules made by other people, rather than being able to make the rules ourselves. I believe firmly that we should not have less power as Members of this House than MEPs have to scrutinise all of those things that come before them, and we should have a bit more than we have in statutory instruments Committees; we cannot vote on those and we cannot amend them either. So we need to have a whole lot more by way of scrutiny of financial services in the future. In those Committees, I have argued regularly to the Minister that we need a plan and a framework, and we need to see the whole spectrum of what this Government propose for financial services. It needs to involve everybody—the people in the sector and Members from across parties in this House—so that we can build something resilient that we can all have trust and faith in. That trust and faith in financial services is what we all need. We need to be able to trust the institutions and that our money will be well managed and we will be protected in the event that anything goes wrong.

This is all about building something new, but there is really not a huge amount that is new in the Bill. The Government need to do a whole lot more on financial services, which have been neglected as part of the Brexit negotiations, put to one side and not prioritised, despite being an absolutely massive sector of the economy in Scotland and the rest of the UK. I hope very much that we will be able to make amendments to the Bill to improve it and that the Government will listen to those amendments and take them forward in good faith.

--- Later in debate ---

[John Glen]

With the leave of the House, I too would like to speak a second time.  I thank hon. and right hon. Members for their contributions and I welcome the broad support that I believe exists across the House on the Bill. Clearly, I will not be able to address all the points that have been made, but I have taken extensive notes and I shall write to colleagues where I feel I can say something meaningful at this point. But I look forward to further comments to address some of these points in Committee.

The right hon. Member for Wolverhampton South East (Mr McFadden) is right to say that the UK is a key player in the global effort to ensure that globally active banks are subject to strong regulation. I have huge respect for him and his experience in Government. I think he set out very clearly and plainly the fundamental challenges with which we are grappling in this industry. The track record we have in the United Kingdom should give him and other Members comfort that this Government have no intention of watering down regulations that have been agreed on the international stage. High-quality, agile and responsive regulation is absolutely key to the continuing success of the UK financial services sector and to addressing the potential challenges raised by my hon. Friend the Member for North East Bedfordshire (Richard Fuller) in his characteristically powerful speech.

On the matter of equivalence, I would like to address the wide-ranging questions from across the House. Equivalence assessments are an autonomous technical process. We have been clear from the beginning that the politicisation of equivalence is in no one’s interests. We are committed to an outcome-based approach. That means acknowledging how different approaches to regulation can achieve the same regulatory objectives.

A number of Members, including the right hon. Member for Wolverhampton South East, raised green finance. While he acknowledges that it is not directly related to the Bill—he wonders why—I hope the measures announced today show that the Government take their commitments in the green finance space very seriously. I look forward to engaging with him on the substantive points about how regulatory oversight works with the announcements made today.

I welcome the comments from the hon. Members for Glasgow Central (Alison Thewliss) and for Aberdeen South (Stephen Flynn) regarding overseas trust. The Government are taking proportionate and effective action to prevent the misuse of trust, through clause 31. The Government also intend to implement a register, the first of its kind, of beneficial owners of overseas entities that own or buy land in the UK.

[Alison Thewliss]

Will the Minister give way?

[John Glen]

I would be very happy to give way, as always.

[Alison Thewliss]

We both know that the Registration of Overseas Entities Bill was a Department for Business, Energy and Industrial Strategy Bill. Does the Minister have any further gen on what happened to it and when it might come back to this House?

[John Glen]

I think I have demonstrated that I have quite a lot to deal with in the Treasury, but I would be very happy to correspond with the hon. Lady further on the status of that Bill. I know she takes a very close interest in those matters.

On the hon. Lady’s words on the duty of care, the Government believe that the FCA, the UK’s independent conduct regulator, is best placed to evaluate the merits of a duty of care. She will know that last year the FCA published a feedback statement on its discussion paper on duty of care and announced that it will undertake further work to examine how best to address potential deficiencies in consumer protection, in particular by reference to its principles for businesses. The Government will continue to engage with the FCA, as I have done during my time in office, on a very regular basis.

The first objective of the Bill is to enhance the UK’s world-leading prudential standards and promote financial stability. On that theme, my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) asked a number of characteristically insightful questions that I expect to cover in detail in Committee. But I will also look to respond to his letter urgently.

Let me address the constructive points made by all Members on the important issue of the democratic oversight of the regulation of the financial services sector. Our independent expert regulators are a key strength of the UK’s existing framework. The right hon. Member for Wolverhampton South East and my hon. Friend the Member for Wimbledon (Stephen Hammond) should be reassured that it is these expert regulators who will be setting the firm-level requirements. We therefore think that they should continue to play a central role in developing and maintaining regulatory standards, in line with their statutory objectives. However, as my hon. Friend the Member for Wimbledon pointed out, that must be balanced with appropriate strategic policy input from Government and parliamentary scrutiny.

This Bill delivers for the specific purposes of implementing the remaining Basel standards and introducing a new prudential framework for investment firms. It introduces an enhanced accountability framework, specifying regulatory principles that the regulators must have regard to, as well as additional consultation and reporting requirements for the regulators when implementing the changes in the Bill. That sits alongside their existing statutory objectives. In addition, I recently issued a consultation on broader reforms to the regulatory framework as a whole: the future regulatory framework review. As I noted in my earlier remarks, this Government are committed to promoting openness to overseas markets. That is the Bill’s second objective.

My hon. Friend the Member for West Worcestershire (Harriett Baldwin), who is one of my predecessors, spoke to our ambitions for building our relationship with the USA in the area of financial services. I value her comments. It is important that we continue to maintain a truly global outlook, and we have well developed regulator-to-regulator relationships. I thank my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) for his intervention concerning the Gibraltar authorisation regime. A number of Members mentioned the overseas funds regime, for which I am grateful, and I hope that the complexity of this technical measure can be fully discussed in Committee.

As our third objective, it is essential that we maintain the effectiveness of the financial services regulatory framework and sound capital markets. I have outlined the measures in the Bill that will help to achieve both those things. Finally, I listened with particular interest to the typically well-informed speech from my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). He covered a lot of important issues, some of which I may have heard before, and I look forward to discussing them further, as I always do; we do discuss these matters further, and we do make progress on some of them.

This Bill is a critical first step in taking control of our financial services legislation. As I said, it has three objectives: to enhance the UK’s world-leading prudential standards and promote financial stability, to promote openness to overseas markets, and to maintain the effectiveness of the financial services regulatory framework and sound capital markets. I am confident that the Bill will succeed in achieving all three, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Financial Services Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Financial Services Bill:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 3 December 2020.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets. Proceedings on Consideration and up to and including Third Reading

4. Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

7. Any other proceedings on the Bill may be programmed.—(David T. C. Davies.)

Financial Services Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a))

That, for the purposes of any Act resulting from the Financial Services Bill, it is expedient to authorise provision enabling sums payable in respect of a debt in accordance with a repayment plan under the Financial Guidance and Claims Act 2018 to be payable towards costs of operating repayment plans of the debt respite scheme operated under that Act.—(David T. C. Davies.)

Oral Answers to Questions

John Glen Excerpts

Tuesday 20th October 2020 Commons Chamber

[Joanna Cherry (Edinburgh South West) (SNP)]

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

[Joanna Cherry [V]]

[John Glen]

[Mrs Pauline Latham (Mid Derbyshire) (Con)]

--- Later in debate ---

[Imran Ahmad Khan (Wakefield) (Con)]

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

[Imran Ahmad Khan]

[John Glen]

[Mark Logan (Bolton North East) (Con)]

Future Regulatory Framework and Solvency II Reviews

John Glen Excerpts

Monday 19th October 2020 Written Statements

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

In the written statement Financial Services Update on 23 June [HCWS309], the Chancellor announced that the Government would commence the next stage of the future regulatory framework (FRF) review and bring forward a review of certain features of Solvency II, the prudential regulatory regime for insurance firms. The Government have today laid the first FRF consultation on the wider regulatory framework for financial services and published a call for evidence as the first stage of the Solvency II review. These reviews reflect the Government’s aim to make financial services regulation better tailored to the needs of the UK economy and its citizens, and to support the UK’s world-class financial services sector.

Following the completion of phase I of the FRF review, which focused on improving co-ordination between the UK’s financial services regulatory bodies, the Government are progressing with phase II of the review, which will examine how the wider regulatory framework for financial services should adapt now that the UK has left the EU. The important and wide-ranging issues raised by this review, combined with the broad range of stakeholders that will be affected, make an in-depth review process appropriate. The Government will therefore consult in two stages, starting with the first consultation published today.

Leaving the EU provides an opportunity to shape our regulatory framework for financial services so that it is more coherent, agile and democratically accountable to support a stable, innovative and world leading financial services sector. The consultation proposes an overall approach that builds on the strengths of the UK’s existing domestic framework by:

Providing a clear and coherent allocation of regulatory responsibilities between Parliament, the Government and the financial services regulators.

Setting out a legislative approach under which Government and Parliament can establish an enhanced policy framework within which the regulators must operate.

Making the UK’s expert, operationally independent regulators responsible for setting direct regulatory requirements on financial services firms and markets, according to the policy framework set by Government and Parliament.

Reviewing accountability, scrutiny and public engagement arrangements, particularly in relation to the financial services regulators, so that these arrangements can be strengthened to reflect the regulators’ expanded responsibilities.

This first consultation is intended to generate a wide-ranging debate about the UK’s overall regulatory approach for financial services. The views gathered through the first consultation will then be used to develop a final package of proposals which will be set out in a second consultation during 2021.

The Government are reviewing Solvency II to ensure that the UK’s prudential regulatory regime for the insurance sector is better tailored to support the unique features of the UK sector and the UK regulatory approach. The review will focus on several specific areas of Solvency II, including the risk margin, matching adjustment, and reporting requirements, but the review will not necessarily be limited to these areas.

The Solvency II review will be guided by three objectives:

To spur a vibrant, innovative, and internationally competitive insurance sector.

To protect policyholders and ensure the safety and soundness of firms.

To support insurance firms to provide long-term capital to support growth, including investment in infrastructure, venture capital and growth equity, and other long-term productive assets, as well as investment consistent with the Government’s climate change objectives.

Both publications are available on www.gov.uk and will be open for responses until 19 January 2021.

The Future Regulatory Framework Review consultation:

https://www.gov.uk/government/consultations/future-regulatory-framework-frf-review-consultation.

Solvency II Review call for evidence:

https://www.gov.uk/government/publications/solvenc-ii-review-call-for-evidence.

[HCWS523]

Covid-19 Economic Support Package

John Glen Excerpts

Wednesday 14th October 2020 Commons Chamber

[Alison McGovern (Wirral South) (Lab)]

I am grateful for the opportunity to contribute to this debate in what has been a horrendous week for all in Merseyside. I would like to pass my thanks, through the Chancellor before he leaves the Chamber, to the Chief Secretary of the Treasury for agreeing to meet Merseyside Members of Parliament on the 20th of this month. Just as the Chancellor walked out of the Chamber now, it has felt to us in Merseyside that it has just been too difficult to get the attention of the Treasury during what has been the most extraordinarily challenging week. I ask the Economic Secretary to the Treasury to flag up to all his colleagues inside the Treasury how very difficult this situation is for us. We have uniquely been placed in the top tier of restrictions, and that surely demands a unique level of attention and a unique set of interventions to ensure that our economy does not go under. I know that the Minister will take those comments very seriously.

I want to take the short time that I have to make a couple of comments about Merseyside, but before I do so I just want to thank all those businesses in my constituency that have been in touch with me. I have had sobering conversations with the management of the Thornton Hall Hotel, and with James, who runs the Rose And Crown pub in Bebington. They have made it absolutely clear to me what the consequences are of this situation. They have done everything that could possibly have been asked of them. This situation is not of their making, and I hope that it is a cross-party endeavour in this House to back our hospitality industry. That is particularly important for the Liverpool City region. We have spent 20 years working to ensure that our visitor economy replaced much of what was lost in de-industrialisation.

Now, Madam Deputy Speaker, if you had said to me when I was a child that, one day, people would come for a mini-break to Merseyside, I would have laughed. Most people in the country—well, they did not think that much of us. All that work could go down the drain if we are not careful, so I say to the Minister: “Don’t do it. Help us.” I urge him to make sure that this place of opportunity, with these young and growing businesses, has the chance of an economic future that says to anywhere in our nation: “It does not matter how far down or out you are, Britain offers you hope.” There is a way to do that. Although our businesses are young and they do not have huge cash reserves, they are incredibly creative and, crucially, fast growing. If the Treasury wants to see growth, I heartily recommend it backing the creative, cultural and visitor economies such as Merseyside.

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

indicated assent.

[Alison McGovern]

The Minister is nodding, and I thank him for it.

We really need that practical support now, so, if the Minister is prepared to work with us to help Merseyside—I know that I speak for the shadow Chancellor here as well—we will be there. We never want to go back to the dark days. I simply ask everyone in this House to work together to help.

--- Later in debate ---

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

It is a privilege to close this debate on behalf of the Government. First, I thank hon. and right hon. Members across the House for their insightful and considered contributions. From listening to those contributions, it seems to me that we can agree about the nature of the challenge, which is to find a flexible and sustainable response to the twin health and economic emergencies caused by the virus. This Government have designed and implemented such a response. The Chancellor called for a toolkit to protect jobs and businesses over the difficult weeks and months to come, and in closing today’s debate, I will outline its newest elements and respond to some of the points made by Members across the House.

On Monday, the chief medical officer, Professor Chris Whitty, observed that we face two potential harms:

“a harm for society and the economy on the one hand and a harm for health on the other hand.”

In other words, the decisions we take are about finding that right balance. The need for balance as we evolve our economic response was expressed eloquently by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who has provided wise counsel over recent months and set out very clearly how the Government’s intentions are to keep as much open as possible for as long as possible. In formulating the Government’s economic response to the pandemic—the subject of today’s debate—my right hon. Friend the Chancellor has sought that balance. He said earlier that we must not shy away from the burden of responsibility to take decisions and lead. We have not, and we will not.

The primary goal of our economic policy remains unchanged: it is to support people’s jobs. That is why we have progressed the next phase of our winter economy plan with the express intention of laying the track for economic recovery by protecting jobs through the coming months. As the Chancellor said, the new phase of that plan has three key elements: the job support scheme; cash grants for businesses that are forced to close; and additional funding for local authorities. These more targeted measures will come into force as the furlough scheme winds down at the end of the month. That scheme has supported more than 9 million jobs, but the House will understand that it cannot continue indefinitely, as the Chancellor made clear from the outset.

First, we will expand the job support scheme. This will help to protect jobs in businesses that can continue to operate as well as in those that cannot. For those businesses that can open safely but where there is reduced or uncertain demand, the Government will directly subsidise employees’ wages, meaning that those employees can work shorter hours rather than being made redundant. Businesses that are forced to close will also be aided by the scheme. In circumstances where staff are unable to work for a week or more, they will still be paid two thirds of their normal wage up to £2,100 a month. This will be covered by the Government and will apply right across the whole of the United Kingdom. Crucially, because the scheme will run for six months, it will give people and businesses the certainty they need. We have intentionally designed the scheme so that there is no gap in support for employees. Staff can remain on the furlough scheme until 31 October and will benefit from the new job support scheme from the following day.

Throughout this crisis, we have not forgotten about the self-employed, which is why we are extending the existing self-employed income support scheme for a further six months. This is in addition to the support through initiatives such as business rates relief, bounce back loans and the local restrictions support grant. For those who question the generosity of the job support scheme, we have looked closely at schemes implemented by our friends in countries such as Germany and Italy, and they are very closely in line.

Importantly, businesses can also access a wide spectrum of other help that we have made available in recent months. As the City Minister, I have been most closely involved in the temporary loan schemes that have been rolled out at pace to meet the needs of businesses large and small and recently extended to ensure that businesses that still want to access them can do so. As of 20 September, more than £57 billion has been provided to businesses of all sizes through Government guaranteed loan schemes.

At the same time, the welfare safety net available to those most in need has become more generous and responsive. Treasury analysis shows that covid-19 welfare changes, together with Government interventions since March, have supported the poorest working households most of all, reducing the scale of losses for working households by up to two thirds. I note the comments made by the hon. Member for Glasgow South West (Chris Stephens), who is no longer in his place, about the continuing need to address carefully the needs of the most vulnerable. The universal credit standard allowance and working tax credit basic element have both been increased by £20 per week for 2020-21, and given the way in which universal credit replaces 63% of lost income for the lowest earners, this means that someone on the job support scheme at 67% of their original earnings will see universal credit make up at least 63% of the 33% they have lost. This will mean that they will end up, in many cases, with nearly 90% of their original income.

[Kevin Hollinrake]

Can I take the Minister back to the loan schemes, which were delivered at pace and were a fantastic success? Does he agree that we will need a new iteration of those loans scheme to take us through the next phase and that, wherever possible, we should make those loans available to all businesses, regardless of where they hold their business account, including those that hold that account with non-bank lenders?

[John Glen]

I very much agree with my hon. Friend. That is something that the Chancellor and I are working on as a live issue, and we will report back to the House in due course.

The second element of the winter economy plan is cash grants. Businesses in England that are required to close for health reasons can now claim a grant of up to £3,000 depending on the value of their property. That is a cash grant, not a loan, that they will never need to pay back and they can use for any business cost. Should the devolved Administrations in Northern Ireland, Scotland and Wales adopt a similar approach, we will make an additional £1.3 billion available to them to help—part of a £7.2 billion total package—further demonstrating the importance of the Union as we face these challenges together.

I turn to the third component: local authorities. I pay tribute to the efforts of local authority leaders and their officers throughout the crisis, and I pay particular tribute to my own in Wiltshire. Up to £465 million will be made available to those local authorities at high or very high alert to support public health and local economic initiatives. That is on top of the £1 billion to protect vital services, which itself is in addition to the £3.7 billion we have already provided since the spring.

Let me conclude by saying that, as we have throughout this crisis, we will continue to listen carefully to represent- ations of hon. and right hon. Members on behalf of their constituents, keep the whole of our support package under review and, where necessary, adapt and evolve our response. Members from across the House have made representations today, and the Government will reflect carefully on them.

I vividly recall coming to the House in March, 209 days ago, prior to the launch of the furlough scheme, to answer an urgent question on jobs. The House made its view plain on that occasion, as it has today. We were listening then, and we are listening now. We will do everything possible to carry this country through the crisis, in the knowledge that we can and we will succeed. We need what the Chancellor has called a consistent, co-operative and balanced approach. The Government will continue to strive for that crucial balance, protecting lives and livelihoods flexibly and sustainably for as long as it takes. That is why I urge the House to support the Government amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Fiscal Support for Events Industry: Covid-19

John Glen Excerpts

Tuesday 13th October 2020 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Midlothian (Owen Thompson) on securing this important debate. It is the second or third occasion that we have encountered each other in this forum. He raises significant issues that I will try to deal with forensically. I draw attention to the presence of the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), who has responsibility for sport, heritage and tourism, which also covers the events industry. We are working with my colleague the Exchequer Secretary to deal forensically with the challenges that the hon. Member for Midlothian set out in his excellent speech.

As the hon. Gentleman powerfully highlighted, the past months have been intensely difficult for the businesses and workers in the events industry. The hon. Member for Strangford (Jim Shannon) mentioned the challenges in his local authority area, which are mirrored across the country. Local authorities are trying to work constructively with the sector in a very difficult set of circumstances. The Secretary of State for Digital, Culture, Media and Sport and the Chancellor both recognise the energy that the industry devoted to the pilot tests in early September to explore how individual events could be run safely. I acknowledge how frustrating it must be that, despite the success of those tests, they have been overtaken by circumstances.

The hon. Member for Midlothian mentioned the We Make Events campaign a couple of times. I am sure my hon. Friend the Under-Secretary will be keen to engage with that campaign, if he has not done so already. I recognise the innovative work that different sectors of the economy are doing to try to overcome the different challenges and how they affect different sectors.

Last month, in the light of rising covid-19 cases, the Prime Minister had to pause the reopening of business events, and yesterday he set out how we will further simplify and standardise local rules by introducing a three-tiered system of local covid alert levels in England. Given the challenges facing the sector, it is imperative that we fully understand the long-term impact of covid-19 upon it. Contrary to the hon. Gentleman’s prompts, I will not reiterate all the Government support schemes for the arts, but I will say that, as a former Arts Minister, I still communicate a lot with the arts sector. Indeed, I received a message at the weekend from Darren Henley, the chief executive of the Arts Council, and I feel passionate about the sector’s concerns. We are committed to continuing to reappraise what has happened so far. That is why the Treasury has been working intensively with employers, delivery partners, industry groups and other Departments to gain a deeper insight into the conditions that would make it financially viable for the events industry to reopen in a covid-secure way.

Some of the sector has benefited from the Government support packages to safeguard the economy during the pandemic. That includes the broader measures of deferral of VAT payments and a year-long rates holiday for eligible businesses, although I acknowledge that for some, whose rateable value falls below the threshold, that has not been something that they have been able to use. I am not presenting all these interventions as fully comprehensive for every business, and the Chancellor, as the hon. Member for Midlothian acknowledged, has said that.

Some businesses have benefited from a range of Government-backed and guaranteed loan schemes, the retail, hospitality and leisure grant fund and the discretionary grant. In addition, 94% of events venues have been able to make use of the coronavirus job retention scheme. Last month, we committed to helping viable businesses facing lower demand due to covid-19 through the new job support scheme. All small and medium-sized businesses, including thousands in the events sector, are eligible. On Friday, the Chancellor announced a further extension to that scheme, which will provide temporary help to businesses that have been legally required to close as a direct result of the covid-19 restrictions. We intend that extension to cover those directly employed by business conference venues and exhibition centres that have been unable to open as a result of the further measures to address the rising cases of covid-19 announced on 22 September.

We will be setting out more detail in due course. I recognise that it would be ideal for me to announce that now, but a lot of work is going on to clarify it. It is important that we have clarity in the communications, but I can assure the hon. Gentleman that we are working very closely to ensure that that is clear and is made available as urgently as possible. Sadly, we cannot promise to save every job or every business, but I can commit that we will continue to listen to representations from across the House and monitor the impact of our economic support, and we stand ready to evolve our policies as required.

This is an extremely challenging time for a sector that I grew very close to and have great affection for, and I empathise with it very clearly and strongly in the challenges that it faces. I can assure the hon. Member for Midlothian that his representations in his very fair and balanced speech will be taken account of, and I can assure the wider audience this morning that we will do everything we can to bring clarity as soon as possible. Indeed, I shall be talking to the Under-Secretary, who is responsible for this sector, after this debate has concluded. That concludes my remarks. I hope that I have responded in some way effectively to the remarks that the hon. Gentleman made.

Question put and agreed to.

Draft Debt Respite Scheme (Breathing Space Moratorium and Mental health Crisis Moratorium) (England and Wales) Regulations 2020

John Glen Excerpts

Wednesday 7th October 2020 General Committees

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

I beg to move,

That the Committee has considered the draft Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England And Wales) Regulations 2020.

It is a pleasure to serve under your chairmanship, Mr Pritchard. This scheme is a priority of mine; I have spoken about problem debt and its corrosive effects on individuals and their families. I know that hon. Members present will know only too well the challenges that we face and will share my determination to help.

The draft regulations come at a crucial time. Despite the Government’s unprecedented interventions, the impact of covid-19 has put many people’s finances under enormous strain. No one should feel pressured or panicked into making decisions about debt, and today’s announcement on default notices is the latest example of how the Government are making efforts to help where we can.

A breathing space, or “moratorium” in the regulations, is a temporary period of respite to help people consider their options and engage with professional debt advice. It will pause most enforcement action, creditor contact and interest and charges on debts in the scheme. There are two kinds of moratorium: a breathing space moratorium, which lasts up to 60 days for anyone who engages with debt advice and meets the eligibility criteria; and a mental health crisis moratorium, where someone who is in mental health crisis treatment is protected for the length of that treatment plus 30 days.

Debt advice providers are the gateway to the scheme, and their judgment and expertise are central to its success. A debt adviser must first consider whether their client meets the eligibility criteria and conditions. If a person could go into a debt solution straight away, or just needs help with budgeting, a moratorium would not be appropriate. In a breathing space moratorium, the debt advice provider must also carry out a midway review to ensure that their client is complying with the scheme’s rules. The debt advice provider can decide to end a breathing space moratorium early if those rules are not observed—for example, if certain ongoing liabilities, such as a mortgage or rent, are not paid as they fall due. The debtor must engage with debt advice in a way that the debt adviser considers appropriate.

When a person is receiving mental health crisis treatment, expert debt advice is not easy to access. That is why I committed to include an alternative way into the scheme for people in mental health crisis treatment. An approved mental health professional—AMHP, or AMP for short—will be able to certify that a person is in crisis treatment. After an eligibility check, a debt adviser can use this evidence to initiate a mental health crisis moratorium without directly providing debt advice. We are working with the Money and Pensions Service to make this process smooth for AMPs and debt advisers.

The protections in a mental health crisis moratorium last longer, and the conditions on the debtor are relaxed. For example, the ongoing liabilities rule, and other obligations on engaging with debt advice, will not apply. There will be no midway review, but a debt adviser will check in regularly. The protections will end 30 days after crisis treatment ends. However, because crises can recur, there is no limit on the number of times that a person can have a mental health crisis moratorium. These are strong measures to address an important gap in provision, and I hope that they make a difference in many people’s treatment and recovery.

The scheme will start on 4 May 2021. I am conscious that that date will seem too late for some and too soon for others. In the light of the ongoing covid-19 situation, creditors have made extraordinary efforts to help customers over recent months, and I know how demanding it is to make these changes at pace. I am confident that, by May 2021, although it is ambitious, this target will also be achievable. For the 700,000 people who could benefit from breathing space in its first year, we must keep pushing forward. Clear information about the administration of the scheme is necessary to support implementation, and I can confirm that the Government intend to publish detailed scheme guidance by the end of this year.

Lastly, a concern for many is the impact of a moratorium on credit files. Debt advisers need to understand that to advise their clients properly, and lenders also need accurate information to lend responsibly. Reporting the moratorium via a new flag or code in credit files could affect a person’s credit file for a long time after the moratorium, depending on how lenders interpreted it. Reporting the longer “mental health crisis” moratorium could also mean that sensitive health information could be inferred from credit files. That would be unacceptable. We therefore propose that creditors should continue to report in line with their existing arrangements. The Government are mindful to avoid unintended consequences and will keep this position under review.

I hope the Committee agrees that the regulations are an important intervention to protect and support people in problem debt, at a time when that support has perhaps never been so crucial. I hope colleagues from both sides will join me in supporting the regulations, which I commend to the Committee.

--- Later in debate ---

[John Glen]

I thank the right hon. Gentleman for his characteristically constructive approach and for the support of the Labour party throughout the passage of this legislation. There is a wide consensus on this measure. The right hon. Gentleman asks four questions and then makes some wider observations about the debt context in the country, and I will address each in turn.

First, the right hon. Gentleman asks about the duration of 60 days. He drew attention to the fact that there will be a need to review that, given the extra debts and the evolving situation of individuals in the moratorium situation. Through the design of this and through consultation, we looked very carefully at that time period and the flexibilities that should or should not exist, and it was decided that it was necessary to have a standard process. If we had a long list of supplementary conditions, that would make it very difficult for the scheme to be clear and understood by the wide range of debt professionals who will be trained to work with it. In the sense that all measures that the Government take are under review, I give the right hon. Gentleman the commitment that we will look at the issue very carefully. However, I am yet to be persuaded that we can develop a clear model to make that work.

On the second question, the right hon. Gentleman remarks about the fact that there will be a stipulation that an individual can enter the moratorium only once in a 12-month period. I would answer in a similar way: as he acknowledges, that stipulation is to prevent people from gaming the system or not taking the outcome seriously. It is a serious intervention to go into a moratorium, put all one’s debts on the table and actually come up with a plan—for which there are different pathways, which we are working on—in terms of how an individual would move forward. We do not want to diminish the significance of that intervention. Obviously, we will work with the sectors involved in delivering it to see how it works, but at the moment we will stick to that policy.

The right hon. Gentleman then asks about qualifying debts and rightly draws attention to the exclusion of advance payments in respect of universal credit; third-party reductions are also excluded. It is our aspiration as a Government to include all UC debts—indeed, we do include overpayments in the scheme—but the situation is a function of the systematic upgrade of the IT systems of the DWP, which are, of course, under significant strain at the moment. However, we are moving in that direction, and I will work with colleagues across Government to improve the scope of the coverage of UC advances. This is not the final word on the matter.

The right hon. Gentleman then asks about the cost-benefit analysis, which forecasts a social value of £9.2 billion in 2016 prices in economic benefits to businesses, charities and voluntary bodies. The business net present value is forecast to be £6.1 billion. I cannot give him chapter and verse on how that has been calculated, but if I can secure any more details, I will write to him.

The right hon. Gentleman then asks about the broader context and the evolving needs of the nation with respect to debt advice. He is right to say that it is incumbent on Government to move as that situation evolves, and that is why we gave an extra £37.8 million to the debt advice sector: it has £100 million through this financial year. We will keep that under review and, further to the Budgets from 2018 onwards, we will continue to pilot the no-interest loan scheme credit union reform; legislation to do that is on the agenda and has been committed to. I will continue to work with the Minister for Pensions through the Financial Inclusion forum on other interventions in this space.

I acknowledge that there is still a lot of work to do for Government, creditors, debt advice providers and others to make the breathing space a reality, but I do think we can see today as a significant moment of progress. I believe this scheme will have a genuinely transformational effect on the lives of people in problem debt in England and Wales when it comes into effect next May. I hope the Committee agrees and will now support the regulations.

Question put and agreed to.