UK's Counter-terrorist Asset Freezing Regime

John Glen Excerpts

Monday 9th July 2018 Written Statements

[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 2018 to 31 March 2018.

This report also covers the UK’s implementation of the UN’s ISIL (Daesh) and al-Qaeda 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-Qaeda (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.

A new EU asset freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings. The first designation under the regime was made during this quarter, and is recorded in the fifth column of the annexed table.

The annexed tables set out the key asset-freezing activity in the UK during the quarter.

The recently passed Sanctions and Anti-Money Laundering Act will help ensure that UK counterterrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies to consider utilising, while also meeting the UK’s international obligations.

Under the Act, a designation could be made where there are reasonable grounds to suspect that the person or group is or has been involved in a defined terrorist activity and that designation is appropriate. This approach is in line with the UK’s current approach under UN and EU sanctions and would be balanced by procedural protections such as the ability of designated persons to challenge the Government in court.

Attachments can be viewed online at:

http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2018-07-09/HCWS838/.

[HCWS838]

Draft Financial Services And Markets Act 2000 (Regulated Activities) (Amendment) Order 2018 Draft Electronic Presentment Of Instruments (Evidence Of Payment And Compensation For Loss) Regulations 2018

John Glen Excerpts

Wednesday 4th July 2018 General Committees

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

I beg to move,

That the Committee has considered the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2018.

[The Chair]

With this it will be convenient to consider the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.

[John Glen]

It is a pleasure to serve under your chairmanship again, Sir Henry. I am pleased to introduce two statutory instruments today, both of which will help to improve the way in which financial firms in the UK can operate and deliver efficient services that meet the needs of firms and consumers. The Government are determined to ensure that our laws keep pace with developments in market practice to ensure that consumers are appropriately protected, while securing the continued international competitiveness of UK markets.

The order amends the Financial Services and Markets Act 2000 to address a gap in the regulatory treatment of alternative finance investment bonds, covering sukuk or Islamic equivalent bonds. The gap arose because of changes in taxation applicable to debt traded on multilateral trading facilities made in the Finance Act 2018. Those changes took effect on 1 April this year, and we intend to close the gap as quickly as possible in the interests of clarity and consistency. It is stated Government policy to provide a level playing field for Islamic finance instruments. That means that although sukuk are not debt instruments, they are deemed to be debt-like for UK tax and regulatory purposes.

That approach has served the UK well, with the UK being recognised as the leading western centre for Islamic finance, and London being a global venue for Islamic capital market activity. To date, more than $50 billion has been raised from sukuk listed on the London stock exchange. The instrument adds two additional types of financial trading venues—so-called multilateral trading facilities and organised trading facilities—to the list of permitted venues for alternative finance investment bonds. Conventional bonds can already be traded in the same venues. The order also amends the Financial Services and Markets Act so that a person administering a benchmark, as specified in the order, will be regarded as carrying on the activity by way of business. That is a minor, technical amendment, and is the final part of the legislation needed to complete the implementation of the EU benchmarks regulation into UK law.

The Joint Committee on Statutory Instruments reported the instrument for

“an unusual use of the enabling power.”

The Joint Committee raised concerns about the order’s coming into force immediately rather than 21 days afterwards. The Government treat the Joint Committee’s reports very seriously and give them full consideration. However, the Treasury has looked carefully at this matter and decided that an expedited approach was necessary for several reasons. First, the London stock exchange and UK-based advisers have warned that the continued failure to update the legislation for alternative finance investments bonds in regulation is causing issuers to look elsewhere. Secondly, the changes do not create any new cost for business, as the regulatory framework for alternative finance investment bonds has been in place since 2007.

I recognise the concerns raised by the Joint Committee that reasonable time should be provided for anyone to familiarise themselves with the changes made by the order, and to take steps to ensure compliance to avoid potential criminal liability. However, the criminal offence of carrying on a regulated activity without permission applies only to those people who are not already exempt or authorised by the regulators.

Instruments of such a nature are very sophisticated and highly unlikely to be traded in that manner by anyone without a significant level of expertise in financial services—in other words, firms already authorised by the Financial Conduct Authority. For those firms, carrying on an activity for which they are not authorised is contravention of a regulatory requirement, not an offence. The commercial reality is that it is a minor regulatory adjustment, rather than one that creates a new opportunity for criminal liability. In such circumstances, given that industry is eager to welcome the changes and the regulator foresees minimal impact from the amendments’ entering into force immediately, a longer waiting period was felt to be unnecessary and potentially even harmful to the markets.

I recognise fully, however, the concerns of the Joint Committee. I acknowledge that in this instance the Treasury could have done more to assure the House that its procedures are awarded due respect by the Government. The Treasury has taken on board the comments of the Joint Committee and will take steps to make improvements in future.

I now turn to the second statutory instrument: the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018. Its purpose is to ensure that the electronic clearing of cheques has no detrimental impact on cheque users. Cheques continue to form a key part of the British payments landscape and, although one cannot deny that their use has declined over the years, cheques are still important for smaller charities, voluntary organisations and certain members of our society, often the most vulnerable. To illustrate the continued importance of cheques, I inform the Committee that in the first quarter of this year more than 65 million cheques were cleared, with a value in excess of £80 billion—an average of almost 1 million cheques cleared per working day.

In the existing anachronistic process of paper cheques being physically transported around the country, a cheque takes six weekdays to clear fully and for recipients to be certain that the money is theirs. For that reason, in 2015 Parliament legislated to allow UK banks and building societies to accept receipt of cheques and similar instruments by electronic image. That innovation, now being delivered through the image clearing system, cuts down clearing times to the next weekday by sending a digital image of the cheque for clearing. Consumers, charities and businesses will therefore receive their funds more quickly. Cheque imaging will also facilitate further innovation in the industry—by enabling customers to pay cheques through their mobile banking app, for example.

I turn to the detail of the draft regulations, which provide for two measures to ensure that the electronic clearing of cheques has no detrimental impact on cheque users. The legislation seeks to protect customers as the image clearing system roll-out intensifies over the second half of the year. The first measure concerns the use of cheques as evidence of payment. In the existing model, customers may request from their bank a copy of the paper cheque that they wrote and that may be used as evidence of payment. To ensure that that right remains available, the measure will ensure that a copy of the cheque, along with some additional information, will be provided to the writer of the cheque on his or her request, and that copy has the same evidential value as a paper cheque.

The second measure concerns compensation. In cases of fraud or error, the rules for compensation are set out in scheme rules by the Cheque and Credit Clearing Company. No legislation, however, stipulates the circumstances in which customers must be compensated, or by whom. To prevent any harm to consumers from a fundamental change to cheque processing, the Government consider it necessary to legislate to ensure that cheque users are not left out of pocket if they incur a loss.

The second measure therefore provides that when a customer incurs a loss under the image clearing system, and prescribed conditions are met, including compensation not already having been received, the bank of the customer receiving the cheque must pay compensation. The Government believe that the existing industry-led approach works well. Indeed, the optimal solution is that the legislation need never be used because the scheme rules continue to effectively resolve losses from fraud or error.

In conclusion, the draft statutory instruments make necessary, albeit uncontroversial, changes to ensure that our financial services remain fit for purpose and work for the benefit of UK consumers. I sincerely hope that Members will join me in supporting the measures.

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[John Glen]

I am grateful for the observations from the respective Front Benchers. I take seriously the observation of Lord Tunnicliffe, in the other place, on the adequacy of the explanatory notes. The Treasury always endeavours to make its explanatory notes as clear as possible, but I recognise the confusion and uncertainty caused. I will examine that and see what improvements can be made.

I welcome the support of both Front-Bench spokespeople for the draft orders. The gap and the delay are a matter of regret from the Treasury’s point of view. It would have been preferable to introduce the draft orders earlier, thereby avoiding a gap in the regulation and taxation of alternative finance investment bonds. On this occasion, I have to concede that the Government fell short of the standard we wish to set. I will do all that I can to ensure that that is not repeated.

I am pleased that the hon. Member for Stalybridge and Hyde acknowledged the leadership that the Government showed in 2014 by the issuance of a sovereign sukuk of £200 million; we look forward to trying to develop that further in the future. I welcome the support of the hon. Member for Glasgow East for the improvements to the image clearing system. With respect to the future protection of the use of cheques, there are no plans at all to curtail their use. A consultation is ongoing about the use of cash. On whether people should be encouraged to use images of cheques rather than physical ones, I think that customer demand and banking innovation will lead the way.

There has been a significant transition in the last three years. Given the advance of open banking and FinTech, we are seeing more and more products and opportunities enabling people to behave differently with their financial products, and I believe that that will lead the way. However, I take seriously the concerns expressed about vulnerable consumers and the need to ensure that they have adequate provision to make the transactions they need to. I hope that I have addressed the substantive points raised and that the draft orders will now be passed.

Question put and agreed to.

draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018

Resolved,

That the Committee has considered the draft Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.—(John Glen.)

Oral Answers to Questions

John Glen Excerpts

Tuesday 3rd July 2018 Commons Chamber

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

The Government have a number of policies in place to support the development of low-carbon technology, including battery storage technologies. Those include the carbon price support mechanism, which encourages decarbonisation of the power sector; the Government’s smart systems and flexibility plan; and the Faraday challenge fund.

[Sir Henry Bellingham]

I am very grateful to the Minister for that reply. Is he aware of the huge investment in the offshore wind sector along the Norfolk and Lincolnshire coast, where more than 1,000 individual turbines are in place, with the prospect of many more to come? The key breakthrough that is required is enhanced battery storage technology, which will enable wind-generated electricity to be put through the grid on days when the wind is not blowing. What more is he going to do to try to incentivise further breakthroughs on that?

[John Glen]

I am grateful for that question. My hon. Friend is correct; we are maintaining our position as a global leader in offshore wind. But the combination of that with support for the battery storage sector is important, and we will be supporting it through the capacity market, which is helping to bring down costs.

[Mr Jim Cunningham (Coventry South) (Lab)]

As the Minister will be aware, Jaguar Land Rover is in my constituency and it is developing batteries. What discussions has he had with Jaguar Land Rover about tax incentives in that area?

[John Glen]

I have not personally had any such discussions, but the Exchequer Secretary will have done. We are supporting that business, and many others up and down the country, through the comprehensive industrial strategy that we are rolling out in different sectors.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

10. What recent discussions he has had with the Secretary of State for Education on changes in the level of funding per pupil in schools since 2010.

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[Craig Mackinlay (South Thanet) (Con)]

13. What steps he is taking to invest in infrastructure in Kent.

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

The Government are committed to ensuring that every part of the country has a modern and efficient infrastructure. In Kent, the extent of superfast broadband has risen from 33% to 95% since 2010, and the South East local enterprise partnership has secured £590 million for 30 transport schemes. Work has recently begun on a £105 million upgrade to junction 10a of the M20.

[Craig Mackinlay]

Given that Kent is on the frontline of EU border trade and that local plans involve the potential of more than 100,000 new homes over the next 15 years, will my hon. Friend consider investing in the dualling of the A2 and the A256 to improve traffic flows and resilience in east Kent?

[John Glen]

My hon. Friend makes a very sensible point. The dualling of the A2 near Dover was raised as an issue in Highways England’s route strategy for Kent and is being considered alongside other investments. The A256 is part of the indicative major road network and the Department will be publishing the final network by the end of the year. If it is included, it will be a matter for the local authority, working with the subnational transport bodies, to determine whether to bid into the fund.

[Ian Austin (Dudley North) (Lab)]

rose—

--- Later in debate ---

[John Glen]

I am very sorry but I do not recognise the hon. Gentleman’s characterisation of the Government’s intentions. We have actually rolled out a comprehensive strategy across the country in terms of the northern powerhouse and the midlands engine with the systematic devolution of decision making and resources to enable growth throughout the country.

[Matt Western (Warwick and Leamington) (Lab)]

14. What assessment his Department has made of the effect on economic growth of levels of (a) car sales and (b) investment in the car industry.

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[Gareth Thomas (Harrow West) (Lab/Co-op)]

T6. In its report published today, which was commissioned by the Co-op party, the New Economics Foundation identifies lack of access to finance as a significant inhibitor in the growth of the co-op sector. While I am grateful to the Economic Secretary to the Treasury for his interest in this area, I wonder what steps the Treasury might now take to tackle that problem.

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

I held a workshop with representatives of various credit unions this week, and one with community development financial institutions last week. I have convened a working group from the financial inclusion taskforce, which will meet in September to consider urgently expanding access to credit options on better terms than the high-cost ones that exist in the market. We are doing all that we can to incentivise growth in that sector.

[Gareth Johnson (Dartford) (Con)]

Dartford has seen over 1,000 new homes built in and around the town during the past 12 months, which is more than anywhere in Kent and one of the highest figures in the country. Does the Minister agree that investment in infrastructure needs to complement those new homes, not wait for several years?

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[Jeremy Quin (Horsham) (Con)]

What is my hon. Friend’s reaction to the FCA report on doorstep lending, and does it go far enough?

[John Glen]

The report is a welcome step forward, and I note the provision that is made for further steps if the proposed measures do not have an effect. I will be meeting Andrew Bailey tomorrow morning to discuss it further.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Over 1,600 people work at the Jaguar Land Rover engine plant in Wolverhampton, and the car industry has serious concerns about the Government’s plans to leave the customs union. Will the Chancellor guarantee that, when he goes to Chequers later this week, he will only sign up to a customs arrangement that preserves just-in-time manufacturing and integrated European supply chains?

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

The all-party parliamentary group on fair business banking is undertaking an important body of work on dispute resolution between banks and business. We will give it a parliamentary launch next week. Once the Minister has had time to digest the contents of that report, will he meet us to see how we can take the recommendations forward?

[John Glen]

I eagerly await the report’s launch next Wednesday. I will be happy to meet the all-party group and make a judgment about the best outcome on that issue, along with three other streams of work, in the autumn.

[Helen Goodman (Bishop Auckland) (Lab)]

Ending tax secrecy in the overseas territories will bring in £10 billion a year. Will the Chancellor organise a lunch for my right hon. Friend the Member for Barking (Dame Margaret Hodge), the right hon. Member for Sutton Coldfield (Mr Mitchell) and the entire Labour Whips Office, who were instrumental in securing this change?

Senior Managers and Certification Regime

John Glen Excerpts

Tuesday 3rd July 2018 Written Statements

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

The senior managers and certification regime (SM&CR) will come into force for financial services firms regulated by the Financial Conduct Authority only (also known as solo-regulated firms) from 9 December 2019.

The SM&CR is aimed at changing behaviours and culture in the financial services sector. It ensures that senior individuals in firms are approved by the relevant regulator, have a statement of responsibilities outlining what they are accountable for, and can be held personally responsible for misconduct. It also ensures that a code of conduct is set out for all financial services staff, and that employees in roles where they could do significant harm to consumers or to the UK’s financial stability are approved annually by their firm.

The SM&CR was first introduced for banks and building societies through the Financial Services (Banking Reform) Act 2013 and has applied to banks, building societies, credit unions, investment firms and UK branches of foreign banks since March 2016. The Government also legislated in the Bank of England and Financial Services Act 2016 to extend the SM&CR to all financial services firms. The Government recently announced the SM&CR would apply to insurance firms from 10 December 2018. The application to solo-regulated firms is the final stage in the extension of the SM&CR.

HM Treasury will make commencement regulations to bring the regime into force for solo-regulated firms.

[HCWS823]

Justice and Home Affairs Opt-in Decision

John Glen Excerpts

Monday 2nd July 2018 Written Statements

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

The proposed EU directive on credit purchasers, credit servicers and the recovery of collateral contains, among other things, provisions on a new EU mechanism for out-of-court collateral enforcement. The directive is part of a broader package of EU measures designed to reduce the levels of non-performing loans (NPLs) in the EU, as NPLs decrease profitability of banks, often leaving them in a weak position from which to provide finance to the wider economy in support of growth and jobs.

The Government have decided that it is in the UK’s interest not to opt in to the Justice and Home Affairs obligations within this directive as the provisions introduce an unnecessary level of administration to the UK’s existing collateral enforcement mechanisms, which are sufficiently robust and fit for purpose.

The directive states that where member states establish collateral enforcement mechanisms “by means of appropriation”, the rights of creditors “shall be governed by the applicable laws in each member state”. The Government’s view is that this provision addresses situations in which conflicts of laws points arise, in which case it is an applicable law provision and therefore includes JHA content.

The directive similarly governs applicable law if a borrower and lender from two different EU member states cannot agree on the appointment of a valuer—with the appointment of the valuer falling on the court within one of those member states.

The Government remain supportive of the European Commission’s broader efforts to reduce levels of NPLs in the EU, supporting solutions that are proportionate and targeted.

[HCWS814]

United Kingdom Debt Management Office Business Plan

John Glen Excerpts

Thursday 28th June 2018 Written Statements

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

The United Kingdom Debt Management Office (DMO) has today published its business plan for the financial year 2018-19. Copies have been deposited in the Libraries of both Houses and are available on the DMO’s website, www.dmo.gov.uk.

[HCWS810]

Financial Services

John Glen Excerpts

Tuesday 5th June 2018 Written Statements

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

The Government have sold just over £2.5 billion-worth of Government-owned RBS shares, as part of the Government’s policy to return the bank to private ownership: 925 million shares (representing approximately 7.7% of the bank) were sold at a price of 271p per share, reducing the Government’s shareholding to 62.4%. The sale commenced on Monday 4 June when markets closed and concluded this morning, Tuesday 5 June, before markets opened.

This sale follows the progress RBS has made in addressing major legacy issues and is a further step in the Government’s plan to return RBS in full to private ownership.

The Government received advice from UK Government Investments (UKGI) that selling shares through an accelerated book-build represented value for money for the taxpayer. The proceeds of this sale will go towards reducing our national debt.

It remains the Government’s objective to return the bank fully to private ownership, and further sales will be made when it represents value for money to do so and market conditions allow. This is in the best interests of the taxpayer and the wider UK economy.

[HCWS734]

Oral Answers to Questions

John Glen Excerpts

Tuesday 22nd May 2018 Commons Chamber

[Justin Madders (Ellesmere Port and Neston) (Lab)]

5. How many people have paid a 25% withdrawal charge to use their lifetime ISA savings since that scheme was established.

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

In the first financial year, 2017-18, there was no unauthorised withdrawal charge in place. The data for 2018-19 is obviously not yet known, but HMRC will publish it when it is available.

[Justin Madders]

Will the Minister look at the effect of the withdrawal charge more closely? A first-time buyer has told me that he has found a home that suits his needs, but because his lifetime ISA is less than a year old, he will not only lose his Government bonus but have to pay a £375 penalty charge back to the Government out of his own money. Why are aspiring homeowners being penalised in this way?

[John Glen]

I am of course happy to look at that case. Following my appearance at the Treasury Select Committee, I asked my officials to look at the guidance on the website, as I am anxious not to put misleading advice on there. The LISA is available for long-term savings. That was the scheme’s objective when it was set up.

[Nicky Morgan (Loughborough) (Con)]

I am pleased the Minister just mentioned his appearance before the Select Committee, where we explored the issue of the 25% charge and the fact that a further 6% of capital can also be lost. Will he update us? He has talked to officials about looking at the website. Will he ensure that the Treasury website is fully compliant with Financial Conduct Authority rules applicable to firms in the private sector?

[John Glen]

I am taking this up further, but I am concerned not to put a misleading flat-rate percentage on there, given that most savers who make an unauthorised withdrawal will pay a different amount according to their circumstances.

[Mr Gregory Campbell (East Londonderry) (DUP)]

We have junior ISAs, cash ISAs, stocks and shares ISAs and lifetime ISAs. Will the Minister consider simplifying the entire ISA system to help young people in particular with long-term, cost-effective saving?

[John Glen]

The Government have developed a range of savings products and incentives, or encouraged providers to do so, to reflect the range of needs. We have also raised the ISA allowance to £20,000 and introduced the personal savings allowance, meaning that 95% of people do not pay any tax on their savings income. It is important that we have that range of options for all age groups.

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

6. What steps he is taking to increase productivity throughout the UK.

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[David Hanson (Delyn) (Lab)]

14. What recent estimate the Government have made of the cost to the economy of money laundering and criminal finance in the UK.

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

The social and economic costs of organised crime, of which money laundering is a key facilitator, total tens of billions of pounds a year. The Government are committed to tackling illicit finance in the UK and have implemented recent measures including the Criminal Finances Act 2017 and the updated money laundering regulations, both of which were brought into law in the past year.

[David Hanson]

The cross-party Foreign Affairs Committee said only yesterday that the Government should show stronger political leadership in tackling the importing of dirty money into the United Kingdom. Is it not time that the Government supported the Labour Front Bench’s proposals for an overseas register of interests?

[John Glen]

I acknowledge the report of the Select Committee. This Government stand by the rule of law. We do not do random confiscations but, alongside the work being undertaken, work is under way across Whitehall to examine what further steps are necessary. I am eager that we go as far as we can, and we must do so in ways that are consistent with our values.

[John McDonnell (Hayes and Harlington) (Lab)]

I associate myself with the Chancellor’s eloquent words on the Manchester tragedy. I also commend the emergency services that operated on that day.

“The Government cannot afford to turn a blind eye as kleptocrats and human rights abusers use the City of London to launder their ill-gotten funds”.

Not my words but the words of yesterday’s Foreign Affairs Committee report. For eight years this Government have turned a blind eye to the flow of dirty money through the City. Not only have they delayed until 2021 the introduction of a full public register of overseas companies that own UK property but they have refused to introduce the tougher scrutiny and regulation of City flotations that we have demanded, and they have failed to broaden the definition of “politically exposed persons” to include more individuals linked to crime or criminal regimes.

Will the Government do as the Foreign Affairs Committee has demanded and start taking money laundering and tax avoidance seriously by bringing forward the date for the register of overseas companies that own property in the UK?

[John Glen]

We will continue to take these matters very seriously. We will freeze Russian state assets where we have evidence that they will be used to threaten the life or property of UK nationals and residents. As the Prime Minister made very clear in her statement to the House, the National Crime Agency will bring all UK capabilities to bear against serious criminals and corrupt elites. As somebody who has experienced that directly in my constituency in recent months, I stand by the Prime Minister’s statement. There is no place for these people and their money in our country.

[John McDonnell]

That is just not good enough. We were promised a register in 2015, and we are still having to wait another three years. The Government are letting the crooks, the tax avoiders and the money launderers off the hook again. They have failed to introduce and enforce stricter due diligence for companies as registered companies, they have failed to take on the service providers that set up these laundering scheme, and they have refused to legislate to create a new offence of failing to prevent money laundering. Those are all amendments that the Opposition tabled to the recent Sanctions and Anti-Money Laundering Bill. The people of this country are entitled to ask why this Government are soft on tax evaders and money launderers.

There is another issue that has to be addressed today, as highlighted by the allegations against Lycamobile. Will the Government bring forward legislation requiring any political party found to have accepted donations from money launderers and tax evaders to forfeit or return that money?

[John Glen]

Obviously, it is impossible for a Minister to comment on live cases, but we will continue to use powers to disrupt and pursue money launderers and terrorists. We will use the anti-corruption strategy, and my right hon. Friend the Minister for Security and Economic Crime is committed to using the National Economic Crime Centre to pursue those who need pursuing, but we will do so within the rule of law, consistent with the values of this country.

[Laura Smith (Crewe and Nantwich) (Lab)]

16. What steps he has taken to give Her Majesty’s Revenue and Customs the appropriate powers and resources to tackle tax evasion.

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[Andrew Bridgen (North West Leicestershire) (Con)]

T3. I have a constituent who, despite having ample equity in her home and never having been in arrears with her payments, is unable to extend her mortgage beyond the age of 75 because of Government rules. That means that she will have to sell the house that she loves. Will my hon. Friend look urgently at whether those rules are absolutely necessary?

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

Lenders are not restricted from extending mortgages beyond the age of 75, as long as the consumer can demonstrate affordability. Several lenders are currently looking into this issue. There is considerable merit in interest-only retirement mortgages.

[John Cryer (Leyton and Wanstead) (Lab)]

What action are the Government taking to tackle payroll and umbrella companies, some of which—not all—are used to perpetuate bogus self-employment and undermine terms and conditions?

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[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

T6. The Royal Bank of Scotland branch in Wick in my constituency has now closed, and a sad sight that is. Last week, we heard that the Homebase branch is also to close. The Chancellor may say that we have to accept change and live with it, but these are hammer blows for a community such as Wick, and I begin to wonder when we will see tumbleweed blowing down the street. Does the Chancellor agree that we should carry out some kind of assessment of the impact of such closures on the local economies of places like Wick and Caithness, before it is too late?

[John Glen]

It is a matter for banks to make commercial decisions on the basis of their assessments, and there are rules on how they inform the affected constituents. I am, though, very concerned about the situation in rural and sparsely populated areas. I shall visit Scotland over the summer recess to address some of the issues that the hon. Gentleman has raised.

[Trudy Harrison (Copeland) (Con)]

T5. I welcomed the Treasury’s recently closed consultation on single-use plastics. Will my hon. Friend update the House on what his Department intends to do next to tackle this problem?

[Wes Streeting (Ilford North) (Lab)]

I am sure that Ministers will be just as concerned as the rest of us about the startling revelations about the conduct of Lloyds and HBOS outlined in the Project Turnbull report. Will the Treasury now demand that, after three years, the Financial Conduct Authority pulls its finger out to expedite its investigation into this matter? Has the Treasury received any requests from police authorities to fund appropriate investigations into criminal activities? If so, will it look favourably on them?

[John Glen]

The hon. Gentleman rightly points out that the events at HBOS in Reading constituted criminal activity. As such, it was right that those responsible were brought to justice. He referred to a report by an internal employee; that matter should be taken seriously by the FCA and is being taken seriously by Lloyds, and it will be followed up on in due course.

[Several hon. Members rose—]

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[John Glen]

The hon. Lady makes a very sound point. The FCA is looking into four aspects of that. It is reporting next week, and I look forward to hearing what it has to say.

[Sir Patrick McLoughlin (Derbyshire Dales) (Con)]

In the autumn statement, the Chancellor announced the extension of the railcard from age 26 to 30. When will my constituents be able to take advantage of that?

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[Bambos Charalambous (Enfield, Southgate) (Lab)]

A Home Affairs Committee report published in summer 2016 found that the suspicious activity reporting system intended for use by the banks to crack down on money laundering was not fit for purpose. The Committee demanded immediate reform, but the Government stated that they would implement the reforms only by 2018. In the light of the Foreign Affairs Committee report on Russia, criminal financing and the UK, will the Minister immediately bring forward plans to reform and improve the system, as was recommended two whole years ago?

[John Glen]

I refer the hon. Gentleman to the response I gave earlier. The Government are taking forward a range of options, but I will examine the issue he raises and write to him.

[Eddie Hughes (Walsall North) (Con)]

The people of Bloxwich will soon be hearing more about blockchain. Will the Chancellor confirm that the Government will continue to invest in this innovative technology to keep the public’s data safe?

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[Yvonne Fovargue (Makerfield) (Lab)]

The Government have decided not to proceed with the legislation that they committed to bring forward to protect consumers from the rip-off practice of logbook loans, despite the Bill being prepared and ready to go through the accelerated procedure. Will the Minister explain why he is prepared to allow innocent buyers to continue to be exploited through this outdated, misused legislation?

[John Glen]

The FCA is looking at a range of options, but I would be happy to meet the hon. Lady to discuss her concerns on this matter as soon as possible.

Counter-Terrorist Asset-Freezing Regime

John Glen Excerpts

Tuesday 15th May 2018 Written Statements

[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 periods of 1 July 2017 to 30 September 2017 and 1 October 2017 to 31 December 2017.

This report also covers the UK’s implementation of the UN’s ISIL (Daesh) and al-Qaeda 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 its Office of Financial Sanctions implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (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.

A new EU asset-freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings. Once a designation is made under this regime it will appear in the annexed tables.

The annexed tables set out the key asset-freezing activity in the UK during each quarter.

The Sanctions and Anti-Money Laundering Bill currently before Parliament will help ensure that UK counterterrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies to consider utilising, while also meeting the UK’s international obligations.

Under the Bill, a designation could be made where there are reasonable grounds to suspect that the person or group is or has been involved in a defined terrorist activity and that designation is appropriate. This approach is in line with the UK’s current approach under UN and EU sanctions and would be balanced by procedural protections such as the ability of designated persons to challenge the Government in court.

Attachments can be viewed at:

http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2018-05-15/HCWS685.

[HCWS685]

Draft Cash Ratio Deposits (Value Bands and Ratios) Order 2018

John Glen Excerpts

Tuesday 15th May 2018 General Committees

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

I beg to move,

That the Committee has considered the draft Cash Ratio Deposits (Value Bands and Ratios) Order 2018.

May I say what a pleasure it is to serve under your chairmanship, Mr Robertson? The draft order, which was laid before the House on 16 April, makes changes to the cash ratio deposits scheme, by which the Bank of England funds certain functions. Under the Bank of England Act 1998, banks and building societies of a certain size are required to place a proportion of eligible deposits in an account with the Bank of England. In turn, the Bank invests those deposits in interest-bearing assets—namely gilts—and the return on those investments is channelled into the funding of its monetary policy and financial stability functions. There is a resultant systemic benefit to the whole banking sector, and to the wider public, from the sustained and stable operation of those functions. For those reasons, the Government are confident that the cash ratio deposits scheme is the best way to fund the Bank’s important policy work.

I will make some remarks on the performance of the scheme in the past five years, from 2013 to 2018. The Bank’s income generated by the scheme is driven by two factors: the yield on gilts and the size of deposits eligible for the scheme, which is largely driven by the overall performance of the banking sector. Over the last five-year period gilt yields, and to a lesser extent the growth in deposits, have been lower than expected, which has caused a shortfall in the Bank’s funding. A similar shortfall arose in the five-year period leading up to the last review of the scheme, which was carried out by the Government in 2013.

The Government seek to address the problem by recalibrating the parameters of the scheme over the forthcoming review period. In particular, they seek to move away from the current use of a fixed ratio as the measure by which institutions calculate the proportion of their deposits to be placed at the Bank; instead, the ratio would be indexed to actual gilt yields. Under an indexation approach, the ratio will be calculated once every six months, to align closely with prevailing gilt yields. Such an approach should lead to a smoother income profile for the Bank, as it will dynamically adjust to the investment environment. It will reduce both the risk of a shortfall in income, if yields do not perform as expected, and the likelihood of future funding deficits for the Bank. The indexation model also has potential benefits to payers. For example, if gilt yields were to increase, institutions would not then be required to place as much on deposit at the Bank.

The Government have consulted on the changes to the parameters of the scheme that are before us today. Alongside the Bank’s efficiency savings, the changes proposed by the order will ensure that the income generated from the scheme covers the costs of the Bank’s policy functions over the next five years. The Bank’s costs have increased since Parliament last agreed to the scheme, and it has committed to maintaining its costs at 2018-19 levels over the next five years. Any subsequent enhancements will be funded from efficiency savings generated elsewhere. Those cost-saving measures include a comprehensive programme of cost containment and reprioritisation. The Bank will also continue to increase transparency about its income sources and the application of income generated under the scheme.

The changes to the scheme are expected to increase the Bank’s income over the next five years and generate income closely aligned to its forecast costs. It is worth noting that the amount that most institutions are required to deposit at the Bank under the scheme is relatively small. In December 2017, 81% of deposits were made by just 20 institutions, with 14 of those each contributing more than £50 million. The majority of contributions are from larger banks and building societies.

The Bank of England Act 1998 sets out that the cash ratio deposit rate can be changed only once every six months. The deadline for amending the rate ahead of the next six months is 1 June 2018. If the scheme is not amended by that date, the shortfall in the Bank’s funding will continue.

The changes proposed by the draft order are sensible and proportionate in the light of the issues identified in the 2018 review. The draft order will ensure that the Bank’s important monetary and fiscal and stability functions are fully funded. For that reason, I commend the draft order to the Committee.

--- Later in debate ---

[John Glen]

I thank the hon. Lady for her observations and challenges. As I set out at the beginning of my speech, the context was to secure sufficient funding for the Bank of England’s execution of its monetary policy and financial stability functions. I recognise that there was a range of contributions to the consultation, with 19 responses received to the informal consultation and three to the public consultation, but overall there were no substantial arguments against the proposal.

The hon. Lady raises the question whether there should be a fee-based mechanism. In any consultation there will be a range of views, but I think the consensus was on tweaking the existing model to give more assurance on the amounts that will need to be deposited, and to reflect a more responsive approach to prevailing gilt returns.

[Andrew Bridgen (North West Leicestershire) (Con)]

The Minister pointed out in his opening address that the Bank of England had suffered a deficit on the current system, as a result of lower than expected gilt yields. Will the new system allow the Bank to eliminate that deficit, or will it be carried forward?

[John Glen]

For the deficit over the last five-year period on its expenditure on these two functions, the Bank will have been obliged to find the funds from other sources within its organisation. We want to ensure that these particular functions—the monetary policy and financial stability functions—are properly funded and that there is flexibility over the amounts based on the prevailing gilts; they will be transparently and publicly available, because they are quoted all the time.

On the risk of the expansion of costs in the light of Brexit, the Government are working toward a solution that involves a long-term economic partnership. The enduring functions of the Bank of England to satisfy monetary policy and financial stability will continue. If, at some future point, the Bank of England realises further costs, it will be for the Bank to have conversations with the Treasury about the matter, but that is not anticipated. The Bank has been able to make projections over the next five years and commit to a budget that it is happy with under this model.

I have just received some advice on carried-forward costs. There are no fixed costs over five years, and there will be no carry-forward of the deficit. That will be dealt with, and we will start on the basis of the budget over the coming five years.

The hon. Lady made some wider observations about corporation tax. I think that they are out of the scope of this discussion, which is simply about the provision for this function of the Bank of England.

[Anneliese Dodds]

I mentioned corporation tax only because the consultation for the order set the requirement to place deposits with the Bank in the context of overall tax burdens on banks. It was mentioned in the consultation first; I did not come up with it initially.

[John Glen]

That was mentioned in passing, but the order is designed to give better assurance about the realising of the return required for the Bank of England to carry out these functions. I do not have anything more to add, so I hope that the Committee will agree to this draft order for the benefit of the Bank, our banking sector and the users of those services across the country.

Question put and agreed to.