Bilateral Loan to Ireland
John Glen Excerpts(5 years, 5 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 7 September, in line with the agreed repayment schedule, HM Treasury received a total payment of £405,490,687.38 from Ireland. This comprises the repayment of £403,370,000 in principal and £2,120,687.38 in accrued interest.
HM Treasury has today provided a further report to Parliament in relation to the loan as required under the Loans to Ireland Act 2010. The report relates to the period from 1 April 2020 to 30 September 2020. It reports fully on the two principal repayments received by HM Treasury during this period, and sets 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.
A written ministerial statement on the previous statutory report regarding the loan to Ireland was issued to Parliament on 29 April 2020, Official Report, column 26WS.
[HCWS486]
Counter-terrorist Asset Freezing Regime: January-March 2020
John Glen Excerpts(5 years, 6 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 January 2020 to 31 March 2020.
This report also covers the UK’s implementation of the UN’s ISIL (Daesh) 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 (Daesh) 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 (Daesh) listings.
The attached tables set out the key asset-freezing activity in the UK during the quarter.
The attachment can be viewed online at: http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-09-24/HCWS467/.
[HCWS467]
Draft International Monetary Fund (Limit on Lending) Order 2020
John Glen Excerpts(5 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 International Monetary Fund (Limit On Lending) Order 2020.
It is a pleasure to serve under your chairmanship, Mr Hosie. The International Monetary Fund plays a critical role at the very heart of the international economic system that ensures global economic stability and facilitates long-term economic growth and poverty reduction around the world. It operates as the global lender of last resort, providing crucial financial assistance to countries in economic crisis and supporting their return to a stable economic footing. This helps to prevent economic instability overseas from spilling over into the UK economy.
The indispensable role of the IMF has never been more evident than during the covid-19 pandemic. The fund has responded with unprecedented speed and breadth to support countries’ health and economic responses, in turn preventing further instability overseas from affecting the UK. The order will increase the legal limit on the amount that the UK is able to lend to the IMF, allowing us to fulfil the internationally agreed outcome of the 15th general review of quotas.
In December 2019, IMF members, including the UK, agreed to maintain the size of overall IMF resources at current levels. It was agreed that this would be done by maintaining the level of quota resources, doubling the new arrangements to borrow and significantly reducing the bilateral borrowing agreements. Quota resources are permanent while the NAB and BBAs are intended to be temporary and are together classed as borrowed resources. IMF members agreed to implement the agreement by the end of 2020, ahead of the existing NAB and BBAs’ expiry. The UK contributes to both types of borrowed resources and therefore must implement the agreement by doubling our commitment to the NAB and decreasing our commitment to the BBAs. As the UK contributes a relatively larger share of the NAB than the BBAs, that will result in an increased UK commitment to the IMF overall.
The UK’s loan agreements to the IMF are denominated in the IMF’s unit of account, the special drawing right. The UK’s maximum commitment to IMF borrowed resources stands at 18.66 billion SDR, which is approximately £20.65 billion at today’s exchange rate. The order will raise the UK’s ceiling for lending to the IMF to 22.91 billion SDR, equivalent to £25.36 billion. The new ceiling is equal to our new contribution as agreed at the 15th general review of quotas and represents an increase in the UK’s commitment to IMF borrowed resources of 4.25 billion SDR or £4.7 billion.
I want to make it clear that lending to the IMF does not represent public spending and such loans do not detract from money that we need to spend in the UK; nor do they contribute to UK net debt levels or the deficit. The IMF holds primary creditor status, meaning that it is repaid even if other creditors are not. It conducts rigorous analysis on all lending and cannot lend into unsustainable debt positions. A loan to the IMF is a loan to probably the most creditworthy institution in the world. No country has ever lost money lending to the IMF. I also want to make it clear that such lending does not represent an additional up-front financing commitment for the UK, but simply increases the potential amount of financing from the UK that the IMF can call on, should it be required. At present, neither the NAB nor the BBAs are being used. While that may change if global financial conditions deteriorate, the UK can use its independent seat at the IMF’s executive board to continue to scrutinise, debate and vote on the use of such resources.
It is in our interests to support the IMF in implementing the 15th general review of quotas. It preserves the IMF’s resources, allowing it to respond quickly to economic crises and retain market confidence. Key members such as the US are also significantly increasing their commitments under the agreement. Although the agreement was reached in December 2019, the covid-19 pandemic makes its implementation more important than ever. Over the past few months, the IMF has provided financial assistance to 80 countries, totalling about £67 billion, and has approved debt service relief grants to 28 of its poorest members. A well resourced IMF is critical to achieving a strong global economic recovery, ensuring a strong trading environment for the UK, and reducing the risk of overseas crises having an impact on UK growth.
The Government believe that it is in the UK’s interests to have a strong and effective IMF at the heart of the international financial system. It is essential that the UK plays its part by increasing its ceiling for lending to the IMF, and in so doing implementing the internationally agreed 15th general review of quotas. I hope that hon. Members will join me in supporting the order, which I commend to the Committee.
John Glen
I thank the right hon. Member for Wolverhampton South East for his support of the order. He makes some general points, probably outside the scope of this specific order, about the need for greater collaboration among nations in supporting the dire circumstances of the most vulnerable. I will just point out that at a time when the UK is providing, through the order, more money for the IMF, the IMF’s lending toolkit consists of the general resource account and the poverty reduction and growth trust, and the £2.2 billion loan announced by my right hon. Friend the Chancellor of the Exchequer was directed to the PRGT, which is the IMF’s concessional lending resource. Similarly, the £150 million grant through the IMF’s catastrophe containment and relief trust is targeted only at the poorest and more vulnerable PRGT members.
Quoting the managing director of the IMF, the right hon. Gentleman makes some very valid points about how we will need to look at how we co-ordinate responses to the full effect of the pandemic, but I think that those matters are perhaps beyond the scope of today’s order. What is clear is that it is in the UK’s interest to have a strong, effective and legitimate IMF at the heart of the international financial system and it is therefore key that we implement our part and our duty in this agreement.
I do not wish to detain the Committee any further. I hope that everyone will be able to join me in supporting the order this afternoon.
Question put and agreed to.
Draft Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020
John Glen Excerpts(5 years, 6 months ago)
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The Chair
Before we begin, I remind Members about social distancing. I can see you are adhering to the rules and sitting in the marked seats. If people are going to speak, Hansard colleagues will be grateful if you email your notes to them at hansardnotes@parliament.uk. I call the Minister to move the motion.
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020.
It is a pleasure to serve under your chairmanship for the first time, Ms McVey.
The Treasury has been undertaking a programme of legislation to ensure that after the end of the transition period, there continues to be a functioning legal and regulatory regime for financial services in the UK. The Treasury lays statutory instruments under the European Union (Withdrawal) Act 2018 to deliver this legislative programme, and the majority of these SIs have already been approved in this place and in the House of Lords. As part of this financial services legislative programme before exit day, the Treasury laid the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, commonly known as the equivalence regulations 2019, in January 2019.
The equivalence regulations 2019 were designed to ensure that, if the UK left the EU without a transition period, the UK would have a fully functioning equivalence framework from exit day. The additional time afforded by the transition period has provided us with the opportunity to put in place supplementary measures in the equivalence regulations 2019 to ensure that the UK continues to have a robust and functioning equivalence framework for financial services both during and after the end of the transition period.
The measures in the instrument being debated today complement the equivalence regulations 2019 by creating additional standalone powers for the relevant UK financial services regulators—the Bank of England and the Financial Conduct Authority—which are appropriate for those regulators in the transition period, and also make minor amendments to the earlier 2019 regulations, again as appropriate for the transition period. The SI will make minor amendments to add to the powers available to the regulators after the end of the transition period and to correct errors in earlier financial services EU exit legislation.
I am grateful that this SI was raised as an instrument of interest by the Lords Secondary Legislation Scrutiny Committee in its July report and for the question the Committee raised on co-operation agreements. I intend to address that question during this debate.
The instrument being debated concerns the UK’s future regime for equivalence, which is a process to determine that another country’s regulatory and supervisory regime is equivalent to the UK’s corresponding regulatory framework. Recognising the regulatory equivalence of third countries is a key component of financial services regulation. Equivalence determinations can help to reduce regulatory burdens on firms and facilitate cross-border market access. This may lead to increased competition, which has benefits for UK firms and consumers by engendering healthy market incentives to lower prices and offer innovative products.
At present, equivalence functions are performed by the European Commission and the European supervisory authorities. At the end of the transition period, these functions will be transferred to the Treasury and the UK regulators as provisions in retained EU law. During the transition period, equivalence determinations can be made for European economic area states via powers within the equivalence regulations 2019. This instrument provides a UK equivalence framework that is appropriate for use during the transition period in relation to the EU’s existing framework. This instrument allows the UK financial services regulators to complete the associated actions that mean that Treasury equivalence determinations taken during the transition period can take full effect at the end of that time.
This is a technical SI that provides for the UK’s transition to its new position outside the EU. I will now explain in more detail the main categories of fixes that the SI introduces. The first three changes provide UK regulators with appropriate powers to complete the associated actions that ensure that the Treasury’s equivalence determinations can take effect fully at the end of the transition period.
Currently, the equivalence regulations 2019 allow the Treasury to make equivalence determinations by direction during the transition period for EEA states, with those directions not entering into force until the end of the transition period. As part of the equivalence process, almost all the equivalence provisions in retained EU law will require UK financial services regulators to conclude co-operation arrangements with the relevant regulatory authority or authorities for that EEA state before the determination can take effect. Currently, there is no mechanism to allow regulators to undertake that during the transition period.
Where the Treasury has made an equivalence determination by direction, the SI will make transitional provision for UK financial services regulators to have the power to enter into relevant co-operation arrangements with the appropriate EEA regulatory authorities before the end of the transition period. Those co-operation arrangements will come into effect at the end of the transition period for the necessary provisions in retained EU law.
Additionally, as part of the direction-making process, almost all equivalence provisions require regulators to issue recognition or registration decisions for non-UK firms. Where the Treasury has made an equivalence determination by direction during the transition period, the instrument puts in place a regime for firms to make an application during the transition period to the appropriate regulator and for that application to be processed.
The instrument will therefore ensure that the regulators have the power to process applications and issue recognition and registration decisions during the transition period, to come into effect at the end of that period for the necessary provisions in retained EU law. It will also give regulators the power to request fees from applicants for regulatory decisions made under it.
I appreciate that the Lords Secondary Legislation Scrutiny Committee questioned whether there is enough time for the UK regulators to establish co-operation agreements with EEA regulators once an equivalence determination is made and then process applications made by EEA firms. I am pleased to say that regulators have a period of one year to process applications from EEA firms once the required co-operation arrangements have been established. Both the Treasury and regulators consider that ample time for the regulators to decide any applications.
Secondly, the SI will amend the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019, which in turn make provision for the onshoring of the EU credit rating agencies regulation. The amendments will onshore the powers to enter into co-operation arrangements currently held by the European Securities and Markets Authority to the Financial Conduct Authority.
The amendments also make provision for the existing EU equivalence determinations that will form part of retained EU law by operation of section 3 of the European Union (Withdrawal) Act 2018. Finally, a minor but necessary amendment is also made to the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018 that relates to a provision within the regulations to ensure that they work in a UK-only context.
In summary, the Government believe that the proposed instrument is necessary to ensure that there is an appropriate equivalence framework for financial services during the transition period and to complement that already put in place by the equivalence regulations 2019. I hope that Committee members will join me in supporting the regulations and I commend them to the Committee.
John Glen
I thank the right hon. Gentleman for his points, which I will address in turn. To reiterate, this SI is needed to ensure that we continue in the UK to have a robust and functioning equivalence framework for financial services after exit. As the right hon. Gentleman acknowledged, these regulations make minor amendments to modify errors in onshored legislation.
The right hon. Gentleman asked me to confirm initially whether there was any intention to change policy. There is no intention to change policy. But he then asked a series of questions related to the broader negotiation of equivalence in financial services. I am happy to address that and to acknowledge that we returned all 17 questionnaires received from the EU as part of its assessment process. Our returns totalled more than 2,500 pages. We received the first questionnaire in late March, and the last 250 pages of questions reached us only at the end of May. Our belief, as I have said previously, is that many, if not most, of those questions relate to explaining the detailed rules and regulations in the UK—ones that we share with the EU. I am happy to confirm that, although decisions on equivalence are autonomous and unilateral in many areas of financial services, it is essential that we understand the approach of the other party when deciding how to approach an area of cross-border activity. Although the UK has undertaken its assessment of the EU, we will not be making equivalence decisions at this stage; we will make decisions when and where we determine that it is in the UK’s interests to do so. Our ambition remains to achieve reciprocal equivalence, supported by effective regulatory co-operation and an ambitious free trade agreement. We continue to work towards that goal.
The right hon. Gentleman asks about broader engagement with the industry. Obviously, I have deep and regular contact with representative bodies from the different parts of the financial services industry. Just last week I chaired the tenth meeting of the asset management taskforce, and I obviously hear the concerns about these unresolved matters. With respect to the specific arrangements in this SI, however, I hope the Committee is assured that these modest changes are fully necessary. I welcome the right hon. Gentleman’s agreement on that.
Question put and agreed to.
2.46 pm
Committee rose.
Oral Answers to Questions
John Glen Excerpts(5 years, 6 months ago)
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Holly Mumby-Croft (Scunthorpe) (Con)
The Economic Secretary to the Treasury (John Glen)
The Government recognise the extreme disruption that the pandemic has caused businesses, which is why we have delivered a generous and comprehensive package of support, in line with best practices globally, totalling more than £190 billion. That has included grants, loans, the furlough scheme, the self-employment income support scheme, deferred VAT payments, business rate reliefs and protections for commercial tenants.
Bim Afolami
I thank the Minister for his answer. Will he and the Treasury consider reviewing the rules of the furlough scheme to deal with cases where some small businesses, particularly one in my constituency, missed out on that scheme through administrative error and, in effect, paid staff when that could have been done through the furlough? Will he discuss that with me separately to see whether we could review the rules to deal with that sort of administrative mistake?
John Glen
Obviously, the scheme has helped 1.2 million employers, and that involves 9.6 million jobs. I am happy to engage with my hon. Friend on the specific example he raises. No appeal process is available for those who have made administrative errors, but if a mistake has been made by Her Majesty’s Revenue and Customs, a complaints procedure can be followed. I will follow up on this with him personally.
Miriam Cates
This Government’s support for businesses throughout the pandemic has been wide-ranging and delivered at speed. Without the real-time information held by HMRC, it would have taken significantly longer for those grants to reach employers and many more jobs would have been lost. Digital tax administration not only helps HMRC, but cuts costs to businesses, so what is the Treasury doing to build on those successes and make the UK one of the most digitally advanced places in the world to run a business?
John Glen
My hon. Friend is right; it is incumbent on the Government, in all Departments, to look at how we can refine the way we operate, to be more effective. That is why in July my right hon. Friend the Chancellor published a 10-year tax administration strategy, setting out our vision for a modern system, which will involve extending making tax digital to more taxpayers. That is a first step, and we hope it will bring us to a world-leading situation in this country.
Holly Mumby-Croft
I have been told by businesses in my constituency that the hospitality VAT cut was a lifeline to them and helped them to continue. Will my right hon. Friend consider extending that VAT cut beyond January next year, to help those businesses with that recovery?
John Glen
Clearly, every intervention has a cost, and that measure provided support for 150,000 businesses, protecting 2.4 million jobs. As we approach future fiscal events, all contributions and businesses cases for changes will be looked at carefully by my right hon. Friend the Chancellor. I am sure that he has heard my hon. Friend’s representations today.
Duncan Baker (North Norfolk) (Con)
Daniel Zeichner (Cambridge) (Lab)
The Economic Secretary to the Treasury (John Glen)
The hon. Gentleman is right to raise ARM, which is obviously a key employer in his constituency. The Government are taking a very close interest in this transaction. It was pleasing to see yesterday that parties close to the transaction said that the headquarters would remain in Cambridge. It is a matter we are engaging very closely on, and I am very happy to engage with him personally on any questions arising from that.
Dr Kieran Mullan (Crewe and Nantwich) (Con)
John Glen
My hon. Friend is right to raise this point, which he has raised before. In his constituency, 1,400 businesses have benefited from the bounce back loans from 28 providers across the country, but I am happy to engage with him in relation to the number of cases he has dealt with and see what interventions can be made at this time.
Zarah Sultana (Coventry South) (Lab)
Co-operative and Community Benefit Societies (Environmentally Sustainable Investment) Bill
John Glen ExcerptsFriday 11th September 2020
(5 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
I congratulate the hon. Member for Cardiff North (Anna McMorrin) both on securing this private Member’s Bill and on highlighting the important issue to the House. I acknowledge the many significant contributions so far: from my hon. Friends the Members for Northampton South (Andrew Lewer), for Berwickshire, Roxburgh and Selkirk (John Lamont), the hon. Member for Croydon Central (Sarah Jones), my hon. Friends the Members for Clwyd South (Simon Baynes), for Grantham and Stamford (Gareth Davies), for Christchurch (Sir Christopher Chope), for Rushcliffe (Ruth Edwards), for Bolton West (Chris Green), for Sedgefield (Paul Howell), for Darlington (Peter Gibson) and for Gedling (Tom Randall). All of them have interrogated the Bill very carefully and thoughtfully with some interesting exchanges along the way.
I wish to put it on record that I fully agree with the ambitions of the hon. Lady’s Bill to support the growth and development of the co-operative and mutual sector and to tackle climate change; I have enjoyed our dialogue during the preparation of the Bill to get to this point. They are two key drivers of my tenure as Economic Secretary. I also wish to put it on record that the Government have taken significant steps to support the co-operative and mutual sector to reach its potential, and I will continue to champion mutuals of all kinds. Just last week, I was pleased to attend a roundtable on the topic of regional mutual banks chaired by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) who has also made contributions again today. I will be taking some of those thoughts from that discussion forward.
Treasury officials who work with me also hosted an innovative mutuals workshop with representatives from across the sector last year to drive practical changes to help co-operatives. In 2014, as has been mentioned, we passed the Co-operative and Community Benefit Societies Act to reduce legal complexity and, at the same time, we increased the amount of capital a member could invest in a society from £20,000 to £100,000.
Kevin Hollinrake
The Minister refers to the roundtable we held on mutual banks. One of the astounding figures in that roundtable was the SME lending by mutual banks in other countries throughout the financial crisis. In Japan, there was no reduction in lending to SMEs. In Germany, there was a 20% increase. In Switzerland, there was a 30% increase over that five-year period. In the UK, there was a 25% decrease in lending to SMEs. Does that not show the power of mutual banks as a solution to SME lending?
John Glen
It does show the considerable potential, but we must be clear about the different legal traditions and frameworks that exist in those different jurisdictions. Right now, we are looking at where we can examine ways of moving forward constructively from the basis that we have in this country.
I would like to move on and examine some of the other elements where the Treasury has made contributions to assist this broad agenda. Where we have identified barriers holding mutuals back, we have acted to remove them. This year, we worked with Her Majesty’s Revenue and Customs to ensure that companies converting to co-operatives are treated on a level playing field. At the Budget, the Government announced that the tax burden on housing co-operatives would be reduced. Most recently, the Treasury has worked closely with the Department for Business, Energy and Industrial Strategy to ensure that co-operatives can benefit from the Government’s covid-19 business support offer, including through the Corporate Insolvency and Governance Act 2020.
I am conscious that the interest of the hon. Member for Cardiff North is not just about the development of the co-operative sector. In our discussions, her passion for taking action to address climate change and her considerable experience in Wales prior to coming to this place have been abundantly clear to me. The Government share that ambition. As the House will be aware, we legislated to reduce emissions to net zero by 2050, becoming the first major economy to do so. In the Budget earlier this year, the Chancellor also announced a series of real, tangible measures to support green growth and tackle climate change. They were wide-ranging and included: committing to the carbon capture and storage infrastructure fund; fulfilling the manifesto commitment to tree planting and peatland restoration through a £640 million Nature for Climate fund; delivering on our commitment to increase the proportion of green gas in the grid by consulting on introducing a Great Britain-wide green gas levy to support biomethane production, alongside other measures to decarbonise heat; doubling the size of our energy innovation programme; and, at the summer economic update in July, the Government announced a further ambitious £3.05 billion package for housing decarbonisation designed to cut carbon, save people money and create jobs.
In my own area of responsibility at the Treasury, green finance is a priority. We published our green finance strategy in July last year. It sets out very clear objectives to align private sector financial flows with clean environmentally sustainable and resilient growth, and to strengthen the competitiveness of the UK financial sector. The tone of the debate and the content of colleagues’ speeches today has shown that there has to be an almost limitless ambition in terms of the dimensions of interventions. A number of contributions focused on the issue of green bonds and mobilising green finance. That means accelerating investments to support clean growth and our environmental ambitions. I think I would want to say that the issuance of green bonds will be an important part of the pathway to delivering the transition to net zero by 2050. It is something that the Treasury keeps under active and ongoing review as we approach fiscal events in the future.
I would like to turn now to the reasons the Government cannot support this Bill, despite sharing the ambitions of the hon. Member for Cardiff North. For the benefit of the House, it may be worth restating that societies can currently issue shares to raise capital and may also issue debt in much the same way as companies, as the Opposition Front-Bench spokesman, the right hon. Member for Wolverhampton South East (Mr McFadden) correctly set out. The current arrangement allows for a considerable amount of flexibility for co-operatives seeking to raise capital, while safeguarding their status as genuinely mutual member-owned and controlled entities.
The Government believe that the UK should have a strong and robust regulatory system which provides strong protection for consumers. Investment in mutuals, like any other investment, is not risk-free—a point that has been made by several hon. Members. Although it is for investors to make their own choices about risk—as has been pointed out, investments can go up and down—it is crucial that the Government ensure that appropriate protections are in place, particularly where a new type of investment instrument or product is being created.
The recent public and regulatory attention, following the failure of London Capital and Finance, to retail investments such as those that are often referred to as mini bonds highlights that care is needed when developing investment products for retail investors. From the beginning of this year, the Financial Conduct Authority took action to limit the promotion of a certain type of mini bond to certain retail investors, citing concerns about the high risk that capital invested would not be repaid and the illiquid nature of the investment. The FCA is now consulting on making those temporary rules permanent and extending them to some similar securities.
Unfortunately, we believe that the type of share proposed in the Bill may unintentionally—I do accept that it would be unintentional—create a capital instrument with characteristics similar to those of a mini bond, without ensuring that adequate protections for consumers were in place. Some of the significant issues with mini bonds arose as a result of their illiquid nature—the fact that they cannot easily be transferred—limiting investors’ ability to access their funds. Although the share proposed in the Bill is transferable, we believe that, in practice, it is likely that it would be highly illiquid. Mutual shares can ordinarily only be transferred at par value, which in turn limits the potential for the emergence of any secondary market for the shares, because the incentive to purchase existing shares is limited. In the case of the share proposed in the Bill, the opportunities for retail investors to recover their funds before the term attached to the share has expired, should they need to do so, may be extremely limited. That limitation could pose risks to retail investors with relatively low net worth who may need to access their capital.
Investment in mutuals is not risk-free. Many investors in mini bonds were motivated by the opportunity to support a brand or product that they had some relationship with, so they may not have fully considered the risks posed to their capital. That issue should be considered carefully in this case, because it is likely that individual socially minded investors may see investment in a green co-operative as an ethical use of their funds and may underestimate the associated risk.
That issue may be compounded by two further considerations. First, although the FCA is the registering authority for co-operatives, where they are not undertaking regulated activity they are not supervised by the FCA in the manner in which financial services firms are. We believe, therefore, that there is a significant risk of mistaking registration with the FCA to suggest a level of scrutiny that does not exist, and that may cause investors to underestimate the risk. Furthermore, as the investments are unlikely to be covered by the Financial Services Compensation Scheme, there would be no compensation available to consumers if the issuing co-operative were unable to repay the original investment. That has been a particularly contentious area with mini bonds.
More broadly, the Treasury’s review of the current regulatory arrangements for the issuance and marketing of non-transferable debt securities, such as some mini bonds, is ongoing. It is right that we consider carefully the outcome of that review before consideration is given to the creation of any capital instrument with similar characteristics. We do not want to have to do another review when we have not concluded this one yet. I hope I have made it clear to the House that the Government have significant concerns about the potential consumer detriment that may unintentionally arise as a result of the type of share proposed in this Bill.
Kevin Hollinrake
Does the Minister agree that the issue with mini bonds, and particularly with London Capital and Finance, was the misunderstanding around what was regulated? In that case, the product itself was not regulated, but the marketing of it was. That was very confusing for consumers, many of whom thought they were buying regulated products when they were not. Would it not be more straightforward to simplify and widen the regulatory framework to bring those kinds of products into it?
John Glen
My hon. Friend shows his usual grasp of these matters. He is right to say that the lack of clarity about the promotions regime and the regulation of the underlying instruments poses some real challenges. Alongside Dame Elizabeth Gloster’s review, which will report in November, we are looking carefully at the right joined-up response to deal with the risks that we have seen in the recent unfortunate situation arising from these mini-bonds.
Alongside protecting consumers, it is right that the Government consider the impact of any proposed changes to the shares issued by co-operatives on the sector. We have seen clear examples in other policy areas of legal forms being used to deliver investor benefits other than for the purpose they were intended, such as tax-advantaged venture capital schemes in energy generation. The FCA noted in response to its 2015 consultation that it had taken the decision not to register a number of energy societies as co-operatives. Those decisions were taken on a case-by-case basis, when it was determined that the conditions for registration as a co-operative were not met. In those cases, the relevant condition for registration was that the society must be a bona fide co-operative society.
Key to what makes mutuals distinct from other legal forms is their purpose-driven nature—one that the hon. Member for Cardiff North set out clearly in her opening speech and to which others have referred. I am concerned that the type of share proposed in the Bill may incentivise investors to inappropriately use the co-operative legal form as a vehicle to attract investment rather than to act for the benefit of its members or community, as co-operatives are intended to. Let me be clear: we are not opposed to community energy schemes, or for that matter any other business seeking to incorporate in the mutual model. However, it is right for the Government to be cautious in proceeding without the possibility for appropriate consultation and consideration, because we have seen real examples of where the model has been used in the wrong way, to considerable consumer detriment.
Finally, I note that there does not appear to be a clear consensus from the co-operative sector in support of the Bill as it stands. I will set out the position plainly as I understand it. In a briefing to MPs, the trade body Co-operatives UK noted that the Bill would be “impractical and counterproductive” and
“would restrict rather than expand the scope for societies to take on mission-aligned investment for environmental and social purposes.”
Co-operatives UK’s preferred approach, as the hon. Lady acknowledged, is to make amendments in Committee to remove the links to environmentally sustainable investment from most of the Bill. However, I believe that would fundamentally contradict the hon. Member’s intentions in drawing the scope of the Bill and is therefore not a viable way forward.
To conclude, let me reiterate my sincere gratitude to the hon. Member for Cardiff North for bringing forward this Bill. There has been a constructive discussion today, and it is important to highlight the value of the co-operative and mutual sector, both to the House and the public. I thank her for the way that she has engaged with me and my officials in recent months. Her passion to support the sector and tackle climate change has been clear throughout. As I have indicated to her previously, I will be happy to continue to work with her and representatives from the sector, of which there are a number across the House, to understand what more can be done. I will continue to champion the work of the co-operative sector more generally and address some of the themes of today’s debate, which have been very valid and worth while.
Protection of Jobs and Businesses
John Glen Excerpts(5 years, 6 months ago)
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The Economic Secretary to the Treasury (John Glen)
It is a privilege to close this debate on behalf of Government. I thank hon. and right hon. Members across the House for their varied and considered contributions. The Government have worked closely with colleagues across the House to help to define the interventions that we have made. I thank my hon. Friends the Members for Cities of London and Westminster (Nickie Aiken), for Dudley South (Mike Wood) and for Moray (Douglas Ross) for making further constructive contributions today.
I think I can discern four themes on which to base my remarks. First, many colleagues have referenced the support from the schemes that the Government have introduced over recent months. The Government have acted decisively to protect people’s livelihoods and support businesses, with what has been one of the most generous and comprehensive responses in the world. The Government have supported people, businesses and our public services with over £190 billion. The OBR and the Bank of England agree that the actions that we have taken in the first phase of our response have helped to safeguard millions of jobs and that without them there would have been far worse outcomes. The OBR has said that the positive action that the Government have taken
“should…help to limit any long-term economic ‘scarring’, by keeping workers attached to firms and helping otherwise viable firms stay in business.”
At the heart of today’s debate is the fact we have supported more than 9.6 million furloughed workers and 2.6 million self-employed individuals through our schemes, as my hon. Friend the Member for Wimbledon (Stephen Hammond) and others recognised. We have helped millions of the most vulnerable people in the country, with a more generous welfare system, a hardship fund and financial support through mortgage and credit payment holidays. We have intervened to reduce income losses faced by working households by up to two thirds, with the poorest working households protected the most—a point that was welcomed by my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb). We have produced extensive support schemes, working with businesses, with tax cuts, tax deferrals, direct cash grants and an extensive programme of loan schemes. I will be happy to engage with the hon. Member for Ogmore (Chris Elmore) and the hon. and learned Member for Edinburgh South West (Joanna Cherry) on the specific concerns they raised about various schemes.
Of course, the direct cash grants to businesses that my right hon. Friend the Chief Secretary has just announced will give businesses either £1,000 or £1,500, depending on rateable value, for each three-week period that they are closed. That will provide vital support to closed businesses throughout the difficult but temporary experience of local lockdown—measures that have been urged by colleagues such as my hon. Friend the Member for Bolton North East (Mark Logan) throughout these difficult weeks.
John Glen
I am sorry; I will not be taking interventions, given the shortness of the time.
The second theme that I want to draw out is that, in response to the unfolding tragedy of people losing their jobs, the Government have announced a specific plan for jobs. We are one of the first countries in the world to do so. The plan for jobs protects, creates and supports jobs. We introduced the Eat Out to Help Out scheme—another scheme that Treasury officials had to issue a ministerial direction for—and temporarily reduced the rate of VAT on tourism and hospitality. Doing so supported millions of jobs in some of our most jobs-rich industries.
To create jobs, we are driving growth in the housing sector by increasing the stamp duty threshold temporarily to £500,000, creating green jobs with the green homes grant, and providing billions of pounds of capital investment. To support jobs, just last week we launched the kickstart scheme to subsidise the most vulnerable category of 16 to 24-year-olds. In addition, we have been providing employment support schemes, training and apprenticeships, and providing the extra support of job coaches in jobcentres.
The third theme I want to draw out from the contributions today is the furlough scheme. The furlough scheme will have run for eight months by the time it closes, and it has supported millions of people and their families. It is right to say that it is one of the most generous schemes in the world. As my hon. Friend the Member for West Bromwich East (Nicola Richards) mentioned, ending the scheme is the right thing to do. On Monday, the chief economist of the Bank of England agreed, saying that to maintain it in its current form would not help either individuals or businesses.
Although I have heard the arguments at a high level for a targeted or sector-specific furlough scheme, I have heard no clear, satisfactory answer to the questions the Chief Secretary posed earlier about which sectors would not be provided with furlough, how we would treat and define supply chains, and when such a scheme would end. Of course, we are not ending our support for furloughed employees; the job retention bonus scheme provides an incentive for businesses that bring employees back from furlough to do meaningful work and ensures that they are supported as the economy gets going. As my right hon. Friend set out, the bonus represents a significant sum that will be vital particularly for small and medium-sized enterprises, which make up 95% of the employers that have claimed for furlough grants and 60% of furloughed workers.
The final thing that I want to emphasise is that our comprehensive and generous economic response has required us to significantly increase our levels of borrowing. In the short run, that has been absolutely the right strategy so that we can protect jobs and incomes, support businesses and drive the recovery, but over the medium term it is clearly not sustainable to continue borrowing at these levels. We will need to return to strong public finances where our debt is in a more sustainable position.
With Government debt now exceeding the size of the UK economy for the first time in more than 50 years, even small changes could be hugely damaging. Thankfully, we were in a strong fiscal position coming into this crisis, which allowed us to act quickly and decisively without hesitation to support jobs and businesses. The difficulties we now face remind us once again that sound public finances are not an optional extra; they are the foundation of a good economic policy.
The Government certainly are not saying “job done”. We know that there is more we need to do to protect jobs and businesses, and today’s debate has helped us to focus on some of the future ideas and solutions.
The economic challenges that we face are extraordinary and unique in our history, but the Government have been proceeding since March with a clear plan to address those challenges. We are providing one of the most comprehensive economic responses to the coronavirus of any country in the world, and we are determined to do everything we can, not just to get through and recover the economy, but to rebuild a better, fairer and prosperous economy, as we deliver on our governing mission to level up and unite the country. That is why we are supporting the Government amendment this afternoon.
Mr Deputy Speaker (Mr Nigel Evans)
Apologies to the 56 Members who did not get in on this debate today. We will now put the original question to the House.
Question put, (Standing Order No. 31(2), That the original words stand part of the Question.
The House divided: Ayes 249, Noes 329.
Stamp Duty Land Tax (Temporary Relief) Bill
John Glen ExcerptsMonday 13th July 2020
(5 years, 8 months ago)
Commons ChamberRead Full debate Stamp Duty Land Tax (Temporary Relief) Act 2020 View all Stamp Duty Land Tax (Temporary Relief) Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 13 July 2020 - (13 Jul 2020)
The Economic Secretary to the Treasury (John Glen)
I beg to move, That the Bill be now read a Second time.
There is no doubt that the spring and early summer of 2020 will be forever remembered as one of the most testing periods in our nation’s post-war history. Covid-19 is both a health crisis and an economic crisis. It has tested the public and private sectors in equal measure, just has it has tested the population as a whole. But the virus has been brought to heel, and thanks to our collective efforts we are now in a position where it is safe to reopen our economy.
From the outset of this crisis, the Government have sought to protect business, jobs and incomes. The coronavirus jobs retention scheme and self-employment income support scheme have between them preserved millions of livelihoods through the lockdown. Meanwhile, our VAT deferrals and business rates reliefs, alongside the coronavirus business interruption loans and bounce-back loan scheme, have carried many businesses through the hardest months, so that they now have a fighting chance to recover.
In the autumn, the Government will bring forward a Budget and a spending review that will set out a longer-term strategy for the United Kingdom’s economic recovery.
However, this pandemic is not yet over. Even as we step out of lockdown, a great deal of disruption and uncertainty remains. Many businesses have yet to reopen their doors. Up and down the country, people are worried about whether their jobs will be secure when they return to work, and that is why my right hon. Friend the Chancellor of the Exchequer came to the House on Wednesday to set out the Government’s plan for jobs. As a first step, the Government are introducing a one-off job retention bonus of £1,000, available to employers for each furloughed employee who is still employed as of 31 January next year.
There will also be new, high-quality jobs for hundreds of thousands of young kick-starters. We will invest £1 billion to double the number of work coaches and support the unemployed. There will be more apprenticeships, traineeships and skills funding, and we will bring forward £8.6 billion of investment in our public services and infrastructure to trigger new job creation projects around the country. However, we know that some sectors of the economy have been hit particularly hard, and that is why the Government will support the hospitality and tourism sectors by cutting VAT on food, accommodation and attractions from 20% to just 5% for the next six months. It is why the Government have put in place a £1.57 billion rescue package for theatres, museums and other cultural industries, in recognition of the 700,000 people employed in those sectors and to safeguard the incalculable contribution they make to our national life.
Chris Grayling (Epsom and Ewell) (Con)
May I congratulate my hon. Friend and his colleagues on the Treasury Bench for what I think has been an exemplary response to an unprecedented crisis? He describes the challenges that still remain in the economy. Many people still face tough times, particularly in the events sector, where businesses remain as yet unopened. Many of the people who work in the events and entertainment sector have not, for various reasons to do with their employment or tax status, been able to take advantage of the schemes we have seen over the past few months. Will my hon. Friend, together with his Treasury colleagues, look at whether there are additional things we can do to support those sectors and those people in the months ahead, because for them times are still tough?
John Glen
I thank my right hon. Friend for his kind remarks. There is more work to be done, and I acknowledge the challenges faced by different industries in different ways. We will continue to look very carefully at further interventions that we could make and shall make in the Budget later this year.
I turn to the housing market, which is another example of a sector that has experienced considerable disruption and which brings me to the subject of this Bill. The Government’s plan for jobs will support the construction sector by injecting new confidence and certainty into the housing market. It will do so by ensuring that anyone buying a main home for under £500,000 before the end of March next year will pay no stamp duty whatever.
A thriving housing market is critical for growth and jobs in this country. Most obviously, a healthy labour market relies on people being able to move home to be closer to the jobs that match their skills, but the building industry is itself a major contributor to jobs and prosperity in the country, adding £39 billion a year to the UK economy. House building alone supports up to three quarters of a million jobs, and let us not forget the many related sectors that benefit from property transactions: estate agents, removal companies, furniture retailers, DIY stores, self-employed decorators and so forth. The lockdown sadly brought much of that trade to a juddering halt.
Rightmove estimates that 175,000 sellers were prevented from coming to the market between March and May this year. Meanwhile, HMRC data shows that residential property transactions in May were about 50% lower than the same month last year. For the first time in eight years, house prices have fallen.
Matt Western (Warwick and Leamington) (Lab)
The Minister is making a fair argument in support of the construction and housing sector, but, as he just described, the sector is down by 50% in terms of sales. He will appreciate that the automotive and car sector was down by 97% over the two months of April and May and down by 30% in June. Does he not think that that sector is worthy of support as well?
John Glen
I thank the hon. Gentleman for his observations, which he made last week as well. Of course the Government look at all industries. The automotive industry is a key industry, and we are in dialogue with companies across the country looking at the appropriate interventions necessary. Obviously, commercial sensitivities sometimes prevent us from discussing those at the Dispatch Box.
With restrictions easing, the Government have been able to reopen the housing market, and there are signs of tentative movement. Transactions in May were 16% higher than in April. It is crucial to our recovery that we maintain this momentum. People should feel confident to move, to buy, to sell, and to renovate and improve their homes. This is why the Government are cutting stamp duty land tax by temporarily increasing the nil rate band for residential property from £125,000 to £500,000, with effect from last Wednesday—8 July—until 31 March 2021.
Kevin Hollinrake (Thirsk and Malton) (Con)
I draw the House’s attention to my entry in the Register of Members’ Financial interests. I am very supportive of these measures. One of the risks to the housing market is the withdrawal by the lenders of high loan-to-value mortgages, especially for first-time buyers. We know that 90% and 95% loans can become a self-fulfilling prophecy that damages the market. Will the Minister do whatever he can to make sure that our banks support high loan-to-value mortgages throughout this time?
John Glen
I am grateful, as ever, for my hon. Friend’s intervention. Of course, he has enormous expertise in this sector. He is right to say that there is a threat given the changes in the profile of LTV mortgages that are being offered. We hope that that will return to more of the normal schedule that we would have seen pre-pandemic. We will be actively looking at this, and I am in conversations with the banks and building societies about it.
Siobhain McDonagh (Mitcham and Morden) (Lab)
Does the Minister agree that this is actually more than a threat for first-time buyers at the moment—it is a reality? First-time buyers are queuing online for websites of lenders in an effort to get the small number of 5% deposit mortgages. Providing more incentive to people who already own their own home or are part of the buy-to-let market effectively crowds out first-time buyers.
John Glen
I thank the hon. Lady for her point. I would look at it in terms of opening up the market, creating more churn and momentum that allows all participants to be able to get on the housing ladder.
The Government’s cutting stamp duty land tax in this way will mean that nine out of 10 people buying their main home will pay no stamp duty at all, and buyers can save up to £15,000. In my own constituency, the average family looking to buy a home worth £349,000 will go from paying £7,450 in stamp duty to absolutely nothing. Indeed, this Bill will take most properties outside of London and the south-east out of stamp duty entirely.
The Bill is the latest in a long line of measures from this Government designed to support current and prospective homeowners in this country. Historically, stamp duty has been charged at a single rate on the whole purchase price of a property, with different rates for different value bands. The same rate of tax was charged irrespective of the number of properties owned by the buyers. In 2014, the Government reformed stamp duty land tax on residential properties, cutting the tax for 98% of buyers who pay it, unless they are purchasing additional property. In 2015, the Government introduced the higher rates of SDLT, which apply on purchases of additional residential properties such as second homes and buy-to-let properties. Finally, in 2017, the Government introduced first-time buyers relief. This increased the price at which a property becomes liable to pay stamp duty, for first-time buyers, from £125,000 to £300,000, with a reduced rate between £300,000 and £500,000.
Together, these reforms have made the tax system fairer and more efficient. They have cut the cost of home ownership for first-time buyers, helping more than 500,000 families to secure a foot on the housing ladder. This Bill will cut the cost of home ownership further, at a time when personal finances are under considerable pressure. In doing so, it will inject new momentum into the property market, protecting thousands of jobs in both the construction industry and the wider economy.
This stamp duty cut is one of several measures in the Government’s plan for jobs that will benefit families and businesses across the country. From September, homeowners and landlords will be able to apply for a green homes grant of up to £5,000 to make their homes more energy efficient. For low-income households, we will go even further, with vouchers covering the full cost up to £10,000. This, too, will support local jobs, as well as reducing carbon emissions and cutting energy bills for hard-pressed families.
Craig Mackinlay (South Thanet) (Con)
I wonder if the Minister could clarify a couple of points. On the 31 March date, we all worry that this will end up being a cliff edge, as the date approaches. Will that be the date of exchange, which is usual, I think, in these matters? Is he not concerned about that cliff edge? For some people, for no reason of their own, late finishing of their property will mean they fall the wrong side, very expensively?
John Glen
I thank my hon. Friend for his point. We are in a situation where, if the transaction is substantially completed by 31 March, it will be able to qualify for the relief.
Almost four months ago, the Government took the extraordinary step of ordering businesses across the country to close for an extended and unspecified period of time. Millions of people put their lives on hold for the greater good, but now that the virus is under control, the time has come to reopen our economy. Providing infection rates remain low, people should be able to get on with their lives, wherever possible. There are few aspirations more important to the British people than home ownership, and this Bill will ensure that those looking to buy a family home will see their stamp duty bill disappear altogether. It is part of our plan to turn our national recovery into millions of stories of personal renewal. In doing so, it will stimulate the housing market, safeguarding many thousands of jobs and helping Britain to bounce back stronger than before. For all these reasons, I commend the Bill to the House.
The Economy
John Glen Excerpts(5 years, 8 months ago)
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Wes Streeting
My hon. Friend is absolutely right, because, as events in Leicester have shown, the virus has not gone away. Local lockdowns, or, God forbid, another national lockdown in the event of a second peak, would deliver a knockout blow to so many businesses struggling to get back on their feet, and as my hon. Friend has just alluded to, those businesses will continue to struggle unless the public are given the confidence they need to go out and start spending money again.
Since the start of this crisis, the Government have been too slow: too slow to take the threat of covid-19 seriously; too slow to lockdown; and too slow to ramp up testing. Our criticism of the Government’s approach to track and trace is not unreasonable; this is not mission impossible. Today, the German embassy in the UK is tweeting to invite British citizens to download its Corona-Warn-App before visiting Germany, and British people are replying to the German embassy here in London asking if they can use it here in the UK. We are not even demanding the world-beating track and trace system the Government promised; we just want a system that works.
In a spirit of national unity and common purpose, we sought to work with the Government wherever possible. We have helped expedite emergency legislation through the House, and we have supported many of the measures taken to respond to the health emergency and to the economic crisis. Where Government have fallen short, we have suggested alternative approaches, and to be fair to the Government they have been prepared to listen. They listened when they introduced the job retention scheme, which we had called for and the TUC helped design, and later when the Chancellor came back with support for the self-employed that has been a lifeline to so many.
In the same spirit, we called on the Chancellor to take immediate action to tackle youth unemployment, and we pointed to the future jobs fund introduced by the last Labour Government as a model. Today’s kick-start announcement is exactly that, and we welcome it. In fact, the greatest compliment I can pay to the Chancellor from this Dispatch Box is that in announcing the kick-start scheme earlier he sounded like Gordon Brown and Alistair Darling. Maligned by the Conservatives at the time, history has been kinder to them than the Conservative Opposition of the day were; their leadership is rightly recognised by the Chancellor today, and that is to his credit.
But I do want to impress on the Chief Secretary the following point before he returns to the Treasury. The success of Labour’s future jobs fund was in no small part thanks to the hard work of the third sector and local authorities in delivering it, all of which are now in a far worse position than they were when the financial crisis hit. They have already stepped up in response to this crisis. Charities have been on the frontline of responding to covid-19, at the same time as the virus has plunged so many of them into financial crises of their own. They are at the heart of community resilience, public service delivery and tackling some of the biggest challenges of our time; we need them to come through this crisis and out the other side, so that they can help our country to do the same.
Councils were asked to do whatever it takes, whatever the cost, and they did. They have delivered food parcels to those shielding and made contact with those isolated and at risk. Their workers have kept essential services running at personal risk to themselves, and they have delivered Government grants to the businesses that need them with remarkable speed and efficiency. We have also seen endless examples of their creativity and ingenuity throughout their crisis response. The Mayor of London has worked closely with London boroughs to get rough sleepers off the streets and into safe harbour, and they are working together now to end rough sleeping for good. My own local council procured step-down accommodation for covid patients leaving hospital in order to delay the immediate discharge of those patients into care home settings to help control the spread of the virus. The Mayor of Greater Manchester, Andy Burnham, provided a loan to a local business to help it scale-up PPE production during the national shortage. While the Government dithered and delayed over supports for arts and culture, the Mayor of Liverpool City Region, Steve Rotheram, was already delivering it through his music fund and film and TV development fund. Councils such as Staffordshire County Council and Brighton and Hove City council have provided additional support to community groups and third-sector organisations, recognising the important role that they are playing in the crisis response.
Today, those local authorities are in far worse shape after a decade of cuts from Conservative Government and the double whammy of rising costs and lost revenues as a result of this crisis. The Secretary of State for Housing, Communities and Local Government promised to reimburse them, but so far he has failed to deliver and, after a decade of Tory cuts, they cannot afford to pay for the opportunity to sit next to him at the next Conservative fundraiser in the hope of a favourable decision coming out of the Government.
The Economic Secretary to the Treasury (John Glen)
It is a privilege to close this debate on behalf of the Government and I thank hon. Members from across the House for their varied and considered contributions, which I will reflect on in a few moments.
At the outset of this crisis, the Government introduced a £160 billion package of measures to protect jobs, incomes and businesses from the harm and disruption caused by covid-19. Thanks to the action that we took, millions of jobs and livelihoods have been safeguarded through the worst months of the pandemic. Most importantly, our frontline services have received the money that they need to tackle this virus head-on and to support the most vulnerable in our society, but we have always been clear, as the Chancellor reiterated today, that we are ready to take further action as the circumstances developed.
Throughout this crisis, we have listened to hon. Members across the House, just as we have listened to businesses and those working in public services. That is why we announced the bounce back loan scheme in response to some of the challenges with the CBIL scheme to help the very smallest firms and sole traders who might not otherwise be able to access the finance that they needed. It is why we announced that both the coronavirus jobs retention scheme and the self-employment income support scheme would be extended into the autumn. It is worth remembering that we still have three and a half months to go on those schemes. It is why my right hon. Friend the Secretary of State for Digital, Culture, Media and Sport came to this House on Monday to announce a bespoke package of support for theatres, museums and our hard-hit creative industries. As a former Arts Minister, it is great to see the National Gallery leading the way by opening today.
Today marks a new phase in our new economic response as we look to the future and to our recovery with a plan for jobs. It is a plan that will build on the success of our jobs retention scheme by rewarding and incentivising employers to keep previously furloughed staff in work through the autumn and into the new year by paying them a jobs retention bonus.
John Glen
I will not, given the time.
It is a plan that puts young people front and centre, with a kick-start scheme that will pay employers to create quality jobs for 16 to 24-year-olds at risk of long-term unemployment, alongside new funding for apprenticeships, traineeships and sector-based work academies. We shall be issuing guidance very shortly on how those schemes will interact with the extra support that we are putting into jobcentres. It also means that we shall invest in infrastructure, decarbonisation, and maintenance projects that will serve the needs of communities across the country, while creating jobs and apprenticeships here and now.
Through our collective efforts, coronavirus has been brought under control in this country, but it has not disappeared completely. Even as our economy reopens, many businesses and families will continue to face significant challenges. The Chancellor made it clear today that the Government are not driven by ideology; we are guided by the simple desire to do what is right. For that reason, we will continue to take significant steps to support the economy in the weeks ahead. We will, for example, inject new certainty and confidence into the housing market by increasing the stamp duty threshold to £500,000 for first-time buyers. That recognises the additional expenditure in the economy derived from a house purchase, and, we anticipate, will have a significant effect.
Few sectors have been harder-hit, though, than retail, hospitality and entertainment, so, from next Wednesday, VAT on food, accommodation and attractions will be cut from 20% to 5%. I welcome the positive comments from across the House for that measure. Through the month of August, everyone in the country will be entitled to a Government-funded discount of 50% in restaurants, pubs and cafés, Monday to Wednesday. The “eat out to help out” discount is the first of its kind in this country, and proof that the Government will leave no stone unturned in our efforts to protect people’s jobs and livelihoods.
I shall now mention some of the themes of this afternoon’s debate. My hon. Friends the Members for Stoke-on-Trent South (Jack Brereton), for High Peak (Robert Largan) and for Keighley (Robbie Moore) emphasised the need for investment in local infrastructure and levelling up, and that means investing now to prevent long-term damage to the economy and support the private sector. That is why the Government have brought forward the shovel-ready projects.
On the theme of sustainable public finances and recapitalisation, my right hon. Friends the Members for Wokingham (John Redwood) and for Chipping Barnet (Theresa Villiers) and my hon. Friend the Member for North East Bedfordshire (Richard Fuller) recognised the challenges ahead with respect to the third phase that the Chancellor referred to today, and we shall be responding in the Budget later this year. My hon. Friend the Member for North East Bedfordshire raised a particularly important point about the need to encourage the private sector to generate the jobs ahead.
My neighbour, my right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes), made a passionate speech, referring to the need to address urgently the challenges faced by the beauty industry. She also mentioned the disproportionate impact on women, people from the BAME community and the disabled, and we shall be responding to the excellent report that her Committee, the Women and Equalities Committee, produced in the spring.
There was a moment of synergy between my hon. Friends the Members for Buckingham (Greg Smith) and for St Albans (Daisy Cooper) as they backed the “eat out to help out” campaign, and my hon. Friend the Member for South Dorset (Richard Drax) emphasised his commitment to that in terms of support for pubs.
There were also references to the need for resilience with our local authorities, who have received £3.7 billion in new grant funding. We will work closely with local authorities as we move into the next stage.
John Glen
I am afraid that I will not give way because of the amount of time I have left.
I wanted to respond to the point raised by the hon. Member for North East Fife (Wendy Chamberlain)—who is not in her place—on the Treasury’s responsiveness to her constituents’ correspondence. We have had a volume increase of eight times over this crisis, but we will be working very carefully to improve our responsiveness.
Over the past few months, our economy has endured unprecedented levels of disruption and uncertainty. People and businesses have experienced considerable hardship and worry, and many will continue to do so for some time yet. However, over the past few months we have seen the best of our economy. We have seen banks and building societies providing support with mortgage holidays. The hon. Member for Glasgow South West (Chris Stephens) mentioned the important role of credit unions; we will be working closely with them as we move to the next stage. Businesses large and small turned over their production lines to the manufacture of ventilators, PPE and antibacterial sanitiser, and supermarkets, chemists, couriers and utility companies have also assisted; but we now need to move forward. As the Chancellor has unveiled a plan to protect, create and support jobs, everyone in this country has the opportunity for a fresh start. The task is not yet done. It will take time, and there will be more to come from the Government in the Budget and spending review in the autumn.
Oral Answers to Questions
John Glen Excerpts(5 years, 8 months ago)
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Dr Luke Evans (Bosworth) (Con)
The Economic Secretary to the Treasury (John Glen)
The bounce-back loan scheme is aimed at helping the smallest businesses across different sectors of the economy to access the finance they need, and we have seen 1 million loans worth almost £31 billion approved since the scheme was launched on 4 May. We are carefully monitoring the use of this scheme by businesses and will keep all policies under review.
Dr Evans [V]
I am grateful for the Minister’s answer. Undoubtedly, bounce-back loans have been a success of this pandemic. However, I have a concern that normally viable small and medium-sized enterprises will face acute problems due to covid and may need to make redundancies. The payments associated with redundancies may, in turn, cause normally viable companies to become insolvent, thus losing all jobs and putting more pressure on the state. With that in mind, will he consider a fund or time-limited mechanism to ensure that SMEs can provide redundancy payments due to covid, thus allowing them to remain solvent, protecting them from further job losses and providing some short-term stability for them to bounce back in the future?
John Glen
I thank my hon. Friend for his question. Of course we recognise the importance of SMEs—there are 5.6 million businesses across the country with fewer than 10 employees, and we need their dynamism and entrepreneurial spirit as the economy starts to recover. The Government have said from the start that they will do whatever it takes to support business. The Chancellor has introduced a significant package of measures, which will be under review, and there will be further announcements in due course.
The Economic Secretary to the Treasury (John Glen)
The Government have been carefully considering the potential issuance of a UK sovereign green bond. At present, we have no plans to do that, but we continue to monitor the case for one, and we will keep it under urgent review.
Ben Lake
I am glad that the Government will keep this matter under consideration because, as evidenced recently by Quebec, green bonds can be effective in raising capital investment and investment for operational expenditure to further the green transition. Will the Government also consider enabling the Welsh Government to issue such a bond to help the effort for a greener economy?
John Glen
Clearly, debt and the handling of it is a significant challenge for the Government at this time. The core gilt programme is the most stable and cost-effective way of dealing with our financing needs. The hon. Gentleman makes a reasonable point. We will continue to look constructively at all options and at the changing environment as a consequence of this crisis.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
Jane Stevenson (Wolverhampton North East) (Con)
The Economic Secretary to the Treasury (John Glen)
On 20 May, the Government launched the future fund. The fund is an investment scheme for high-growth companies impacted by the pandemic. It provides between £125,000 and £5 million in Government funding through convertible loans, with third-party investors at least matching the Government funding on each loan. As of 5 July, £379 million-worth of convertible loans had been approved through the future fund, and the Government have also made £750 million of support available for innovative firms through Innovate UK grants and loans.
Jane Stevenson
Unemployment in Wolverhampton North East was three times the national average as we came into the pandemic, and many businesses have expressed their gratitude for the wide range of support. As we emerge from the pandemic, can my hon. Friend reassure me that this will be the party that champions innovators, start-ups and SMEs, so that we can get job opportunities and more prosperity in seats such as Wolverhampton North East?
John Glen
My hon. Friend makes a very good point and case for her constituency. As the Prime Minister set out last week, we will double down on levelling up and give everyone growing up in this country the opportunity that they need. The Prime Minister announced the acceleration of £96 million of investment from the towns fund, including nearly £13 million on kick-start activity in the west midlands.
Mr Speaker
Order. May I just say that the Members not reached are pretty upset at others taking too long? They were desperate to get in, but there we are. I am sorry about that.