Problem Debt: Breathing Space
John Glen Excerpts(4 years, 2 months ago)
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The Economic Secretary to the Treasury (John Glen)
The Government are establishing breathing space to help those individuals in problem debt. Today, the Government are updating the House in order to reaffirm our commitment to implementing this in 2021, as planned, and to provide figures from the impact assessment which is also published today.
Breathing space will provide a period of up to 60 days, where people in problem debt would be protected from enforcement action by their creditors and the accrual of further interest and fees on their debts.
This protection will help those in problem debt move towards a sustainable debt solution. The protections from enforcement action, fees and charges will encourage more people to seek out debt advice and to seek it earlier. It will provide them with the time and space to work with their debt adviser in an environment free from creditor pressure, in the knowledge their debt would not escalate due to further interest or charges. This will help give people the time and space they need to choose the right debt solution for them.
To ensure that breathing space works for everyone, people receiving treatment for mental health crisis will be able to enter breathing space without seeking advice from a debt adviser. They will be able to remain in breathing space for the period of their crisis treatment and a further 30 days.
In its impact assessment, the Government forecast;
700,000 people to be helped by breathing space in the first year, rising in time to over 1 million a year.
25,000 - 50,000 a year are expected to receive a breathing space via a specific route designed to support those in mental health crisis treatment.
The Government impact assessment can be found here:
https://www.gov.uk/government/publications/breathing-space-impact-assessment
[HCWS100]
Lloyds, HBOS and the Cranston Review
John Glen Excerpts(4 years, 3 months ago)
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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship again, Mr Hollobone. I, too, pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). Obviously, in this role, I have shadow Ministers shadowing my every move, but I also have my hon. Friend, who has spoken up very effectively on these issues over the past 25 months. We have had a constructive dialogue on many matters, and I look forward to addressing the points he and others have made in my response.
It has been just over a year since I announced that Lloyds would commission a review into the Griggs compensation scheme, which is another stepping stone in Lloyds’ journey to right the wrongs of the past and rebuild trust with their business customers. From the outset, I was clear that if the findings of the review were to hold up to scrutiny, the person overseeing it must be truly independent. I was therefore delighted by the appointment of Sir Ross Cranston, a former Labour Member of Parliament who was Solicitor General between 1998 and 2001 and is a professor of law at the London School of Economics, a Queen’s counsel, and a retired High Court judge. I met him on two occasions to check on progress, between May and when purdah commenced. That was not to influence him regarding the particular conduct, but to encourage him to look at this issue as thoroughly as possible.
Sir Ross found that the Griggs compensation scheme had serious shortcomings, as has been expressed fully in this debate, and that it did not achieve the stated purpose of delivering fair and reasonable compensation offers. Assessments of direct and consequential loss were too adversarial and legalistic, which was unfair and unreasonable for the customers it was designed to support. Sir Ross also found several other inconsistencies, along with a general lack of clarity underpinning the scheme, while the bank’s failure to communicate with customers in a transparent manner caused further unnecessary confusion.
Sir Ross found that some elements of the compensation scheme were good. For example, Lloyds provided generous legal assistance and wrote off some customer debts, as well as paying substantial distress and inconvenience redress. Nevertheless, the overriding conclusions were hugely disappointing, and Sir Ross has made it clear that Lloyds has more work to do to achieve the stated aims of its original compensation scheme.
The most substantial of Sir Ross’s recommendations is that customer claims for direct and consequential loss must be reassessed, and Lloyds is working with customers and relevant parties to agree the details of this process. I know that representatives of Lloyds have been mentioned in this debate, and I have been given assurances that they are eager to get on with things. That could be through the new Business Banking Resolution Service, which has been referred to in today’s debate, or through an equivalent scheme that is committed to achieving the same rigorous outcomes. Either way, it is pretty clear to me that these cases must be considered by an independent body in a transparent manner.
There has been work on this issue by the all-party parliamentary group on fair business, with support from Heather Buchanan, who was mentioned earlier, and the SME Alliance. I also know that Sir Ross Cranston himself is engaged in this process, which must continue, and must be thorough and rigorous.
Sir Ross has also recommended that Lloyds make payments to cover the debts of customers who repaid or refinanced loans, as well as releasing customers from certain aspects of their settlement agreements. It is vital that Lloyds now implements the recommendations as quickly as possible and continues to support customers as they navigate this process. I will follow progress closely and I expect to be regularly updated; I have made that clear.
I turn now to some of the points made by hon. Members throughout the debate this afternoon. The hon. Member for Gower (Tonia Antoniazzi), who is no longer in her place, asked whether all reviews should be tested against Sir Ross’s methodology. I will just say this: I think that all banks have a responsibility to reflect on the findings of the Cranston review and consider whether their own redress schemes achieved fair and reasonable outcomes for customers. Obviously, people have different interpretations, but the Cranston review is a wake-up call to banks to examine whether the appropriate transparent processes have been followed. That should happen now.
John Glen
I will just make my next point, then I will give way to my hon. Friend.
My hon. Friend the Member for Thirsk and Malton asked about the appropriateness of the Financial Conduct Authority carrying out a review under the senior managers and certification regime. As he will know, the FCA is operationally independent of Government and it is for the FCA to consider whether there is sufficient evidence for such an investigation.
I know that we have spoken previously about Dame Linda Dobbs’s investigation, which has been ongoing for a considerable amount of time. That really needs to come to a conclusion; we need to see the results of that investigation. However, I cannot say more than that, because it is a matter for the FCA to consider. Now I am very happy to give way to my hon. Friend the Member for Beckenham (Bob Stewart).
Bob Stewart
I thank the Minister for giving way; he is an honourable and decent man. However, what shocks me most about all of this is that some banks are not acting decently and honourably. That really worries me; they should do that naturally. They are a bastion of our society, just as business is.
John Glen
My hon. Friend makes a powerful point, which goes to the core of this matter. The Cranston review points to the fact that we now have a higher bar of expectations in terms of how these redress schemes should be operated in a transparent way. He has spoken in this debate and previously about the distress that has been caused to his constituents, and many other Members have also made points during this debate.
The wider banking industry has a responsibility to reflect on the review’s findings and act accordingly, so I welcome the banking industry’s commitment to creating a new scheme to address unresolved historic complaints from small and medium-sized enterprises that have not been through a formal independent process, and to address future complaints made by slightly larger SMEs that are just outside the remit of the Financial Ombudsman Service.
John Glen
I will in a moment.
The aforementioned Business Banking Resolution Service opened to expressions of interest last November, ahead of its full launch later this year. Meanwhile, the expansion of the FOS last April means that over 99% of all SMEs now have access to fair, free and fast dispute resolution.
The hon. Member for Strangford (Jim Shannon) asked me to give way; I am happy to do so, but I want to refer to the points that he made. He referred to the eligibility of the BBRS. It is not for me to determine the eligibility of the BBRS, but his points about the prioritisation of cases will have been heard very clearly by those who have set up that service, and I urge the BBRS to reflect on his contribution to this debate.
The BBRS and the expansion of the FOS build on several initiatives that the Government have introduced, including the senior managers certification regime, which will hold key individuals at banks to account for the decisions that they make, including decisions that could impact on their SME customers. The industry has also made changes. For example, all major lenders are signatories of the standards of lending practice, ensuring that banks treat their customers in a fair and reasonable way. I hope that these steps, together with the work carried out this year to address historic SME disputes, will bring unresolved disputes to a close and prevent the same circumstances from occurring again.
I will conclude by saying that over the past year Sir Ross has taken considerable time to discuss sensitive and often distressing matters with customers; he has had 49 meetings with 62 customers, alongside his adopting a detailed and forensic approach to the cases he has reviewed, so I thank him for his efforts.
I welcome the commitment of Lloyds to implementing the recommendations of the Cranston review, and I will follow progress closely. I note the points made by the hon. Member for Glasgow Central (Alison Thewliss) and others, and I will reflect on them carefully.
The establishment of the Business Banking Resolution Service provides a further means of redress, and I look forward to seeing it bring closure to many long-running disputes. I am confident that we can continue to build on the good work that industry, small business representatives, regulators and Government have begun to rebuild trust, so that small businesses can access the finance they need to prosper and grow.
Mr Philip Hollobone (in the Chair)
I call Kevin Hollinrake to sum up the debate.
Bilateral Loan to Ireland
John Glen Excerpts(4 years, 3 months ago)
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The Economic Secretary to the Treasury (John Glen)
I would like to update Parliament on the loan to Ireland.
In December 2010, the UK agreed to provide a bilateral loan of £3.2 billion as part of a €67.5 billion international assistance package for Ireland. The loan was disbursed in eight tranches, and the final tranche was drawn down on 26 September 2013. Ireland has made interest payments on the loan every six months since the first disbursement.
On 3 February, in line with the agreed repayment schedule, HM Treasury received a total payment of £404,714,183.56 from Ireland. This comprises the repayment of £403,370,000 in principal and £1,344,183.56 in accrued interest.
As required under the Loans to Ireland Act 2010, HM Treasury laid a statutory report to Parliament on 3 October 2019 covering the period from 1 April to 30 September 2019. The report set out details of future payments up to the final repayment on 26 March 2021. The Government continue to expect the loan to be repaid in full and on time.
https://www.gov.uk/government/collections/bilateral-loan-to-ireland
The next statutory report will cover the period from 1 October 2019 to 31 March 2020. HM Treasury will report fully on all repayments received during this period in the report.
[HCWS89]
Counter-Terrorism Asset Freezing Regime
John Glen Excerpts(4 years, 3 months ago)
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The Economic Secretary to the Treasury (John Glen)
Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to prepare a quarterly report regarding its exercise of the powers conferred on it by Part 1 of TAFA 2010. This written statement satisfies that requirement for the period 1 July 2019 to 30 September 2019.
This report also covers the UK’s implementation of the UN’s ISIL (Da’esh) and al-Qaida asset freezing regime (ISIL-AQ), and the operation of the EU’s asset freezing regime under EU Regulation (EC) 2580/2001 concerning external terrorist threats to the EU (also referred to as the CP 931 regime).
Under the ISIL-AQ asset freezing regime, the UN has responsibility for designations and the Treasury, through the Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Da’esh) and al-Qaida (Asset- Freezing) Regulations 2011.
Under EU Regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under Part 1 of TAFA 2010.
EU Regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaida and ISIL (Da’esh) listings.
It can also be viewed online at: http://www.parliament. uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-02-04/HCWS88/.
Tables set out the key asset-freezing activity in the UK during the quarter.
Counter-terrorist asset freezing regime Q3 2019 (TAFA Q3 2019 Table.pdf).
[HCWS88]
Draft Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019
John Glen Excerpts(4 years, 3 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Public Bodies (Abolition of Public Works Loan Commissioners) Order 2019.
It is a pleasure to serve under your chairmanship, Mr Sharma.
The draft order, which is being introduced under the Public Bodies Act 2011, will abolish the office of public works loan commissioners and transfer their functions, interests in land, and all other rights, liabilities and property to Her Majesty’s Treasury. The role of the Public Works Loan Board as a lender to local authorities is not affected by the draft order, which will rather ensure continuity of such lending by providing ongoing improvements in efficiency and accountability.
The Committee may be aware that the PWLB was formalised in 1817 via an Act of Parliament. It has supported England, Scotland and Wales through major historical events such as the Napoleonic wars, the formation of Trafalgar Square and our recovery after the two world wars, and through construction projects relating to vital infrastructure—projects for public utility and sanitary improvements, housing development and harbour maintenance. PWLB loans have supported employment opportunities and improved quality of life for successive generations.
Today, the PWLB is a statutory body of up to 12 independent commissioners. It issues loans to local authorities and other specified bodies from the national loans fund, and operates within a policy framework set by Her Majesty’s Treasury, while daily lending functions are carried out by the UK Debt Management Office. However, since the introduction of the prudential regime in 2004, which devolved borrowing decisions to local authorities, the commissioners retain a merely ceremonial role, carried out so that central Government lending complies with statute, rather than serving any practical purpose. Recruiting for the commissioner roles in that context has, inevitably, become more challenging.
If the PWLB is not quorate, it cannot lend or collect repayments. The result would be to freeze central Government lending, which would have a significant impact on local authority budgets and financing plans and jeopardise essential capital projects. Acute concerns about that will continue while PWLB governance remains outside the Treasury’s jurisdiction. This draft instrument will place that vital lending function on a more secure footing, so that we continue to provide a foundation for local authorities to commit to value-for-money long-term capital investment initiatives, and so reinforce the Government’s vision for levelling up.
As is usual for this type of legislation, the draft order has been put before the Secondary Legislation Scrutiny Committee, the Joint Committee on Statutory Instruments and the Treasury Committee for scrutiny. I met the Chair-elect of the Treasury Committee to inform him of this statutory instrument debate. None of the Committees requested the enhanced scrutiny procedure available under the Act.
I hope that the whole Committee will join me in thanking the public works loan commissioners—often ex-finance officers of local authorities—for the services they render, entirely voluntarily, for the benefit of the citizens of this country. I commend the instrument to the Committee.
John Glen
I am keen to respond to the points made by the hon. Members for Stalybridge and Hyde, and for Glenrothes. I stress, as I did in my opening remarks, that the order removes a purely ceremonial role. Although we are removing a function, it is one that does not exist in a meaningful sense, in terms of arbitrating on individual loan decisions.
The issue of commercial property speculation was raised. Local authority borrowing and spending decisions are made at a local level with reference to the Chartered Institute of Public Finance and Accountancy’s prudential code and the Ministry of Housing, Communities and Local Government’s statutory guidance. Those bodies revised the guidance in 2018, which makes it clear to local authorities that if they borrow more than or in advance of their needs solely to generate a profit, they are not acting in accordance with the prudential framework. MHCLG is reviewing the impact of the revisions to the prudential framework. When local authorities borrow, they must have regard to it to ensure that their borrowing is sensible and affordable.
Borrowing and capital spending decisions are devolved to local councils, but it is expected that they should not take on disproportionate levels of financial risk. PWLB finance continues to play a critical role in helping local authorities to transform services, but they cannot use that provision for day-to-day spending, which must be balanced off by the accounting officers each year.
The hon. Member for Stalybridge and Hyde asked about the interest rate rise before Christmas. I am sorry about the apparent lack of answer to any question he may have asked. The Government raised rates to slow borrowing, because of the statutory lending limit; they also raised that limit by £10 billion, to ensure that lending remained available. Let me stress that that is managed by the Debt Management Office; the rates are set daily against benchmark gilt prices, and should be seen against the spending round provision for local government. The forecast is for a 4.4% increase in real terms this coming year—the largest increase in spending power since 2010. I should also mention the additional grant funding available for adults and children in social care announced in the spending review.
John Penrose (Weston-super-Mare) (Con)
Could I press the Minister a little more on his answer about the interest rate rise? Since there is concern in the Treasury and elsewhere in Government about borrowing to invest in commercial property, as he mentioned in his reply letter to the Chair of the Treasury Committee, and as he just laid out, is he at all concerned that raising the interest rate from 1.8% to 2.8% may have a depressing effect on local authority investment in non-commercial property—that is, in genuine capital expenditure? As he rightly laid out, the Public Works Loan Board was originally constructed to enable that investment.
John Glen
All these matters are subject to ongoing review. There is no evidence that the rate is depleting the ability of local authorities to borrow to invest in the sorts of projects that the Government, CIPFA and MHCLG would deem appropriate, but as I indicated, the subject of this SI is much narrower than that. The wider issue is a separate matter, which is always under review. I would be happy to engage with my hon. Friend on any issues that he wants to raise from his experience of his local authority.
John Penrose
Since the Minister kindly makes that offer, the Treasury has raised the interest by what must be roughly 35%, from 1.8% to 2.8%. Surely that must have an impact on the amount of borrowing that local authorities are willing to do for what are presumably much-needed capital projects. Does the Minister have any assessment of the likely impact on demand for that kind of genuinely needed loan?
John Glen
It is helpful to put this in context. The rate was a function of the prevailing gilt rates last year, and the change brought it back to the level of the previous year, so we should not see this as a great leap in interest rate that will have a major effect. It is questionable whether the advantageous window offered by the relationship to the historically very low gilt rate was creating a different sort of behaviour. Again, that is outside the scope of my comments. I am happy to look at these matters, which are under ongoing review.
Let me turn to the hon. Member for Glenrothes’s remarks. He expressed general concern about any Government Minister taking control of anything, because he has no confidence in the Government. This is not a matter of Government Ministers overruling local authorities; the change is a reform of governance, with no practical effect on local authorities. It is based on the prudential code; decisions on borrowing and spending are devolved, and that continues. The Government consulted on this in 2017, and found widespread support for it. I am told that when the commissioners have met annually to sign off the annual report, they have said that they were keen for this SI to pass. The SI is quite complicated because it makes many references to primary legislation, and was delayed because of the events of recent years.
Peter Grant
I am interested to hear the Minister say that there is no practical effect on local authorities. The Government’s explanatory memorandum claims that the process will become more effective for local authorities. Is that not a practical effect? Does the Minister intend to reply to my question about whose policies will be implemented more effectively?
John Glen
The process is more effective in so far as the ceremonial role, which did not meaningfully alter any decisions on the ground, is transferred to the Treasury. There, we can ensure that we have a quorate body meeting to oversee the borrowing, but it will not make any different arbitration decisions, because the existing group of commissioners do not make those decisions. I am sorry that there has been a misunderstanding, but the order is not a power grab by the Treasury.
Transferring the powers of the public works loans commissioners to the Treasury will place that crucial function on a secure platform, enabling the continuity of lending for essential local capital projects. Those investments are often fundamental to quality of life and economic development, and by passing the SI, we will enhance the robustness and resilience of the lending facility, thereby supporting local authorities in such endeavours. I hope that the Committee has found the sitting informative and will join me in supporting the Order.
Question put.
Oral Answers to Questions
John Glen Excerpts(4 years, 3 months ago)
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Marsha De Cordova (Battersea) (Lab)
The Economic Secretary to the Treasury (John Glen)
In September, the Chancellor announced a new £500 million youth investment fund to build and refurbish youth centres and deliver high-quality services to young people across the country. That will include £250 million of capital investment, which is expected to deliver 60 new youth centres, 360 refurbished facilities and more than 100 mobile units for harder-to-reach areas.
Marsha De Cordova
Over the past decade, spending on youth services has been cut by more than £1 billion. In constituencies such as mine and across London, the number of youth clubs has almost halved. Will the Chancellor finally own up to the devastating effect that austerity has had on young people in my constituency and commit to funding a proper statutory youth service in his upcoming Budget?
John Glen
What I can promise the hon. Lady is that the Government are committed to funding local government with a settlement, which was announced before the election, of an additional 4.4% in real-terms increase that will give local authorities that additional spending power alongside the youth investment fund announcement that I mentioned earlier.
Mr Steve Baker (Wycombe) (Con)
Will my hon. Friend take steps to ensure that young people in Wycombe are not disadvantaged by excessively coarse aggregate measures of deprivation, which can obscure real need in constituencies such as mine?
Christian Matheson (City of Chester) (Lab)
Mr Virendra Sharma (Ealing, Southall) (Lab)
The Economic Secretary to the Treasury (John Glen)
The Government are always willing to work with the City and interested parties to consider how we can advance investment across all those sectors, and I would be happy to discuss such matters with the hon. Gentleman.
James Wild (North West Norfolk) (Con)
Katherine Fletcher (South Ribble) (Con)
John Glen
I welcome my hon. Friend to her place. I know she has great experience as an SME leader. The Government recognise that SMEs are the backbone of the economy. We have international trade adviser networks giving peer-to-peer support to encourage more exports. The Government’s export strategy, launched in August 2018, lays the foundations of how to extend that. I hope she will be able to make use of it during her time in the House.
Karl Turner (Kingston upon Hull East) (Lab)
The “back of a cigarette packet” policy to increase road duty by more than 700% for motor homes and camper vans is reminiscent of the caravan tax of 2013, which I think was invented by the Chancellor’s predecessor George Osborne. That would have decimated manufacturing industry in Hull. Will the Chancellor meet me, colleagues and those in the industry, who are very concerned about this policy, so that they can explain directly to him how disastrous this policy will be for manufacturing industry in Hull?
Ministerial Equivalence and Exemption Directions in Financial Services for the EU and EEA
John Glen Excerpts(4 years, 6 months ago)
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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 HM Treasury, for up to 12 months after exit day, to make equivalence directions and exemption directions for the European Union and EEA member states.
On 11 April 2019, I laid before Parliament HM Treasury directions under those powers to help to ensure that the UK will have a functioning regulatory regime for financial services in all scenarios. Today, I have laid before Parliament two further directions in preparation for the UK’s withdrawal from the EU.
The Prospectus Directive and Transparency Directive Equivalence (Variation) Directions 2019 amend a previous direction made on 11 April 2019. The existing equivalence direction determines that EU-adopted International Financial Reporting Standards (IFRS) are considered equivalent to UK-adopted international accounting standards for the purpose of preparing financial statements for transparency directive regime requirements and for the purpose of preparing a prospectus under the prospectus directive regime. This decision delivered on a commitment made by the Government in November 2018, allowing overseas issuers with securities admitted to trading on a UK regulated market, or overseas issuers making an offer of securities in the UK, to continue to use EU-adopted IFRS when preparing their consolidated financial accounts for future accounting years.
On 21 July 2019, the prospectus regulation came into full application in EU legislation, and the prospectus directive, including the UK domestic legislation implementing the directive, was repealed. HM Treasury has made the Prospectus (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/1234) to ensure that there continues to be a coherent and functioning prospectus regime in the event that the UK leaves the EU without an agreement on 31 October 2019. This new equivalence direction therefore amends the existing direction to refer to prospectuses being prepared under the prospectus regulation rather than the directive. This amending direction ensures that the existing equivalence direction continues to be legally operable and does not change its intended effect.
The markets in financial instruments exemption directions 2019 give effect to the decision taken by HM Treasury, the European Union and the EEA European Free Trade Association countries to exempt central banks of certain states, including EEA states, from certain provisions under the markets in financial instruments regulation in the event that the United Kingdom leaves the European Union without an agreement. This direction is necessary because adaptations to the EEA agreement granting the relevant exemption are not yet operative for all affected EEA central banks. This direction will therefore ensure that those affected EEA central banks can continue to carry on their activities in the UK without disruption at exit.
Copies of the directions are available in the Vote Office and Printed Paper Office and will be published alongside the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 on Legislation.gov.uk.
[HCWS46]
The Economy
John Glen Excerpts(4 years, 6 months ago)
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John McDonnell
Is it not interesting that virtually every Government apart from this one are willing to undertake an impact assessment of some sort? What does that display? I am not usually a suspicious person, but I think we have our suspicions.
Let me say to the Chancellor that he has a role to play in shouldering his responsibility to provide us all with the fullest possible information on the basis of which we can make our decisions. That means publishing a full economic impact assessment and doing it fast, so that we can have a proper debate.
As the Government have a working majority of minus 45, it is obvious that the Queen’s Speech is little more than a pretty crude election stunt. In all their various comments in the House and the media, the Prime Minister and the Chancellor have depicted their programme as “the people’s priorities”. As a political artisan, I can admire a good turn of phrase—
John McDonnell
I have been here for 22 years. That is a long apprenticeship—and sometimes the apprentice can point out the truth as well.
As I say, I admire a good turn of phrase, and I congratulate the creatives in whatever PR agency the Conservative Party now uses for coming up with that one—it must have tested very well in the focus groups—but that is all it is: a slogan, a turn of phrase. The reality, as demonstrated in the Queen’s Speech, is that after something approaching a decade of harsh and brutal austerity, a few cynical publicity stunt commitments to paper over the massive cuts in our NHS, schools, policing and care will go nowhere near what is needed. A slogan will not suffice.
People know—and this is relevant to the Brexit debate—that if the economy hits the buffers again, as a result of Brexit, economic mismanagement by the Tories or both, and when a choice must be made by the Tories about who will pay, they will always protect their own: the corporations and the rich.
Ged Killen (Rutherglen and Hamilton West) (Lab/Co-op)
It is a pleasure to follow my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney).
It does seem rather bizarre to be talking about a Queen’s Speech that the Government have no intention or any ability to implement, and I would not exactly describe myself as a monarchist but I do think the way the Prime Minister has treated Her Majesty through all this is shameful.
First, I want to touch on the implications for the UK. The Government say:
“The integrity and prosperity of the union that binds the four nations of the United Kingdom is of the utmost importance to my Government”
and Scotland will see a £1.2 billion cash bonus as a result of the latest spending round, but this Queen’s Speech ends freedom of movement, which will have a disproportionate impact on Scottish sectors, and even by the least damaging Brexit that would mean a reduction in Scottish GDP of 2.7%, and we know that a disastrous no-deal exit could mean a loss of economic output for Scotland of as much as £12.7 billion by 2030.
And it is not just prosperity in Scotland that is under threat from the Government; so too is the very existence of the United Kingdom itself. We have seen over a decade of austerity that Scotland did not vote for; we had David Cameron’s English votes for English laws speech on the steps of Downing Street on 19 September 2014; of course we had the Brexit referendum in 2016; and now we have this Government’s reckless deal, which tears up workers’ rights and simply delays a no-deal Brexit until the end of next year. The Conservative party, in truth, has done almost as much as the Scottish National party to undermine the United Kingdom. It is no longer the Conservative and Unionist party; it is the Conservative and Brexit party.
I was deeply disappointed, once again, to see nothing for 1950s-born women who are being denied a pension. That is a huge missed opportunity. Just as we are seeing with PPI repayments, we could have seen a boost for the economy had those women been paid what is rightfully theirs. As one of the leading members of the local WASPI branch in my area put it,
“these women are not going to be squirrelling this money away in offshore accounts.”
It will be spent in our local towns and on our high streets. However, the campaign will go on and I can assure them of my continued support.
Lastly, I want to touch on the lack of any new measures to protect free access to cash. I have been campaigning on that issue since my election. It has become increasingly clear, from the work of consumer rights groups, from international examples, from what is happening in many of our constituencies and from reports like the Access to Cash review, that this issue will not simply resolve itself. The banks have made a conscious decision to shift responsibility for running ATMs to private companies, and now they have decided that they really do not want to have to pay for that either. So the pressure they have put on LINK means that the fee being paid to the operators has been cut, and we are now seeing free-to-use ATMs closing, or turning fee-charging. That is having a particularly difficult impact in rural communities and in small towns such as those in my constituency, where businesses on the high street are already struggling and do not need any new additional barriers, such as a lack of availability of cash.
The Joint Authorities Cash Strategy Group, which the Government have set up to look at this issue, is no more than a talking shop.
Ged Killen
The Minister shakes his head, but what has that actually done since it was set up? The Government have to get real, or millions of people—some of the most vulnerable in society—will be left behind in a so-called cashless society.
In conclusion, this is a completely unnecessary Queen’s Speech, which has wasted everyone’s time and will do nothing at all for my constituents in Rutherglen and Hamilton West.
Draft Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019
John Glen Excerpts(4 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019.
It is a pleasure to serve under your chairmanship once again, Mr Bailey. As the Committee will be aware—some Members will be too aware—the Government had previously made all necessary legislation to ensure that in the event of a no-deal exit on 29 March 2019 there was a functioning legal and regulatory regime for financial services from exit day. Following the extension to the article 50 process, new European Union legislation has come into force and, under the European Union (Withdrawal) Act 2018, will form part of UK law at exit. Further deficiency fixes are therefore necessary to ensure that the UK’s regulatory regime remains prepared for exit.
This statutory instrument makes deficiency fixes to a new piece of EU legislation that has recently become applicable relating to the European market infrastructure regulation. EMIR implemented the G20 Pittsburgh commitments agreed in the aftermath of the financial crisis in 2009, regulating over the counter derivative markets, and in particular requiring some derivatives to be cleared in a central counterparty, known as a CCP. The European Commission reviewed EMIR in 2015-16, resulting in an update known as the EMIR regulatory fitness programme—EMIR REFIT—which came into force on 17 June 2019.
EMIR REFIT makes a series of changes so that the framework for over the counter derivatives applies in a more proportionate way. It focuses on users of OTC derivatives and does not make significant changes to the rules for CCPs. In particular, it expands exemptions from the requirement to clear trades in OTC derivatives through a CCP. As the Committee is aware, this is not the first time that EU exit legislation has been used to address deficiencies in EMIR as it will form part of UK law at exit, but this instrument is necessary to address new deficiencies that will arise as a result of the recent amendments made to EU legislation by EMIR REFIT. After exit, the UK would be outside the European economic area and outside the EU’s legal and supervisory framework for financial services. The EMIR framework that will form part of UK law at exit therefore needs to be updated to ensure that the new provisions continue to work effectively.
This instrument will ensure continuation of the new provisions introduced in EMIR REFIT and will transfer new EU functions to the appropriate UK authorities. Many provisions in EMIR REFIT do not produce significant deficiencies in UK law, and will continue to work effectively at exit. For example, this is true of the new exemption for small financial counterparties from the requirement to clear trades through a CCP. However, there are two key deficiency fixes in this instrument that are necessary to ensure EMIR REFIT is workable in a UK context. First, the instrument ensures that UK pension schemes will continue to be exempt from the requirement to clear trades through a CCP. This is an important provision for industry and consumers; an exemption for pension schemes is needed because there is currently no approach to clearing that works without subjecting pension schemes to disproportionate cost, particularly the requirement to pay margin to the CCP. The additional costs would ultimately undermine the ability of pension funds to meet their obligations to pension holders.
EMIR REFIT includes a pension scheme clearing exemption that will last anywhere between two to four years. To ensure there is no ambiguity about the length of the extension, that extension will now last the full four years in the UK. The fix is appropriate given the size and nature of UK pension schemes, the vital role that they play in pension provision, and their crucial position as long-term investors in the UK economy. The instrument will provide the time to find a solution that balances the interests of pension schemes and CCPs, which will be particularly challenging in the UK context.
The instrument enables the Treasury to extend the pension scheme exemption further, for up to two years at a time if no appropriate solution for the UK market has been found. That will give certainty to UK pensioners and industry. The instrument also ensures that EEA pension schemes will continue to be exempted in the UK, enabling UK banks to continue trading derivatives with EEA pension schemes without using a CCP, just as they currently do. Her Majesty’s Treasury committed to this action on 21 February 2019 to avoid disruption to UK businesses.
Secondly, the instrument transfers the function to suspend the clearing obligation from the European Securities and Markets Authority and the European Commission to the Bank of England. In EMIR REFIT, ESMA can recommend that the European Commission suspend the clearing obligation for three months at a time, up to a total of 12 months. We believe that the Bank of England is the most appropriate UK authority for that function, consistent with the responsibilities that Parliament has already conferred on the Bank for financial stability and the supervision of CCPs.
The Bank of England must secure the consent of Her Majesty’s Treasury and inform the Financial Conduct Authority if it needs to suspend the clearing obligation in the UK. The Bank may decide to issue a suspension lasting any period up to 12 months. Such flexibility will enable the Bank to reduce uncertainty for globally significant clearing members and clients based in the UK in the unlikely event that a suspension is necessary. Finally, this instrument ensures that all references to EMIR are up to date on exit day so that references in UK legislation after that point will refer to the right version.
The Treasury has worked closely with the Bank of England and the Financial Conduct Authority to prepare this instrument, and we have engaged with the financial services industry. The draft legislation has been publicly available on legislation.gov.uk since 24 July, when the instrument was laid before Parliament.
In summary, this instrument is necessary to ensure that EMIR will continue to function effectively in the UK after exit, following the updates made in EMIR REFIT. In particular, it will ensure that UK pension funds continue to benefit from the pension scheme clearing exemption and enable the Bank of England to take necessary action to safeguard financial stability when necessary. I hope that colleagues from all parties will join me in supporting the regulations, and I commend them to the Committee.
The Chair
The question is that the Committee has considered the draft Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019.
John Glen
Let me say at the outset that the instrument is needed to ensure that UK firms are able to make use of the new provisions included in EMIR REFIT and that EMIR will function appropriately after exit. Without the instrument, UK pension funds would be required to clear derivatives in a CCP, and that would come at a considerable cost to UK pension schemes and pensioners.
The instrument also ensures that the clearing suspension, a key financial stability tool, operates effectively in the UK. The hon. Member for Stalybridge and Hyde characteristically went through familiar arguments, stating his party’s position on the unsuitability of this process, and I will not go over that again. As he said, we both know where we are on that. He did make some specific points, which I will respectfully try to accommodate.
On the appropriateness of the transition of powers, the Bank of England will be given responsibility for suspending the clearing obligation in exceptional circumstances, with the consent of the Treasury. Both the Bank of England and the FCA will take on the responsibility to set certain binding technical standards that currently sit with ESMA. That is a widely understood common responsibility between them.
The SI does not give any new supervisory responsibilities to UK authorities. No new firms will be subject to supervision by UK supervisors due to the SI. National supervisors across the EU already have responsibility for supervising the users of uncleared derivatives and CCPs, and we are confident that the regulators are appropriately resourced for those roles.
The hon. Gentleman made a point about the wider framework. As he knows, a review is ongoing with respect to what we term air traffic control of regulations. There will be subsequent reviews of the configuration of powers between the Treasury, the FCA and the Bank of England, so the wider point that he made was a fair one, but that will be resolved hopefully after a deal is secured.
The hon. Member for Stalybridge and Hyde mentioned impact assessments. The Treasury has considered the impact of all its financial services SIs. I did not mention it before, but I am happy to say now that the impact of today’s SI was assessed to be below £5 million. When that is the case, Government policy is not to publish a full impact assessment. For previous exit SIs where the impact was assessed to above £5 million, impact assessments were published in advance and could be scrutinised.
The hon. Gentleman made some points about reassurance on the direction of travel of regulation. The context of the SI is that the UK’s pension regime relies on a higher number of defined benefit schemes than the rest of the EU. The way that those schemes need to interact with CCPs is unusual and different, so we have had an enduring dispensation not to participate in the same way. That is not a deregulatory effect, but because the pension schemes would have to hold a large amount of cash, which would be costly and uneconomic for them.
In essence, there has been enduring uncertainty around the conclusion of the process of resolution, but we have actively participated in it, given our historically different pension scheme arrangement. There is no desire not to observe the G20 Pittsburgh obligations on derivatives, and this is not some sort of deregulatory effort.
Jonathan Reynolds
It is an entirely reasonable observation that the UK pensions industry is structured differently and requires a different set of regulations and approach, but we have always known that. Is the Minister saying that, if we had not spotted this back then and left the European Union without passing the instrument, our regime would be deficient, or has something changed so that we now need to address it?
John Glen
Clearly, had we left on 31 March, the EMIR REFIT regulation would not have come in in July. What happened would have depended on the conditions under which we had left at the end of March and on whether we observed the changes naturally as part of the EU through a transition period, or if, in a no-deal circumstance, we used a different mechanism to consider ongoing legislation into which we had had some input but that was not quite finished. That is a bit of a difficult question to answer fully, but that is my understanding.
John Glen
I sense that there is a degree of frustration and impatience in the Committee, but I will respectfully address the point made by the hon. Member for Linlithgow and East Falkirk. We clearly have disagreements over the fundamental outcome that we need to secure, but all the interventions across the 58 SIs have been designed to give as much stability as possible in the event of no deal, which is in the interests of the whole of the United Kingdom’s financial services sector.
I hope that the Committee has found this morning’s sitting informative and will join me in supporting the draft regulations.
Question put and agreed to.
Prospectus (Amendment etc.) (EU Exit) Regulations 2019
John Glen Excerpts(4 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the Prospectus (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019, No. 1234).
It is a pleasure to serve under your chairmanship, Mr Paisley. The Government had previously made all necessary legislation under the European Union (Withdrawal) Act 2018 to ensure that, in the event of a no-deal exit on 29 March 2019, there was a functioning legal and regulatory regime for financial services from exit day. Following the extension of the article 50 process, new EU legislation has become applicable, and under the EU withdrawal Act that new legislation will form part of UK law at exit. Further deficiency fixes are therefore necessary to ensure that the UK’s regulatory regime remains prepared for exit.
This statutory instrument amends the EU prospectus regulation and related legislation, including a previous EU exit instrument—the Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019, or “the official listing instrument”. The official listing instrument fixed deficiencies in the prospectus regime as it applied before 21 July 2019. This instrument will ensure that the UK continues to have an effective prospectus regime after exit, taking into account the new EU prospectus regulation, which applied across the EU from July of this year.
The EU prospectus regulation contains the standardised rules that govern the format, content, approval and distribution of the prospectus that issuers must produce when securities are offered to the public or admitted to trading on a regulated market in a European economic area state. Deficiency fixes to the new EU prospectus regulation are necessary to reflect the fact that, after exit, the UK will be outside the EU single market and the EU’s regulatory and supervisory framework for financial services. The amendments in this instrument follow the same approach as the amendments made in the official listing instrument to the UK prospectus regime as it applied before 21 July 2019.
First, in line with the approach that the Government are taking to all onshored financial services legislation, this instrument transfers functions currently within the remit of EU authorities—in particular, the European Securities and Markets Authority—to the appropriate UK bodies. Such functions—for example, the development of technical rules on certain provisions of the EU prospectus regulation—will now be carried out by the Financial Conduct Authority. That is appropriate, given the FCA’s expertise in applying the UK prospectus regime and the major role that it has already played in the EU to develop technical standards. Where the EU prospectus regulation confers a delegated legislation-making power on the Commission, the powers are converted into regulation-making powers conferred on the Treasury. Use of those powers by the Treasury will need the approval of Parliament.
Secondly, this instrument removes the obligation for UK authorities to share information with the relevant EU and member state authorities. The obligations will no longer work appropriately once the UK is outside the EU’s joint supervisory framework. For the purposes of supervisory co-operation, that means that the EU will be treated like other third countries. The FCA will still be able to co-operate with EU regulators, using the existing framework in the Financial Services and Markets Act 2000, as it currently does with other third countries on a discretionary basis. The UK is committed to maintaining a high level of supervisory co-operation with the EU and its member states after exit.
Thirdly, post exit, EEA issuers wishing to access the UK market will be required to have their prospectus, or their registration document—the part of a prospectus that contains information on the issuer—approved directly by the FCA, as any other third country issuer would. Currently, an EEA issuer’s prospectus or registration document approved by another EEA regulator can be passported for use in the UK.
This instrument introduces transitional arrangements that will allow any prospectus approved by an EEA regulator and passported into the UK before exit to continue to be used, and supplemented with additional information, up to the end of its normal period of validity. The instrument also permits registration documents passported into the UK before exit to continue to be used as a constituent part of a prospectus in the UK, pending approval of the full prospectus by the FCA after exit. For both a full prospectus and a registration document, the period of validity is usually up to 12 months after it was originally approved.
An exemption for certain public bodies from the obligation to produce a prospectus under the EU prospectus regulation is maintained, but is extended to the same set of public sector bodies of all third countries post exit. That is in line with the approach taken in the official listing instrument previously. Members of the Committee will remember that this issue was discussed during the debate on that instrument in March; I think that the hon. Member for Oxford East raised these points then. Like then, I believe it makes sense to extend this exemption more broadly to ensure that UK capital markets continue to be attractive to public body issuers.
The EU prospectus regulation allows issuers to incorporate information from certain documents that are available electronically elsewhere, by making reference to them in a prospectus. This includes information approved by the regulator of another EEA state. To provide a smooth transition, this instrument sets out that information contained in relevant documents approved by an EEA regulator before exit day can continue to be incorporated by reference in a UK prospectus going forward. Any prospectus that incorporates information in this way will still require FCA approval before it can be used in the UK.
Lastly, the instrument ensures that matters in relation to the UK prospectus regime and transparency framework will continue to apply to Gibraltar as they did prior to the UK’s departure from the EU. This is in line with the approach taken in other EU exit instruments. Throughout the drafting process, the Treasury has worked closely with the FCA and engaged with the financial services industry—TheCityUK in particular, as a convenient body to develop this instrument.
Before I conclude, I want to address the procedure under which this instrument has been made. Along with three other financial services exit instruments, it was made and laid before Parliament on 5 September, under the made-affirmative procedure provided for in the EU withdrawal Act. This is an urgent procedure that brings an affirmative instrument into law immediately, before Parliament has considered the legislation. But the procedure also rightly requires that Parliament must consider and approve a made-affirmative instrument if it is to remain in law.
The Government have not used this procedure lightly, and it must be remembered that across Departments we have already laid over 600 exit SIs under the usual secondary legislation procedures. However, as we draw near to exit day, it is vital that we have all critical exit legislation in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute. Industry and our financial regulators need legal certainty on the regime that will apply from exit. Without addressing the deficiencies that will arise from the EU’s prospectus regulation, there would be significant legal uncertainty and disruption for issuers and regulators. Confidence in the UK’s role as an international hub for the issuing of securities would be undermined.
To conclude, this Government believe that the legislation is necessary to ensure that, if the UK leaves the EU without a deal, the UK’s prospectus regime can continue to function appropriately post exit. I hope colleagues across the Committee will join me in supporting these regulations. I commend them to the Committee.
John Glen
I appreciate the three points raised by the hon. Member for Oxford East. In typical fashion, she has got to the heart of some of the core matters of the SI. I will address regulation 32, the accounting standards and the wider point she makes about the 12-month transition. I will then deal with the points raised by the hon. Member for Motherwell and Wishaw on the broader effect of this process on the financial services industry.
On the first point—the consideration we have given to the risk of extending public bodies exemption to all third countries—we have worked closely with the FCA in the drafting of the instrument to ensure that investors remain suitably protected, and we believe this approach offers the most appropriate balance between investor protection and maintaining the attractiveness of the UK’s capital markets. It is in line with the approach taken in the previous official listing SI that we discussed.
As with all investments, there is a risk that public bodies offering securities could fail, and a prospectus might help an investor to understand that risk. However, there is generally more information available to potential investors on public bodies, such as sovereign issuers and state bodies that currently make use of the exemptions, than on corporate entities. For that reason, we feel that it is justified. We will, of course, keep the arrangements under review and consider them if they appear to expose investors to disproportionate risk—there is no complacency on that point.
The hon. Member for Oxford East made a second point on accounting standards. She raised the issue of the appropriateness of the Government to specify the accounting standards deemed equivalent to UK international accounting standards, and she asked whether we are making new decisions. Unlike the delegated Act under the EU prospectus directive, the delegated Act under the EU prospectus regulation does not explicitly state which third countries’ accounting standards have already been deemed equivalent for the purpose of preparing a prospectus. The ambiguous drafting of the EU prospectus regulation leaves the position unclear, which might create uncertainty for market participants on which accounting standards are permitted post-exit.
To ensure consistency and clarity for market participants, the instrument explicitly provides for a new article on the accounting standards that are permitted to be used when preparing a prospectus for use in the UK, and its introduction is supported by the FCA. The article does not go beyond what is currently permitted under the EU regime; it does not designate any new third countries’ accounting standards that were not previously explicitly stated in the prospectus directive, as equivalent for the purpose of preparing a prospectus. All the current equivalent regimes for accounting standards will continue to be equivalent after exit.
The hon. Member for Oxford East asked about the 12-month transition and suggested that there is a gap and an inadequacy in the long-term view, and that this impacts on the resilience of the City. I recognise that uncertainty is unwelcome, and the Government are working to secure a deal. In a situation where that is not secured, there will need to be a considerable amount of additional work in the light of the new reality. At the suggestion of many groups in the City, we have started a review that looks at an air traffic control mechanism to deal with all the regulations that exist coming in from the City. That call for evidence will conclude on 18 October, and there will be a series of further regulatory reviews, but their nature and scope will be determined by the outcome of the process that we are in during this month.
A lot of work is going on to look at the financial services industry and its competitiveness. What we need to do is get that balance between systemic stability, which all parties have been committed to ensuring since the crash, and the future.
The hon. Member for Motherwell and Wishaw referred to her party’s position on Brexit. In the interest of time and of trying to get the heart of the concerns about the financial services, I will focus on the area that I am familiar with. I have grave sympathy with her for having had to study these matters, but I guess that was her choice.
The hon. Lady refers to the $1 trillion of assets that has been moved offshore. The City has made modest and consistent contingency arrangements. There is no denying that it would be undesirable for extra costs to accrue, but in the context of this significant decision of the UK as a whole—although I acknowledge that her view on that is different—those decisions have been made.
This process actually avoids red tape, because it keeps us completely aligned with where we are as members of the EU. The fact that a de minimis assessment was made illustrates that it will not cost the industry additional sums. I take seriously the footprint of financial services across the United Kingdom—including in Edinburgh and Glasgow, where it is significant, as the hon. Member for Motherwell and Wishaw knows better than I. We will do everything we can to take appropriate measures in all circumstances to safeguard the health of the financial services industry.
In conclusion, the instrument is needed to ensure that the UK has an effective prospectus regime and that the legislation functions appropriately after the UK has left the EU. I hope that I have answered the points thoroughly, that the Committee has found the sitting informative, and that it will join me in supporting the regulations.
Question put and agreed to.