Covid-19: Government Support for Business

John Glen Excerpts

Thursday 16th December 2021 Commons Chamber

[Mr Speaker]

The Minister will answer the question, and then you can say your piece.

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

It is clear that omicron is much more transmissible than other coronavirus variants, which is why, as the Prime Minister announced on Sunday, we are offering every eligible adult a booster dose before the end of the year. To get more jabs in arms, we have taken the proportionate and responsible step of moving to plan B in England to slow the spread of covid-19.

The rapid spread of omicron means this is a challenging time for a number of sectors, including hospitality. The Chancellor will be speaking to UK hospitality representatives this afternoon to understand their concerns. The Government continue to offer considerable support to businesses that might require extra assistance into next spring, as part of the £400 billion of direct economic help that we have provided during the pandemic.

For instance, we have reduced the VAT rate for hospitality and tourism businesses to 12.5% until March. Eligible retail, hospitality and leisure businesses in England are also benefiting from 66% business rates relief until March. And at the recent autumn Budget the Chancellor introduced a further 50% business rates relief for eligible businesses into the 2022-23 tax year.

Businesses can continue to apply for the additional restrictions grant until March 2022, as part of more than £2 billion of discretionary business grant funding during the pandemic. Businesses can benefit from our extension to the recovery loan scheme, which helps small and medium-sized enterprises to build back from the crisis by providing guarantees to lenders on finance of up to £10 million. Firms are also protected from eviction until March 2022 if they fall behind on their rent.

Firms in the arts and culture sector, meanwhile, can access the £2 billion culture recovery fund, the sports recovery package and the film and television production restart scheme until the end of April 2022. And our £800 million live events reinsurance scheme is giving event organisers confidence to plan ahead. Furthermore, the devolved Administrations have received an extra £12.6 billion this year, including an additional £1.3 billion in the autumn Budget.

This Government are helping businesses in every region and nation of the UK during these difficult times. We are speaking to the most affected sectors, and we will continue to respond proportionately to the virus’s changing path to support jobs, businesses and individuals, just as we have since the start of this pandemic.

[Mr McFadden]

Forgive me for my Christmas eagerness, Mr Speaker.

I extend my best wishes to my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chancellor, as she recovers from covid at home. We know where she is, but where is the Chancellor? Why did he decide to proceed with a trip to California on Tuesday, when it was already clear that UK businesses were struggling to cope with what the Prime Minister himself has called a “tidal wave” of omicron?

Even if the Chancellor is abroad, California is not exactly a communications desert. They have television, and I have even heard that they have the internet, but it is still radio silence from the Chancellor. There is tumbleweed rolling through the Treasury, which says he is in communication with officials, but what about some communication with businesses that are losing bookings by the hour and watching their December profits vanish into thin air? Last night the chief medical officer advised the public to deprioritise social contact. Adherence to that advice will have a clear and direct impact on the hospitality industry, live music, theatre and other public events across the country.

The Government documents for plan B say that the decision on economic support will be made

“based on the data at the time.”

That time is now, so let me ask the Minister this: what measures will the Government take to ensure that those who have to isolate at home have proper sick pay that enables them to follow the rules? What will the Government do to help hospitality businesses affected by the chief medical officer’s advice to deprioritise social contact? Will any support also apply to live music, theatre and other events?

What are the Government doing to maintain supply chains, should they be affected by staff absences in the coming weeks? What is the Government’s response to the hospitality industry’s call to maintain the value added tax rates for that sector at 12.5%? Will the Government also allow local authorities to release any unused funds they may have from previous covid aid packages to support businesses right now?

The principle here should be that the level of support should match the economic restrictions in place. It is not about a blank cheque; there has already been enough wasteful spending from the Government in the past two years. Any package should be timely, proportionate and properly targeted and must guard against fraud. That is why it needs the full and focused application of Treasury Ministers and officials.

We are not in lockdown, but it would be totally disingenuous to pretend that businesses can trade normally when the Prime Minister has used a special national broadcast to warn the nation of a “tidal wave” of covid infections and the chief medical officer has told us to cut back on social contact. The Government cannot pretend that nothing has changed. This is not the time to abandon businesses, so will the Minister commit to announcing a package of support by the end of today—I mean UK time, not California time—that matches the situation that British businesses and workers now face?

[John Glen]

I thank the right hon. Gentleman for his questions. The Chancellor has been deeply engaged with business representatives throughout this pandemic and he will continue to be so. He was on a long-planned business trip to the United States, conducting Government business, and he will continue to engage today with other Ministers, with representatives of the hospitality sector and others, to hear their concerns about what further support should be required.

However, I will not be taking lessons from the right hon. Gentleman on some of these measures. Last year, when we put in place the bounce back loans, it was the shadow Chancellor at the time, the hon. Member for Oxford East (Anneliese Dodds), who specifically engaged constructively with the Chancellor to agree the basis for those loans. We have continued to work constructively throughout on a range of interventions for multiple sectors. We put in a package of measures at the Budget offering additional support and as of yesterday the covid additional relief fund will provide £1.5 billion for those in the supply chain to deal with some of the additional challenges. Of course the Government recognise the additional pressures that these measures and this strain of the virus bring, and of course we will engage carefully and listen carefully to those business representatives this afternoon.

[Mr Speaker]

I call the Father of the House, Sir Peter Bottomley.

[Sir Peter Bottomley (Worthing West) (Con)]

The Minister has talked about some of the costs that will be reduced. The problem with the reduction of Christmas cheer, especially in the hospitality and entertainment industries, is revenues.

If I listen to my publicans, restaurateurs and hoteliers, I know they will want to hear after the meeting this afternoon how their revenues can be lifted, how they can treat their staff properly and how the loss of revenue from those events that cannot be postponed will in some way be made up to them. That is what matters most in most constituencies, including mine.

[John Glen]

I thank the Father of the House for his comments, and point out that there is £250 million of funds still to be given to businesses through the additional restrictions grants. Three out of four local authorities have between 5% and 40% of their funds unallocated. However, I recognise that this is a distinct new challenge, and that is why I and the Chancellor will be having meetings with representatives from the affected sectors this afternoon to see what more needs to be done.

[Chris Stephens (Glasgow South West) (SNP)]

The omicron variant is now present in all Scottish health boards, so I am sure the Minister will congratulate Scotland on being the first nation in the UK to vaccinate 50% of the eligible population with the booster jab.

On Tuesday, during the First Minister’s address to the Scottish Parliament, the Treasury sent out a press release indicating that more covid support was coming, but it later backtracked and pulled it. In response to those erroneous claims, the Scottish Finance Secretary has written to the Chancellor seeking clarification. When should the Scottish Finance Secretary expect a reply? Do we have to wait for the Chancellor to return from California? Does the Minister not believe that the Government’s flip-flopping and flippancy of the last few days has undermined the devolved Administrations and that assurances of funding must be provided right now?

--- Later in debate ---

[John Glen]

Of course, the devolved authorities will secure £77.6 billion next year, which is £12.6 billion more than this year. Just yesterday, £430 million of additional money was agreed with the Chief Secretary to the Treasury. The hon. Member should contact the Finance Secretary in Scotland to clarify what he is talking about, because that money was allocated yesterday by the Chief Secretary.

[Theresa Villiers (Chipping Barnet) (Con)]

Government policy has been clear that people can proceed with their Christmas socialising plans as expected. However, yesterday the chief medical officer said that people should limit social contact, which will clearly have a devastating effect on hospitality businesses. Can we have clarity about how people should plan their social contacts for Christmas?

[John Glen]

The advice is clear: one should get the booster as quickly as possible—I did so on Saturday—take lateral flow tests and act responsibly. On Monday, I shall take my Salisbury team out for lunch.

[Mr Kevan Jones (North Durham) (Lab)]

Public health messages need to be clear and consistent, but last night the Prime Minister’s press conference was confusing and sowed turmoil in the hospitality sector. Another sector that is already hurting is small coach and bus operators, such as Stanley Travel in my constituency, who rely on Christmas and the new year for income to tide them over the fallow period of January and February. When the Chancellor comes back from his winter sun trip to California, will the Minister ensure that he does not forget the sector as we look at support in the coming months?

[John Glen]

The right hon. Gentleman legitimately raises a point about the whole range of businesses affected. That is why the Government’s priority was to give local authorities maximum discretion in how to allocate funds. As the Chancellor has done yesterday, today and every day, he will continue to focus on the needs of the economy and businesses up and down the country.

[Mr Steve Baker (Wycombe) (Con)]

I am reassured that my hon. Friend the Minister will take out his team on Monday. Like him, I took a lateral flow test this morning. However, is it not the case that when officials give advice, it has a massive capacity to herd the public into particular behaviours? Therefore, while the Government have formally allowed hospitality businesses in particular to stay open, the reality in my constituency is that fantastic businesses such as The Old Queens Head in Penn and Tylers Green have seen massive cancellations. What reassurance can he give me that when officials speak—particularly from podiums at press conferences—they stay within the bounds of the policy decided by Ministers, and that what Ministers have decided takes into account the broad spectrum of collateral harms that follow from, for example, encouraging people not to mix together?

[John Glen]

It is really important that we follow the best advice to get jabbed, take those lateral flow tests and wear masks. However, where we possibly can, we should also continue to engage with our local communities and support our businesses at this difficult time. Of course, that means that judgments have to be made, and people must take responsibility for their decisions in the light of that guidance.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Small and medium-sized enterprises make up a significant proportion of the UK hospitality sector, and in recent days they have seen their footfall decline by as much as 40%, with one business I know of having had 79 cancellations in three hours. This comes at a time when businesses also continue to face high energy costs, supply chain disruptions and dropping consumer confidence. If we know this, it beggars belief that it is not clear to the Government. We have been meeting hospitality businesses since last week. Why is this meeting happening only today, and are the Government going to commit to come forward with a package of support that will give confidence for Christmas and the months ahead by the end of today?

[John Glen]

As I have said, the Government are meeting a dozen representatives from the sector this afternoon to assess the latest situation and see what more can be done.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I sympathise with my hon. Friend and good neighbour in having to deal with data that is changing extremely rapidly. We know from South Africa and southern Africa that things may be changing, perhaps for the better, but we cannot rely on that, so the cautious words of Ministers and officials and the measures that we passed earlier this week are absolutely appropriate. Does my hon. Friend agree that, at a time of change such as now, it is important that the House is convened to debate the issues and that we should seek an opportunity next week and the week after for us to meet again so that Ministers can update the House on the current situation and change what is required one way or the other, if that is necessary? The public expect that level of leadership.

[John Glen]

I thank my right hon. Friend and neighbour for his question. As I think he will appreciate from his time in government, some of those decisions come from those above me. It is critical that we are clear about what we are doing and why we are doing it, and the basis for the decisions that we are making.

[Jeremy Corbyn (Islington North) (Ind)]

It is pretty obvious that during this crisis many workers have lost a lot of income, wages have gone down and living standards have gone down. For those who have to self-isolate or are sick and have to rely on statutory sick pay, SSP is wholly inadequate. Will he, in his consideration of business support, include an immediate substantial increase in SSP so that living standards can at least be maintained?

[John Glen]

The Government will always look at such matters. We have maintained the self-isolation £500 payment, means-tested through local authorities, but we will obviously keep all matters under review.

[Steve Brine (Winchester) (Con)]

Boosted this morning, Mr Speaker.

Listening last night to the Prime Minister’s Downing Street conference, I could see why there was no statement to the House. No new Government policy was announced. Then Professor Chris Whitty answered a question from the BBC, and at a stroke, the chief medical officer changed Government policy and put this country—certainly hospitality, and Winchester’s hospitality bears this out from what I am hearing—into effective lockdown. May I ask—yes or no—whether what Professor Whitty said last night is now the policy of the Government, namely, that we should socialise carefully? What in practical legal terms does that mean?

On support, because advisers are now running the show—I bet none of them run businesses facing complete ruin as a result of what was said last night—the Treasury is going to have to do more. Otherwise, we risk wasting the amazing support that Her Majesty’s Treasury gave last year. We are going to have to do more, whether or not we want to be here and whether or not I think we should be here, or businesses will face ruin and thousands of people are going to lose their jobs.

[John Glen]

I have been very clear that we should get boosted, encourage our constituents to get boosted, take the lateral flow tests, wear masks and engage in normal activity as far as we can. There will not be a legal definition of what every individual should do on an individual basis, but most people will use common sense, and that is really important. I recognise the core point that my hon. Friend makes. The sector will need engagement from Government, and that is why Ministers—not advisers— will be engaging with that sector this afternoon.

[Wendy Chamberlain (North East Fife) (LD)]

As the Father of the House said, we will all be receiving emails from businesses in our constituencies. One has written to me saying:

“As with most businesses, a hospitality business is not run from one day to the next. Plans are in place for staff, events and orders.”

These are businesses that were struggling already with accrued debt and a staffing recruitment crisis before omicron hit. Does the Minister agree that, if businesses are facing the same set of circumstances they faced when they received support from the Government, it is reasonable for them to expect the same level of support again?

[John Glen]

We have put in a range of interventions, be that through loans, the furlough scheme, support through grants or support through reliefs from VAT and business rates. We will continue to look at what specific sectors are facing in these coming days and weeks, and we will act appropriately in light of those changed circumstances.

[Bob Blackman (Harrow East) (Con)]

Clearly we are all going to have to live with covid for a long time to come. Businesses in my constituency report a double whammy: people cancelling bookings for hospitality and shortages of staff as a result of people testing positive for covid, doing the responsible thing and not coming in. Can my hon. Friend look at ways we can promote business and encourage people to take on short-term roles in the hospitality industry to cover these gaps? We need to provide incentives for business to continue.

[John Glen]

As ever, my hon. Friend makes sensible points, and I will certainly look carefully at what he has said, and we will look at in light of the representations we receive this afternoon.

[Kevin Brennan (Cardiff West) (Lab)]

The hon. Member for Winchester (Steve Brine) is right: the Government are trying to sing two different songs at the same time, and the result is a cacophony of mixed messages in everyone’s ears. This afternoon, the Chancellor needs not just to listen, but to act, because the taxes we are talking about are supposed to be taxes on business activity, not business inactivity caused by misfortune and Government mixed messaging. Will the Minister tell the Chancellor this afternoon when he meets him, albeit from California, that action is what is required now, not just listening?

[John Glen]

I am grateful for the hon. Gentleman’s points. I have constant contact with the Chancellor, and I will make sure he is very aware of the range and strength of opinion in the House today.

[Greg Smith (Buckingham) (Con)]

I welcome my hon. Friend’s commitment to the meetings this afternoon, but a common theme has developed on both sides of the House of reports, including in my constituency, of pubs losing 50% to 60% of their bookings. Like the right hon. Member for North Durham (Mr Jones), I have a local coach operator that reported losing £40,000-worth of bookings yesterday alone. While advisers press the panic button way beyond what this House voted for a couple of days ago, can my hon. Friend give me an absolute assurance that there will be a decision by Ministers after his meetings this afternoon that will give businesses the clarity they need on the support they will get in this effective lockdown?

[John Glen]

What we will do is listen carefully and act appropriately. Just yesterday, we secured this covid additional relief fund to support the supply chain and city centre economies, but I fully recognise that we are in a very difficult and rapidly changing set of circumstances, and it is important that Ministers act and make decisions on the basis of that data and the evidence that is presented to this House.

[Owen Thompson (Midlothian) (SNP)]

While it is important that we have a swift health response, it is equally important that we have a swift financial response to support that health response in tackling the impact of covid. What steps are being taken to ensure that these decisions are taken quickly? It is not good enough simply to wait until the Chancellor can wake up, whenever that is, in California. When will the Government finally ever do anything to support those who have been excluded from any support at any time throughout this entire pandemic?

[John Glen]

Clearly we have worked hard throughout to bring customised support to different sectors, with a range of grants, reliefs and direct support through furlough. The Chancellor was very clear from his earliest statements last spring that it would be impossible to protect every single job, but just this week we have seen unemployment at 4.2%, which is obviously considerably better than was anticipated. There is no complacency on behalf of the Treasury or the Chancellor, who is fully engaged in looking at what interventions are appropriate in addition to the comprehensive winter plan, which was laid out in advance to give reassurance over the coming six months. As I have said, circumstances have now changed, and we will need to look very carefully at the implications of that.

[Martin Vickers (Cleethorpes) (Con)]

Like my hon. Friend the Member for Buckingham (Greg Smith), I have had a coach operator on to me this morning, so may I urge the Government to look at the wider impact of what is happening? It is welcome that the Chancellor and his team are meeting the hospitality sector, but the closure or limited closure of that sector has a massive knock-on effect, for example, on coach operators and taxi drivers. Sadly, this is going to mean more online sales and another hit to the high street, so may I urge the Minister to ensure that the wider aspects of what is taking place are considered in the meeting later?

[John Glen]

I thank my hon. Friend for his question. He is absolutely right to draw the House’s attention to the wider impact across related businesses, which is why Ministers will this afternoon meet a range of representatives, to ensure that the full understanding of the Government is grasped.

[Mr Clive Betts (Sheffield South East) (Lab)]

I simply say to the Minister that unless he acts today to help hospitality businesses they will not be there next year to be helped—that is the simple reality. People choosing not to go to hospitality events, following guidance not to go to the office, is having a big impact on the revenues of public transport operators—bus, coach and Supertram operators in Sheffield. Will he have urgent conversations with the Transport Secretary about extra help for those operators—already we have seen massive cuts to services—and give the money to the transport authorities so that it can be best spent in the interests of passengers?

[John Glen]

Of course discussions will take place across government. The hon. Gentleman draws attention to the transport sector, where of course significant support has been given. However, I take on board his point.

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

I welcome the fact that the Minister and the Chancellor are meeting those in the hospitality sector this afternoon. There is no doubt that they are suffering because of some of the mixed messages we have heard in the past few days. The obvious places to help them would be by looking at VAT again, potentially reducing it back to the 5% rate until the end of March, and at the recovery loan scheme. As the Minister knows, the original schemes—bounce back loans and the Coronavirus Business Interruption Loan Scheme—did not require a forward viability test, whereas the recovery loan scheme does. It is very difficult for those in hospitality at the moment to demonstrate forward-looking viability for their businesses, so will the Minister look again at the scheme and look to reform it so that businesses can access this vital financial support?

[John Glen]

As ever, my hon. Friend brings sensible and credible points to the Chamber on these matters. He is very familiar with the different aspects of small and medium-sized enterprise financing. The recovery loan scheme, operational until June next year, gives a 70% guarantee to lenders, but of course we will look at all those measures in the round, and I look forward to our meeting later today on other matters.

[Ms Karen Buck (Westminster North) (Lab)]

I am acutely aware, having a constituency on the edge of the west end, of the impact that the pandemic has had not only on hospitality and tourism, but on the culture, arts and live performance sector. Last night, it was reported that 12 west end shows were unable to go ahead because of illness among the cast, many of whom are self-employed. Will the Minister confirm that he or fellow Ministers will be meeting representatives of the theatre and live performance sector to discuss the impact of this latest wave of the crisis on their finances?

[John Glen]

We will continue to engage with the sector. I just draw the hon. Lady’s attention to the £2 billion culture recovery fund; the emergency resources support fund, which gives up to £3 million of support to charities and £1 million to commercial entities in that sector; and the £800 million to the live events reinsurance scheme. However, we will continue to engage across different sectors of the economy.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Newcastle has a fantastic night-time economy and the Chancellor should visit, as it is a lot closer than California. Those businesses will be seeing a real reduction in footfall and trade, as will their suppliers directly, because of the omicron variant. What support is the Minister offering to them directly as a result of the omicron variant?

[John Glen]

As I mentioned, there is outstanding support from the local additional restrictions grant, which local authorities have available. I would be happy to hear from the hon. Lady where Newcastle’s local authority is on the disbursal of that grant. As I said, we are meeting representatives from across the economy this afternoon and we will look carefully at what can be done.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

Merry Christmas, Mr Speaker, to you and the excellent House staff.

It should have been a very busy Christmas period, but hospitality, entertainment and linked businesses in my constituency, on top of trying to contend with soaring energy costs, are being hard hit. They are losing bookings and events after the Prime Minister announced his recent plan. Where is the Chancellor? Why did he not announce a corresponding support package plan for those affected? What support package can businesses in my constituency apply for to help them in these difficult times?

[John Glen]

I have already set out a number of support measures that we have taken, which are ongoing through to next March, such as business rates relief, grants from local authorities, grants that we have already given and a concession on the lower VAT rate. Of course, I recognise the reality of behaviour at the moment. We have to assess that, look at the data and look at what the appropriate measure is. It is really clear: we have not shut anything down. What we have done is set out new conditions which people are finding it difficult to come to terms with. I understand that, which is why we have to work carefully with the sector to look at what sort of support we can bring in.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

Sacha Lord, Greater Manchester’s night-time economy adviser, just said:

“100,000’s staff hours are being slashed up and down the UK, due to cancellations. A large proportion”—

of those staff—

“are on a living wage.”

He says that the silence from the Chancellor is “deafening” and it is, “Unforgivable and Unforgettable.” Does the Minister agree?

[John Glen]

I don’t.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

I just asked the Secretary of State for Transport about support for aviation and was given the Department for Transport’s greatest hits. The truth is that the aviation sector was hardest hit. Its recovery has been uneven and the weakest in Europe. It will need support. Measures already brought in, such as the coronavirus large business interruption loan scheme, will have to be extended for some sectors, in the same manner as CBILS. Thousands of jobs have gone in my constituency. Does the Treasury actually understand how serious the situation is?

[John Glen]

Yes, we do, and that is why we have given £12 billion of loan guarantees through the covid corporate financing facility for the aviation sector. At the Budget, we put in the airport and ground operations support scheme to help with fixed costs over the next six months. Of course I recognise that the situation is having a significant impact on the sector and the Government will remain engaged to support where we possibly can.

[Ian Mearns (Gateshead) (Lab)]

A number of different things have happened this week in the Government’s messaging, but one significant thing was when the Prime Minister made his television statement on Sunday and told people to work from home if they can. Reinforcing that message has meant that, this week, an awful lot of people are not in the places that they expected to be, which has resulted in cancellations of bookings for hotels and restaurants. Rightly, reinforcing that message has had an impact that the Treasury needs to react to.

[John Glen]

I recognise that, which is why I have set out today the engagement that we are having to try to determine exactly what we need to do.

[Lilian Greenwood (Nottingham South) (Lab)]

For more than a week, hospitality businesses and workers in Nottingham have been contacting me desperately worried about falling custom at what should be their busiest time of year. I have also heard from hair and beauty salons in my constituency that are facing cancellations and wondering how on earth they will get by on a reduced income when they are already struggling to pay back the loans that they took out to survive lockdown. Why do the Government not seem to understand the urgency of the situation and what will the Minister now do to help?

[John Glen]

What I will do is ensure that the hon. Lady’s point is passed to the Chancellor. I will also ensure that the engagement is as broad as possible across Treasury Ministers, so that the full impact of the evolving circumstances is reflected in our response.

[Sam Tarry (Ilford South) (Lab)]

A few weekends ago, on Small Business Saturday, I was happy to host the first inaugural Ilford business awards. With about 1,500 nominations, it spotlighted the best businesses in Ilford. Recent research from the TUC, however, shows that 647,000 workers in hospitality, retail and entertainment do not currently qualify for statutory sick pay and many will be incredibly anxious about what that means, especially given the contradictory advice from Government scientists and the Prime Minister in the past few days. Why have the Government let down the industry so badly? What will the Minister commit to do to help to support those industries today?

[John Glen]

Today we are having meetings to discern exactly what the data is showing and what interventions we need to make going forward.

[Dave Doogan (Angus) (SNP)]

I think I am now the sixth Member to mention the coach sector, and I hope the Treasury is listening to hon. and right hon. Members in that regard. Robert Black’s of Brechin has contacted me to say that bookings have been disappearing like snow off a dyke since the omicron situation developed. I have also been contacted by The Townhouse in Arbroath, The Stag in Forfar and many others, and I am not taking my staff out on Friday because I am following advice. There are booking cancellations right across the board. It is an omicron support package that we need—where is it coming from?

[John Glen]

As I have said repeatedly, the Government are engaging across sectors. I recognise the depth and breadth of the impact of this variant, and we will look very carefully at what we need to do.

[Chris Law (Dundee West) (SNP)]

Despite the Treasury spin, last night’s Cobra meetings only confirmed that of course there is no money coming to Scotland; the money announced by the Treasury on Tuesday was pre-announced money. The Scottish Government have already acted to deliver £100 million of funding to support businesses disrupted by health advice in Scotland. They want to give more, but they cannot, due to the restrictions in place on devolved borrowing. Does the Minister accept that this aspect of the devolution settlement is hampering the ability of devolved Governments to act as necessary?

[John Glen]

I am sorry, but I cannot accept that. The Government have given an additional £12 billion to the devolved Administrations, which also benefit from the reduced VAT, the recovery loans and the other UK-wide measures, and the additional £430 million that was agreed this week.

[Liz Twist (Blaydon) (Lab)]

Two weeks ago, on a very frosty north-east morning, I met small businesses at my business forum. They told me of their concerns about what might happen over the Christmas period with covid-19. They included beauty businesses and businesses such as the Railway Tavern in Rowlands Gill in my constituency. Will the Minister please urgently address the need to support our hospitality and personal care businesses throughout this situation?

[John Glen]

The hon. Lady makes a very reasonable case about businesses in her constituency. As I have said, we will be engaging with the sector to come forward with appropriate interventions based on the data and the experience across the economy.

[Rachael Maskell (York Central) (Lab/Co-op)]

One thing is clear: we can trust the word of the chief medical officer more than that of the Prime Minister, as the Government sleepwalk into another covid crisis. In York, we have a significant hospitality sector. It is really struggling, as are many other businesses. What steps is the Minister taking with Her Majesty’s Revenue and Customs, as the tax year comes to an end, to ensure greater flexibility for businesses so that they can have longer to repay money to the Treasury?

[John Glen]

As ever, the hon. Lady makes a reasonable point. We have to look at the range of interventions and ways that we could support the economy at this time. She raises an interesting area for us to focus on, and I am sure that will be a substantive area of considerations with the Chancellor.

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

The music industry has been hit hard. The industry trade body LIVE—Live music Industry Venues and Entertainment—has concerns that while venues can technically stay open, they are haemorrhaging money and that will lead to permanent closures. Will the Chancellor maintain the current rate of VAT beyond March 2022? In addition to support packages, will the Government fix the insurance scheme for cancelled events to include pandemic-related cancellations?

[John Glen]

I thank the hon. Lady for her question. The Government worked very closely with the sector in the determination of the parameters of the live events reinsurance scheme—I was involved in it myself—over late summer. That £800 million scheme will give events across the country confidence, but I obviously recognise that that needs to be kept under constant review, as all the measures do.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for his answers to the questions and, clearly, for the commitment to financial support to help businesses, but may I ask him a question on behalf of travel agents and tour operators, which are again taking a very specific hit, not simply from cancellations but from frightened people being afraid to book for the future? Will he explore urgently a financial aid scheme alongside the one that is so clearly needed for the hospitality industry as a whole?

[John Glen]

Throughout this pandemic, we have received representations from many sectors, we have introduced a range of interventions to deal with the challenges, and we will continue to engage with sectors across the economy, including travel operators, which have been reflected a number of times in the concerns of Members across the House this morning.

Overseas Framework Consultation

John Glen Excerpts

Wednesday 15th December 2021 Written Statements

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

The Chancellor’s Mansion House speech and accompanying document—"A new chapter for financial services”—set out the Government’s vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens, creating jobs, supporting businesses and powering growth across all of the UK.



In December 2020, HM Treasury published a call for evidence on the UK’s overseas framework, and the regimes within it, to ensure that they continue to work effectively and support the UK’s consumers, firms and markets. The Government issued a response to that call for evidence and set out next steps for this review in July 2021.



In doing so, the Government stated that they remain committed to maintaining a safe, open and globally integrated financial system, enabling international financial services business by reducing barriers and frictions, where safe and practicable. Our overseas framework, including regimes such as the overseas persons exclusion, has been a fundamental part of the success of the UK as a global financial centre.



In responding to the call for evidence, the Government said that there were four principal areas that they wanted to look at in more detail:



The overseas persons exclusion (OPE);

Investment services equivalence under Title VIII of the Markets in Financial Instruments Regulation (MiFIR);

Recognised overseas investment exchanges (ROIEs);

The Financial Promotion Order (FPO) in general, and specifically in relation to the distribution of certain overseas long-term insurance products in the UK.

The Government’s response to the call for evidence noted that there are still information gaps about how firms use the OPE, how they might do so in future, and what the implications are for UK financial markets, including their resilience and safety. We have been working closely with the Financial Conduct Authority, the Bank of England and the Prudential Regulation Authority to gather further information in preparation for an upcoming consultation on the UK’s regime for overseas firms and activities. This involves considering whether the access for overseas firms remains appropriate following the UK’s exit from the EU and given technological developments that are changing how firms can serve their clients.



The Government are committed to maintaining an overseas access regime that ensures firms based in the UK can connect with counterparties and customers globally, while continuing to ensure that those with significant UK business lines continue to maintain the appropriate operations, regulatory permissions and authorisations in the UK; and are able to be supervised effectively. We want to ensure the UK remains a world-class environment to do business and maintain the ability of UK and global firms to benefit from the UK’s deep wholesale markets, which has been key to the UK’s leading global role in financial services.



The Government have noted the feedback from respondents to the call for evidence that the current overseas framework is complicated, difficult to navigate and that the implications of any changes to the framework should be carefully considered. As such, the Government intend to assess how the current framework is being used and consider the implications of any reforms in careful detail before bringing forward proposals on potential changes to the UK’s regime for overseas firms and activities. The consultation will also consider changes to the UK’s overseas framework which will make it more coherent and easier to navigate, reinforcing the Government’s commitment to maintaining an open financial centre.



In considering how best to move forward, the Government want to be fully informed about the views of stakeholders. We would emphasise the importance of further evidence being provided on how these regimes are used, and how market participants navigate them, so we can ensure they continue to support the principles that guide our approach to cross-border financial services.

[HCWS490]

Co-operatives and Mutual Societies

John Glen Excerpts

Tuesday 14th December 2021 Westminster Hall

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

It is a pleasure to serve under you in the Chair, Dame Angela.

I thank my hon. Friend the Member for Wycombe (Mr Baker) for calling today’s debate. As we have heard, he is a strong believer in the transformative capabilities of the co-operative and mutuals sector. He opened the debate with a very reasonable challenge on the drivers and enablers of growth across the different parts of the sector. I will reflect carefully on what he said and examine further the proposals that underlay some of the contributions this morning, but I will also think about what we can do to work with regulators to address those drivers.

I also thank the other Members who have contributed this morning. It has been a fascinating debate, and we have heard about a number of enterprises, across a number of constituencies, that are making a real difference to communities up and down the country. The Government strongly support the co-operative and mutuals sector—not just financial mutuals, which offer mortgages, affordable credit and insurance, but the whole sector across the country. We see it as making a special contribution to society and the economy due to, as Members have said, the focus on the interests of their members in the long term, the democratic nature of those institutions, and their local focus and commitment.

The evidence for that is clear. For example, a recent report from the Association of Financial Mutuals highlighted that mutual insurers serve over 30 million people across the UK, and that contribution deserves recognition. I have recently engaged a number of times with the hon. Member for Harrow West (Gareth Thomas), who is unable to join us this morning, and I recognise that he has brought forward a set of proposals and written to the Chancellor. We will be reflecting on that very carefully. I have received correspondence from LV= subsequent to the vote, and I will continue to update the House on that.

I am a big believer in the power of co-operative institutions of all sizes, from the giant Co-operative Group to High Wycombe Rugby Club and the Chalke Valley Community Hub in my own constituency. It was interesting to hear from the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) about his prolific investments, from the Clipper pub to sail-powered fishing; I am pleased that this forum has perhaps offered him further investment opportunities from my hon. Friend the Member for Wycombe.

The variety of businesses embracing the co-operative model founded by the Rochdale Pioneers almost 200 years ago is something to be championed, and there is much that other sectors can learn from the guiding principles of co-operatives and mutuals. Those organisations can contribute to a new era of responsible capitalism in which financial services, firms and businesses do not just focus on their bottom line, but also on their societal impact. The hon. Member for Cardiff South and Penarth (Stephen Doughty) highlighted a number of examples in his constituency, such as the taxi drivers and the work going on to improve the quality and resilience of the supply of food in schools.

I agree that there is potential for the sector to generate even more prosperity, opportunity and liberty by helping people to take greater control of their lives and finances. Clearly, though, co-operatives and mutuals need strong foundations. In recent years, we have made some significant advances on that front. We have cut the red tape facing the sector through measures such as the Co-operative and Community Benefit Societies Act 2014. We made it easier for such organisations to attract capital, and that supportive approach continued during the pandemic. Co-operatives and other mutuals were not only given access to our financial assistance schemes, but we also took legislative action through the Corporate Insolvency and Governance Act 2020.

Beyond the pandemic, we have reaffirmed our commitment to the co-operative model and the values that underpin it through our £150 million community ownership fund, which supports co-operatives and community-owned businesses to level up the UK by enabling them to take over valuable and viable local assets at risk of closure. The first set of announcements on that were in the recent Budget, and that is across the whole of the United Kingdom. That will mean a minimum of £12.3 million in Scotland, £7.1 million in Wales, and £4.3 million in Northern Ireland. We have announced 21 projects receiving the first tranche of that funding, which I hope will be a significant intervention. Another issue I would like to focus on—to reference the points made by the hon. Member for Neath (Christina Rees) on the Marcora law and her wider engagement with the experience in Italy—was discussed in a previous debate. I am sorry that she was disappointed with the Under Secretary’s response and I look forward to her ten-minute rule Bill in the new year.

However, we need to recognise the difference between the UK and Italian economies, which I think will make the Marcora law less effective here. We cannot subsidise businesses that are predisposed to fail. I remain open to discuss any constructive proposals with her, but Italy has a much higher rate of long-term unemployment than the UK has currently, so it is not clear if providing an advance sum of unemployment benefit would generate savings on welfare spending in the UK, as it may do in Italy. I am sincere in my call to bring forward constructive proposals, appropriate for the UK economy, perhaps drawing on the experience we have seen in Italy.

[Christina Rees]

I thank the Minister for his offer to have further discussions. Can I bring more information about the success of the Marcora law in Italy to share with him at that discussion?

[John Glen]

Absolutely. I sincerely look forward to that and we will engage with the substance of the information.

In my role as Economic Secretary, I would like to focus on the role of mutuals as providers of financial services, because they can play a significant role there. I see these organisations as key to providing people with greater financial stability and therefore greater choice. Indeed, I believe this is levelling up in action.

Credit unions are at the core of this. A few weeks ago, I visited the Glasgow Credit Union that the hon. Member for Glasgow South West (Chris Stephens) mentioned, and a few years ago I visited 1st Class Credit Union in Glasgow. They are two of the largest and most successful credit unions of the 402 that exist across the United Kingdom. The Glasgow Credit Union even offers mortgages, consequential of the deep relationships and bonds it has with its members and its understanding of their financial position. That demonstrates the potential that well-organised, well-supported credit unions can provide in communities.

The hon. Member for Strangford (Jim Shannon) listed the 13 credit unions in his constituency and talked about the distinct tradition that exists in Northern Ireland with respect to credit unions, across multiple sectors. Credit union and co-operative legislation is devolved in Northern Ireland, but I continue to listen carefully to what the hon. Gentleman has to say on this matter.

Affordable finance is key to generating opportunity, wealth and liberty for people around the country.

[Chris Stephens]

The hon. Member for Strangford (Jim Shannon) and I both raised the point about the Prudential Regulation Authority, the work it does and the capital requirements it places on credit unions. Does the Minister have anything to say about that? Can he encourage the PRA to make some changes to help successful credit unions?

[John Glen]

I am extremely grateful for the prompt; one of my kind officials passed me a note on this matter and reminded me that there has been progress in this area. We saw some changes in the way that was delivered last year. In 2020, the PRA implemented a simplified capital regime for credit unions to remove barriers to growth. This created a graduated rate approach, removing the 2% capital buffer and the link between capital requirements, activities and memberships. These changes were broadly welcomed by the sector, but I have committed to continuing to work with the sector further. I hope I will be allowed to introduce legislation next year to address some outstanding concerns that exist within the sector as a whole. I am grateful for the prompt and to the hon. Member for Glasgow South West for raising that matter.

As I said, affordable finance is key to generating opportunity, wealth and liberty for people around the country. We provided £3.8 million to fund the pilot for the no-interest loans scheme, which I have championed over a number of years. The scheme is run by Fair4All Finance, which encourages credit unions and other non-profit lenders to offer these loans. I believe that when this gets through the “proof of concept” phase imminently, it stands to be able to expand significantly. A number of individuals have approached me wanting to support this work, and I look forward to campaigning to broaden that pool on a sound foundation of how it would operate.

We have introduced other changes to help credit unions to generate greater opportunity and wealth for communities. For instance, we introduced and ran a pilot prize-linked savings scheme for credit unions until March this year, which was a real success. Independent research found that it helped to increase positive awareness of credit unions, enabled individual savers to build financial resilience and demonstrated that prize-linked savings be an effective tool in encouraging people to build a nest egg. We have 13 credit unions around the country and the Association of British Credit Unions Ltd currently involved in continuing the scheme, and I hope more will join them in future.

We have also released £96 million of dormant asset funds to Fair4All Finance, to support access to affordable credit products, including those from credit unions. Last Monday, on Second Reading of the Dormant Assets Bill, we introduced the extension of the pool of moneys that will be available from an extended range of financial instruments—£880 million over the next 10 years—which will be for Fair4All Finance to allocate. We will bring forward legislation when parliamentary time allows. That phrase is used a lot, but I am working hard to generate that opportunity in the next Session. It would allow credit unions to offer a wide range of products and services.

I want to spend a moment on building societies, because they are key to unlocking opportunity and driving positive change across the country. For example, in mortgages, Yorkshire and Skipton building societies are among the first institutions to bring back a 95% loan, when there was a problem in the spring, and 95% loan to value mortgages after the lockdown. That obviously brings first-time buyers on to the housing ladder. In addition, the sector is pioneering new products that will decarbonise the UK housing stock. For instance, Nationwide offers a green additional borrowing mortgage, and the Leeds building society has launched two new mortgages for the most energy-efficient homes.

To help building societies continue to flourish, we want to ensure they benefit from an appropriate legislative framework. That is why last week we published a consultation proposing several changes to the Building Societies Act 1986, working with their representatives, to try to provide them with greater flexibility in their funding model, and maintain their key mutual status, which is so important. The consultation also includes proposals to update their corporate framework in line with companies.

[Sir Mark Hendrick]

The Minister has waxed lyrical on the good work that the Government are doing on credit unions and is now touching on building societies. Is he considering changing some of the regulations on demutualisation? As I mentioned earlier to the hon. Member for Wycombe, if we cast our minds back, we will remember that the demutualisations of the past gave a number of those building societies, which were more dependent on mortgage lending, a lot of leverage that made them very vulnerable during the financial crisis. Will the Minister comment on that, and on how he will be proactive in developing the co-operative sector, as well as building societies, through his work on mutuals?

[John Glen]

I mentioned the response we are considering when I talked about the hon. Member for Harrow West and LV=. The reason I am waxing lyrical is that we have genuinely put in place specific interventions across a number of dimensions of the broader sector to ensure that building societies can continue to operate more effectively, offering services that their customers want, and retain their current status. I mentioned the community ownership fund as a source of support for individuals and community groups, encouraging them to form new business models that might be more effective in dealing with their long-term community interest.

I am conscious of the time, but I hope I have illustrated that the Government are committed to supporting mutuals and co-operatives and the unique qualities they provide. Just as those organisations provided opportunity, wealth and liberty to those Rochdale pioneers, we see them as key to strengthening communities, expanding possibilities and increasing prosperity for people today. I look forward to continuing the conversation on specific interventions. As I said to my hon. Friend the Member for Wycombe as I entered the Chamber this morning, it is important that we strike the right balance between hearty aspirations for a healthy sector receiving appropriate consideration of reasonable changes to the rules and regulations underpinning them, and a doe-eyed romanticism about things that are not financially secure in the medium and long term. My job is to interrogate those opportunities and take legislative action where I can, but also to be clear that we have to take a clear, economically valid and reasonable approach to this issue if we are going to have a secure and thriving sector, which I sincerely hope we will.

Greenwashing in Finance

John Glen Excerpts

Tuesday 14th December 2021 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) on leading this debate, even if he acquired it from my hon. Friend the Member for Kensington (Felicity Buchan). I wish him well in his new role on the Treasury Committee, subject to the approval of the House later this evening. I thank him for the constructive contributions that he has made during my tenure, including on this subject.

Let me start with a simple statement of fact: the Government have high ambition to transform the UK financial sector and align it with net zero. We are taking bold action to deliver on that. As my hon. Friend mentioned, we launched two record-breaking green gilts this year in September and October, and announced new sustainability disclosure requirements for businesses across the economy to report their impact on the planet. We are starting to see real results. London was ranked the leading hub globally for green finance this year in a leading index run by Z/Yen, overtaking Amsterdam. I do not want to be complacent, but I think we have made significant progress already, specifically on green finance.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

I thank my hon. Friend the Minister, for giving way and I congratulate my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) on securing this debate. On the issue of those reporting requirements, as has been said companies clearly have indirect as well as direct impacts through their supply chains. Is it only direct impacts that will have to be reported, or will the indirect impacts of company supply chains also have to be acknowledged?

[John Glen]

I thank my hon. Friend for his intervention. I shall come in a few moments to address the details of the reporting requirements, the mechanisms for enforcing them and their extent. If I have not adequately scrutinised his point and given him the right response, I will right to him—but I hope I will cover it fully in a moment.

Z/Yen said that London was

“propelled up the table by the government implementing measures to stimulate Britain’s green finance sector”

and that it

“has the best sustainability standards in the world”.

As my hon. Friend the Member for Thirsk and Malton mentioned, at COP26 the Chancellor announced that the UK would go further and become the world’s first net zero-aligned financial centre. That is easier said than done. In fact, delivering this will require the Government and private sector to work hand in glove—I welcome the UK private sector’s leadership on this. At COP26, we heard that organisations with $130 trillion of assets globally have now made a net zero commitment. These are big numbers with big implications; it is critical that the claims that firms make about their green performance are credible and backed up with real action.

I will now turn to the title and substance of today’s debate. It is absolutely clear that we need a robust approach to greenwashing. We have heard that phrase a lot over recent years, but I would define greenwashing as when businesses, or investment funds, make misleading or unsubstantiated claims about the environmental performance of their products or activities. That can lead to the wrong products being bought—undermining trust in the market—and to misallocation of capital intended for sustainable investments. In other words, it has the potential to be a significant problem at a time when we are trying to make a sincere and credible transition that is verifiable.

The Treasury Committee report on decarbonisation and green finance, published in June, was also clear that

“‘greenwashing’ is detrimental to good consumer outcomes and to the achievement of... net zero”.

As interest in environmental, social and governance investing increases—which it is, rapidly—it is only right that there should be more attention given to, and more scrutiny of, the claims that firms make. It is for all those reasons that the Government have sought to be on the front foot on tackling greenwashing.

I will take the Chamber through the three areas of action: disclosures, mainstreaming climate into financial regulation, and transition plans. On disclosures, as I mentioned previously, it is the Government's intention to propose legislation, I hope in the next Session, to implement economy-wide sustainability disclosure requirements. This will see financial services firms, real economy corporates and investment funds reporting information on the risks they face from climate and environment, and those that they create. A key element of SDR will be reporting against the UK green taxonomy, which my hon. Friend the Member for Thirsk and Malton has mentioned. The taxonomy will set a robust standard for when economic activities can be considered environmentally sustainable. It is specifically designed to tackle greenwashing by creating a common understanding of which activities, and which investments, can actually be considered green. There is one other aspect on disclosures. Asset managers, asset owners and investment products will all be required to substantiate any sustainability claims they make in a way that is accessible to clients and consumers. All of this will create much-needed transparency in the market and ensure that firms cannot claim things without backing them up.

Our second area of action as a Government has been mainstreaming climate change in the UK’s financial regulation. In March, the Chancellor set out new remit letters to the Financial Conduct Authority and Prudential Regulation Committee, which included climate change for the first time. In November, the FCA published its new environmental, social and governance strategy, and the themes of trust and transparency are core to the FCA’s plans in this area. I am also aware that market participants are increasingly reliant on third-party ESG data and rating services to make decisions, which is why the Government are considering bringing these firms into the scope of FCA regulation and will report back next year.

I also want to address transition plans. Industry leadership on climate change, particularly through net zero commitments, has been impressive, but commitments need to become concrete action. That is why the Chancellor announced at COP26 that the UK would move towards making the publication of transition plans mandatory in the next 12 months. A transition plan should set out an organisation’s high-level carbon targets, its interim milestones and, most importantly, the actionable steps it plans to take. That will improve transparency around how those headline commitments translate into action.

My hon. Friend the Member for Thirsk and Malton asked me a number of questions about which businesses will have to report, when those requirements will come into force and how reporting will help us reach net zero, and I will take those in turn. We will ensure that any burden on business is proportionate and provides useful information for investors’ decision making. Exact details of organisations and products in scope will be determined by the relevant regulators and Government Departments following consultation. Anticipated timings are set out in the roadmap that we published in October.

The UK’s approach ensures that the SDR will come into force in a sequenced, co-ordinated manner, so that reported data flows from corporates to the financial sector, investors and financial market participants make sense, are logical and are scrutinisable. The “Greening Finance” road map, published by the Government in October, sets out the indicative path to introducing integrated sustainability disclosure requirements across the whole economy. The implementation of legislative and regulatory measures will be subject to the parliamentary timetable that I referenced earlier.

In terms of the impact of reporting on the UK getting to net zero, high-quality corporate sustainability reporting is clearly foundational to investors having the information that they need to make well-informed investment decisions. Any action to align capital investment with the transition to net zero is contingent on financial markets having access to the right and relevant information, and identifying which companies are successfully managing their climate-related risks and opportunities. Fixing that information gap is the first phase of the UK’s approach, and getting market participants to act on the information is the second phase, which will ensure that financial flows across the economy shift to align with that net zero commitment. There has been a concerted attempt across Government to ensure that we are very clear about what that journey needs to look like, and more will flow from the legislation next year. I hope that addresses my hon. Friend’s points.

The Government are taking determined action to tackle greenwashing and maintain trust in the growing market for sustainable finance. I thank my hon. Friends the Members for Thirsk and Malton, and for Central Suffolk and North Ipswich (Dr Poulter) for their well-informed contributions and challenges. I hope that this has been a helpful exchange for my hon. Friend the Member for Thirsk and Malton. I will consider his points carefully, as I always do, and take forward any elements to which I have not responded.

Question put and agreed to.

Financial Services: UK Economy

John Glen Excerpts

Thursday 9th December 2021 Commons Chamber

[Dame Angela Eagle (Wallasey) (Lab)]

It is a pleasure to follow the hon. Member for South Cambridgeshire (Anthony Browne), who has opened this Backbench Business debate and is a fellow member of the Treasury Committee. He has given us a grand tour of a large and diverse sector of the economy that is, as he pointed out, very important. He also pointed out that it is affected by a range of issues at the moment.

The hon. Gentleman gave us some of his ideas on what should be happening post Brexit with some of the more complex of the EU directives that have been onshored—in particular, MiFID—which have been against the grain of how the UK financial services and insurance industries have always tended to work. He hinted at the philosophical difference between EU regulation in these areas and how the UK more traditionally did it; it is the difference between having principles-based regulation, which is not so specific, and the EU way of doing regulation, which tends to be so specific and puts a lot of those specifics in legislation. When I was in the Treasury and in the Department for Work and Pensions as Pensions Minister, it was a battle that we constantly had with the EU in the Council of Ministers and with the Commission.

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

indicated assent.

[Dame Angela Eagle]

I can see the Minister is nodding, possibly because he recognises some of those tensions, which always existed when we were in the EU.

When we were in the EU, because of the size of the influence of the UK financial services industry as part of that bloc, we had a very good and effective way of pulling at least a lot of the regulation that went on more towards our way of doing things. One of the worries I have post Brexit, which I suppose is a philosophical and practical worry, is that the EU will now go off and do a lot more of the things that we were able to persuade it not to do when we were a member. The divergence between how EU regulation works and how we may wish our future regulation of financial services to work is likely to grow larger.

It has not been a very friendly divorce to date, and there may well be implications to that, too, in terms of competition for business. We have seen some of that in the wholesale markets for euros and we will doubtless see more of it. The outcome of our way of leaving the EU will challenge some of the agreements that we came to and the influence we were able to have when we were inside the Council chambers, the European Parliament and the European Commission, rather than the situation we find ourselves in now. As the hon. Member for South Cambridgeshire said, that can be an advantage, but it can also be a disadvantage. It is an opportunity, but there are also threats and issues that we have to deal with. We have a sharp disjunction with the recent past, after 40 years of that kind of influence, that we will have to deal with in the coming period. We have the inadequacies of the non-existent deal on financial services, which was part of the EU-UK so-called trade agreement, and those are already having an effect.

The hon. Gentleman was right to say that we are in a period of rapid regulatory change, which would have been the case regardless of whether we left the European Union. The fact that we have, and the fact that we have onshored all this regulatory machinery, means that we now have to start looking at how we wish to change all of it.

Even thinking about the sheer weight of work and oversight that will have to be done by the Treasury Committee is quite overwhelming, as the hon. Gentleman acknowledged in the exchange we had during his speech. The Minister must go weak at the knees when he thinks of the detailed work that he will have to put in to deal with the onshoring in the aftermath of Brexit, and whether we want to move quickly or slowly to adapt the laws and regulations that we have imported.

Members of the Treasury Committee have also gone weak at the knees thinking about how they might have some oversight, because of the highly technical nature of much of that regulation. We certainly need to be significantly more tooled up than we have been if we are to have proper oversight of what the regulators are tasked with doing, what philosophical direction the Government wish to go in, and what the practical aspects of that method will mean for our financial services industry and, of course—they have not been mentioned much—for consumers in the UK and for financial stability.

We should not lose sight of those two basic reasons why we have to get regulation right. Consumer protection is a huge issue in financial services, as the hon. Gentleman touched on when he said that financial services are not always the most popular sector of our economy. Perhaps some of those who supply and form part of the industry ought to stop and think about why that is they case and do some self-reflection about it.

Clearly, financial stability is also crucial in an era when markets are becoming more rapid and more global. In the context of highly rapid technical change, financial stability becomes even more important, because innovation outruns the capacity of many regulators to keep up with what on earth is going on in some markets. Those two important issues have to underpin all regulation; the future of the entire financial services industry rests on them.

Regulatory change in a rapidly evolving situation with a lot of flux is inevitably difficult for those who participate in the market and for those who wish to regulate it. It is also difficult for those such as the Minister who want to see how it can be properly harnessed and allowed to be beneficial to our economy while being safe. It is a period of big uncertainty and flex. New technology has the capacity to change things and lead to innovation, some of which might be fantastic and some of which might be awful. That structural issue has hit us greatly through the innovations of digital currencies.

The systems that control financial services have to deal with the practical and philosophical issues that arise, such as whether digital coins are ever stable, what central banks ought to be doing to deal with that, and whether the wild west of Bitcoin and the rest should be left as a gambling thing on the side. Those markets can be volatile—the wild west—but the capacity of software such as open registers and blockchain, and their potential for transparency and in-time and open trading of all sorts of things, could be harnessed for good purposes as well as for the more nefarious ones that feature on the darker edges of the net. On top of that, the demands of climate change will cause a systemic change in the way that things are valued, priced and assessed for value.

That structural change will completely change the context in which the financial services industry has to exist. In the UK, which is one of the most open economies in the world and always has been, we know how important the financial services sector is, and not only to London as a global centre. In 2020, it was worth £164 billion to the UK economy, which is the third-largest sector by size in the OECD. That is 8.6% of economic output, half of which is generated in London but half of which is generated across our regions. Of the 1.1 million jobs, 91,000 are in my region of the north-west. As the hon. Member for South Cambridgeshire pointed out, it is one of the few sectors where we have a healthy trade surplus—£46 billion in 2020. It is the fifth-largest economic sector in our economy, and all the more important for that.

As the hon. Gentleman also pointed out, the sector is important for taxation, with £28.8 billion in tax taken from it. According to PwC, it makes up £75.6 billion, or 10% of the total receipts. In the face of such change—technological, structural or the disjunction of Brexit—any Government would want to see how they could remake the environment in which the financial sector can operate and flourish to benefit and protect the sector so that it can benefit and protect our economy. We certainly all have a stake in ensuring that that is the case.

In that area of flux, we have to remember that the regulators, although they could be powerful, are struggling with an increasingly complex and fast-moving environment that they are not always geared up to deal with in detail or to keep on top of. We have seen the travails of the Financial Conduct Authority and how it manages the perimeter, and philosophically the view of caveat emptor—that the buyer should beware in all circumstances. When things go wrong, the reputation of the entire financial services sector is at stake, so it is a difficult balance.

The Financial Conduct Authority gave evidence to the Treasury Committee yesterday, some of which reflected how difficult it is to try to remake a regulator after scandals such as London Capital & Finance, at the same time as operating within all the extra complexity and uncertainty. It has a formidable task. I suspect that being chair of the FCA is one of those jobs where people are told that, if they do a stint, they will get the diplomatic equivalent of the Washington embassy as a reward. The current Governor of the Bank of England is one example of that.

The FCA needs to be strengthened. We as policy makers, and the Minister in particular, have to think about how it can practically do the job. The job cannot be so big and complex that it is undoable. Sometimes, the way that the FCA has to cope means it is difficult for it to achieve a balance and be given a job that it can sensibly do. We know there is a big turnover of staff at the FCA at the moment, and that there is workplace stress and unrest. We know that the head of the FCA is trying to transform that organisation into what he calls a lean organisation that can respond very quickly to what is going on in the market and in the areas it has to regulate. I am not convinced that it has that balance right yet, and I am not even convinced that that job can sensibly be done without more support.

I want to deal with a couple of areas that the hon. Member for South Cambridgeshire did not touch on. These are what I would call threats to the reputation of the financial services industry in this country. First, I want to talk about economic crime, which I think poses a threat to the entire sector and its integrity if it is allowed to get out of hand. We know that there are rising levels of economic crime, fraud and scams that have been turbocharged during the lockdown. The sector itself has survived covid and the lockdown pretty well so far, because it could manage remotely—it does a lot of its work remotely in the first place—but one of the things we have all seen, unfortunately, is the rise in fraud and scams. We have also seen, and perhaps it is inevitable when it is one of the biggest global centres of financial services, that London has attracted the attention of international criminals and fraudsters who wish to launder their money through cities like London. We know that, as a major financial centre, it is a target for all of these kinds of people.

The Intelligence and Security Committee, in its Russia report, which was suppressed for far too long and was finally published after the 2019 general election, said that London is considered the “laundromat” for corrupt money. We have seen that kind of magnet effect, which is extremely disturbing, and I do not think that we have yet really got a handle on it. There are regulatory failings, there are legislative failings with the structures we have to try to deal with this, and there are certainly enforcement failings of the laws that we do have.

--- Later in debate ---

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

It is a great pleasure to respond to the debate on behalf of the Government. It has been an extremely well-informed debate, and I have enjoyed listening to all the contributions. I particularly thank my hon. Friend the Member for South Cambridgeshire (Anthony Browne), the hon. Member for Wallasey (Dame Angela Eagle) and the hon. and learned Member for Edinburgh South West (Joanna Cherry) for sponsoring the debate. They were absolutely right to point out that the financial services industry is critically important to the United Kingdom’s economy, and to champion the UK as an environment that ensures that the sector is able to retain its competitiveness on the world stage.

I discerned five themes as I listened to the debate: the response to the pandemic, the issue of levelling up, green finance, the context for our international relationships, and regulation, about which there have been a range of comments across the wholesale and retail sector.

I have been the Economic Secretary for nearly four years, and in that time I have come to recognise the vast economic contribution that the financial services industry makes to this country—we have heard a great deal about that today—but I have also observed the many hidden contributions that it has made, which have been particularly clear during the pandemic. On the frontline, bank staff have kept branches open and supported vulnerable customers at times that have been very worrying for them financially. In the back offices, people have rolled up their shirt sleeves and worked all hours with us and the regulators to deliver tens of billions of pounds of emergency loans. I have already thanked the industry publicly for what it has been doing, and I am delighted to do so again today at the Dispatch Box.

My hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) mentioned the £100 million of loans and other support in his constituency, and that has been replicated across the country. The bounce back loans, the coronavirus business interruption loan scheme and the forbearance measures were critical at what was a critical time for our country.

I recognise and acknowledge the sentiments about the financial services industry not always getting a good press. This is not just about banks, although they are critically important for the underpinning of lending to our economy. However, I think we should also recognise, as the Scottish National party speakers did, that the industry is not just about the square mile but about the whole United Kingdom. I visited the constituency of the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) a few weeks ago to see the bank hub that is active there and informing the industry’s response to the challenge of access to cash.

In places such as Birmingham, Bristol, Glasgow, Cambridge, Edinburgh and Merseyside, this industry is critical. There is not an equitable distribution across every region, but there are hubs of real significance. Two thirds of people employed in the industry work outside London: 37,000 in Northern Ireland, 69,000 in Wales, and 153,000 in Scotland. I am proud that the Government have used that imperative to headquarter our new national infrastructure bank in Leeds and to establish our new economic campus in Darlington.

The sector has also made significant progress on diversity and inclusion, so that the very best people for the job have an equal opportunity to succeed, no matter what their race, gender or background might be. There is a lot more work to be done in that area, and I commend the incoming Lord Mayor of London for his championing of that agenda during his tenure.

I want to address some of the points raised by Members during the debate. I thank my hon. Friend the Member for Wimbledon (Stephen Hammond) for his kind words, his focus on the importance of the regional agenda, and his challenge to ensure that we have opportunities across the regions. The opportunity to secure high-paid, high-value jobs beyond Wimbledon and across the United Kingdom is a real imperative. I draw his attention to the Kalifa review into FinTech that was published at the beginning of March, and to the money secured and announced in the Budget for the centre for financial innovation and technology, which will be a key driver of that.

My hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) mentioned levelling up and also raised some specific concerns about debt advice. I draw his attention to the work we have done with the breathing space scheme, which went live in May. I recognise the uncertainty around the maps and the reprofiling of face-to-face and online debt advice. I am taking a close interest in that. We are also trying to innovate when it comes to no-interest loan schemes, which are at the proof of concept phase and could make a massive contribution to assisting many vulnerable people.

My hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) put a stark statistic before us when he said that more than 36% of his constituents worked in financial services and the broader legal and professional services sector. It is a critical sector for our economy. The financial services sector also has a crucial role to play in our response to climate change. The ambition is clear: we want the UK to be the best place in the world for green and sustainable investment. As a Government we have taken bold action in this area to transform the UK financial sector. That has involved introducing new economy-wide sustainability disclosure requirements for businesses, and the kick-starting of a green financing programme with two record-breaking sovereign green bonds: one for around £10 billion on 21 September and a further £6 billion on 21 October, achieving a “greenium”—a premium on what we would have gained from a non-green bond—of around 2.5 base points. We will not be complacent about this. We also need global action on green finance, and the Chancellor recently hosted the COP26 finance day, which saw financial firms with assets of over £130 trillion committing to net zero.

My hon. Friend the Member for Bromley and Chislehurst also drew attention to the role of the City of London Corporation in green finance, and I absolutely endorse his recognition of its contribution and in particular that of Catherine McGuinness, who has been the policy lead through most of my tenure. She has done an excellent job, and her tenure comes to an end next spring. As I have said, the Lord Mayor is also committed to taking on his predecessor’s leadership in that area.

Looking ahead, it is important that we do not rest on our laurels, as the motion recognises. There are obviously strong competitive pressures in the industry, and it is my mission to help to deliver the Chancellor’s vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the UK. In his speech on 1 July, the Chancellor said that we should be proud that people around the world looked to this country for leadership, and we should be. We have an opportunity and a responsibility to lead the world on international standards, FinTech, green finance and much more.

When I took on this role in January 2018, the nature of the international relationship that the UK would have in financial services was uncertain. We have now left the EU institutional framework and, where it makes sense to do so, we are taking advantage of our new freedoms to refresh the UK’s position as the world’s pre-eminent financial centre. We are not deregulating, but we are looking at those international relationships. We have set out a clear, ambitious programme of work to broaden and deepen those relationships. We have signed trade agreements with Japan, Singapore, the European economic area and the European Free Trade Association, and reached agreements in principle on free trade agreements with Australia and New Zealand.

I recognise that in many of these free trade agreements, financial services will not be as prominent because the regulator-to-regulator dialogues that exist on an ongoing basis are so instrumental in unblocking opportunities on both sides in financial services. The Swiss mutual recognition agreement, which we are negotiating at the moment, will be the most ambitious financial services agreement globally in both breadth and depth.

I recognise the uncertainty of the EU relationship. We have co-operated fully, and it will be for the EU to determine what sort of dynamic it wishes to have. I was pleased to visit my counterparts in Madrid last week, and I met several bank leaders over there. The warmth that exists towards the UK in financial services is clear, and I have recently had conversations with other bilateral partners.

We need a regulatory framework that is more agile, that avoids politicisation and that gives decision making to the independent and expert regulators. I take the point raised by my hon. Friend the Member for Wimbledon on the need to ensure proper scrutiny of that autonomy. I recognise and appreciate the support for the secondary growth and competitiveness objective that we set out in the consultation, and it is now critical that we clarify in legislation how the responsibility of scrutinising those independent regulators will work. It will be for Parliament to determine how to examine the way in which those regulators meet the objectives we will set out in primary regulation.

Members mentioned a number of initiatives concerning the wholesale markets review. I see broad consensus on the vast majority of issues identified in the consultation document. We are talking about incremental changes informed by deep dialogue with industry.

On the prospectus regime review, I am delighted to say there was extensive support for the proposals in our recent consultation, and I look forward to pushing ahead with our reforms. We are taking forward the recommendations of the Kalifa review on FinTech. We must remain at the cutting edge of technology and innovation in financial services. I recognise that its application both to the regulators and to the financial market’s infrastructure will be significant.

We have responded to the call for evidence on insurance and Solvency II, and we are now working closely with the PRA to identify an optimal reform package across both the risk margin and the matching adjustment. This is complex work, but we are taking it forward with enthusiasm.

It seems to me that the House is largely in agreement on two things. The contribution of the financial services sector to the country is critical, but we cannot take it for granted, and I will never do so in my role. I am proud to be delivering on the Government’s vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the United Kingdom.

I welcome the many varied and well-informed contributions this afternoon. I agree with the motion, and I encourage others to do the same. It would be remiss of me not to welcome the hon. Member for Hampstead and Kilburn (Tulip Siddiq) to her place as my shadow, and I look forward to discussing these matters with her in future.

Draft Solvency 2 (Group Supervision) (Amendment) Regulations 2021

John Glen Excerpts

Tuesday 7th December 2021 General Committees

[The Chair]

Before we begin, I remind Members that they are expected to wear face coverings and to maintain distancing as far as possible, in line with current Government guidelines and those of the House of Commons Commission. Please also give one another and members of staff space when seated and when entering and leaving the room. Members should send their speaking notes by email to [e-mail]. Similarly, any officials in the Gallery should communicate electronically with the Minister.

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

I beg to move,

That the Committee has considered the draft Solvency 2 (Group Supervision) (Amendment) Regulations 2021.

It is a pleasure to serve under your chairship, Ms Rees. This instrument is being made to address deficiencies in retained EU law relating to the supervision of UK insurance groups under the insurance prudential regime known as solvency 2. The UK Government have made equivalence decisions that assess that the insurance group supervision regime in another country—a third country—is equivalent to the UK. To date, Bermuda, Switzerland and the European economic area countries have been determined to be equivalent to the UK for the purpose of insurance group supervision. The instrument will ensure that the UK Government’s equivalence decisions achieve in full the objective of avoiding unnecessary duplication of supervisory work.

The instrument affects UK insurance groups whose parent companies are domiciled in equivalent third countries. Such insurance groups are supervised at two levels: first, the UK insurance group level is supervised by the Prudential Regulation Authority and secondly, the ultimate parent group level, the so-called worldwide group, is supervised by the supervisory authority in the relevant third countries.

The instrument enables the PRA, when certain conditions are met, to defer to third-country supervisory authorities if the UK has determined that the third countries are equivalent for the purpose of insurance group supervision. The conditions apply where compliance by firms would be overly burdensome and where waiving the requirements would not adversely impact the PRA’s advancements of its objectives.

In that circumstance, the PRA may disapply or modify regulatory requirements, which amounts to issuing waivers to UK insurance groups. In effect, the waivers exempt those UK insurance groups from demonstrating to the PRA compliance with solvency 2 group supervision requirements at the UK sub-group level. That is in recognition of the fact that compliance at the UK sub-group level has already been supervised by virtue of being a subset of the ultimate group that is supervised by the equivalent third countries.

Pre-EU exit, the European Insurance and Occupational Pensions Authority issued guidelines to allow EEA supervisors to issue such waivers. Under such guidelines, the PRA could issue waivers to affected UK insurance groups pre-EU exit. However, those guidelines ceased to have effect in the UK following EU exit. Consequently, existing waivers are due to expire on 31 March 2022. The instrument confers on the PRA the power to issue new waivers.

The instrument brings advantages to UK insurance groups with a parent in an equivalent third country, to the PRA and to the third-country supervisory authorities. The advantages are reduced regulatory compliance cost for the insurance groups; reduced supervisory cost for the PRA; and reduced need for co-ordination between third-country supervisory authorities and the PRA where they are reviewing duplicative materials.

On 2 December 2021, in its 22nd report, the Secondary Legislation Scrutiny Committee listed the instrument as an “instrument of interest”. In the report, the Committee noted the

“absence of a level playing field: while the UK has granted equivalence to the EU in relation to the supervision of insurance groups, the EU has not reciprocated.”

Although that is true, I urge the Committee not to conflate those two separate matters. Equivalence determinations are made by the UK and EU unilaterally. One decision is within the power of the UK Government and another is beyond the power of the UK Government. Where the UK Government have unilaterally determined equivalence, we have a duty to ensure that our decisions are meaningful and achieve their objectives in full. The instrument ensures that we do not undermine our own equivalence decisions with deficiencies in our domestic law.

Rejecting this instrument does not increase the probability of the EU reciprocating equivalence decision. Conversely, it would penalise UK insurance groups and our regulator by increasing regulatory compliance and supervisory cost.

To conclude, the Treasury has worked closely with the PRA in the drafting of the instrument. The Treasury has also engaged with the UK insurance industry through its industry body, the Association of British Insurers. The ABI has informed the Treasury that the industry welcomes the instrument and has no concerns with it. I hope the Committee has found my explanation useful and I commend the instrument to it.

--- Later in debate ---

[John Glen]

I very much appreciate the comments of the Opposition Front-Bench spokesperson and I welcome her to her place this afternoon. I will try to address three or four points that she made about this regulation, and I will come on to the wider issue of equivalence and the broader Solvency 2 reform.

This statutory instrument just re-establishes the PRA’s power to exempt UK insurance groups from duplication. It affects 11 groups. If it were not done, that would mean an annual recurring cost of half a million pounds. The hon. Lady asked about the objectives and who would define them. The PRA has a statutory objective to take account of policyholder protections. That is part of its remit and something that it has an enduring and ongoing responsibility for.

The ongoing evaluation of prospective alternative countries is a matter for the PRA. The context here needs to be understood. We were completely aligned up till the end of the transition period. As a Government, we were very transparent about how we were approaching equivalence. Indeed, we made a number of determinations —I think 17 or 18 out of the 32—in November of last year. We complied fully with the EU and filled in 2,500 pages on equivalence. We also advanced a conversation around a regulatory dialogue and were ready for the memorandum of understanding to be signed. It is now a matter for the EU how it determines the way forward.

Both Opposition spokespeople spoke about the broader Solvency 2 reform. That is being looked at by the PRA and the Treasury, which are looking at the risk margin and the matching adjustment. We are looking at that closely with industry to determine the best way forward. That is completely distinct from this statutory instrument, but there is encouraging progress there.

This is not, though, a deregulatory move on the part of the UK. I think the whole Committee will understand that financial services is a dynamic industry where changes of regulation occur all the time, both on the EU side and here. This SI does not mean lower prudential standards. The PRA cannot issue waivers if by doing so it so adversely impacts the advancement of its objectives, which, as I said, are statutory ones of policyholder protection. The SI simply prevents a cliff edge that would otherwise happen on 1 April 2022. The hon. Member for Glenrothes asked whether the SI takes us back to the pre-Brexit position. The answer is no, it just restores the mechanism by which we can continue to grant equivalence.

I do not think there is too much else I can say to assist, but what we doing is pretty straightforward and uncontroversial. It will ensure that the UK’s equivalence decisions, which assess that the insurance group supervision regime in another country is equivalent to the UK—

[Peter Grant]

I am grateful to the Minister for giving way, and I thank him for the answers that he has provided to almost all of the questions I raised. I do not think he has yet covered the possible issue of UK insurance companies whose parent companies are headquartered outside the equivalent regulatory countries. Is that a significant issue? Is he aware of any UK companies that will still have to face duplicate regulation because their parent company is regulated somewhere else?

[John Glen]

Offhand, I cannot give the hon. Gentleman a list of countries, but I am happy to look into matter and write to him if I can say something edifying. I do not want to complicate this anymore than I already may have done by my responses.

The instrument simply reduces the regulatory compliance cost for those affected insurance groups and reduces that supervisory cost for the PRA and equivalent third country supervisory authorities. There is nothing that I am trying to do here that represents a significant policy deviation, and I hope that my response has been sufficiently helpful to the Committee to allow the SI to be passed.

Question put and agreed to.

Oral Answers to Questions

John Glen Excerpts

Tuesday 7th December 2021 Commons Chamber

[Mr Toby Perkins (Chesterfield) (Lab)]

6. What recent assessment he has made of the availability of (a) mortgages and (b) credit for self-employed people who utilised the Government’s covid-19 support schemes.

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

Previous receipt of covid-19 support should not, in and of itself be a barrier to credit provided that the applicant meets the lender eligibility criteria. It remains important that lenders carry out checks to ensure that they do not lend to individuals in an unaffordable way.

[Mr Perkins]

I take the Minister’s point and I agree with what he is saying, but that is not the reality of what people are finding in my constituency. Business owners as diverse as a music teacher, a house renovator and an airport taxi driver have been told that the reason they cannot get a mortgage or other credit arrangements is that they have availed themselves of the Government’s schemes. Their businesses are up and running, and it is concerning if no assessment has been performed. Will the Minister get in touch with people at the high street banks and prevail upon them to ensure that businesses with a sustainable track record that simply used those schemes are not penalised for that reason?

[John Glen]

The Government have worked with the Financial Conduct Authority and we will continue to work with it and with credit agencies to ensure that those payment holidays have no impact on borrowers’ credit ratings. However, the checks that banks and financial institutions undertake need to reflect changes to individuals’ income. We do not seek to involve ourselves in commercial decisions. The mortgage lending rates to the self-employed are in line with those overall for the self-employed, but of course I will continue to work with the banks and financial institutions, and the regulators, to keep the situation under review.

[Siobhan Baillie (Stroud) (Con)]

7. What fiscal assessment he has made of the potential merits of a national retrofit strategy for homes as part of the Government’s levelling-up agenda.

--- Later in debate ---

[Helen Hayes (Dulwich and West Norwood) (Lab)]

11. What recent assessment he has made of the effect of inflation on living standards.

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

The Government recognise that inflation is rising, and are closely monitoring the situation. The Bank of England is responsible for keeping inflation at its 2% target. As my colleagues mentioned earlier, we are working with international partners to tackle global supply chain disruption, and are taking targeted action worth more than £10 billion over the next five years to help people with the cost of living.

[Helen Hayes]

As food and energy bills are skyrocketing this winter, far too many of my constituents face the appalling choice between heating their homes and putting food on the table. Will the Minister therefore confirm how much more my constituents on average earnings will be paying in income tax and national insurance from next April, as a result of the Government’s decision to freeze the income tax personal allowance and to increase national insurance contributions?

[John Glen]

The Government very much recognise the challenge that people are facing, which is why we have introduced a range of interventions, including: the warm home discount; the household support fund, giving £500 million to local authorities to distribute; changes to the taper rate; and an increase in the national living wage. That range of interventions will help with the cost of living challenges, and will help many of the hon. Lady’s constituents.

[Mr Steve Baker (Wycombe) (Con)]

Is it not the case that the dreadful seeds sown by years of ultra-cheap credit and quantitative easing are now bearing their awful fruit through inflation, the ultimate stealth tax?

[John Glen]

I do not agree with my hon. Friend’s characterisation of the causal relationship, but I recognise that the Bank of England continues to be responsible for monetary policy. My hon. Friend has always held distinct views that represent a particular school of economists, and I will continue to listen carefully to what he has to say to the House.

[Mr Speaker]

We now come to the shadow Minister; welcome to the Front Bench, Tulip Siddiq.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

There is a cost of living crisis, temperatures are falling and Ministers are ignoring average households, who are struggling to pay enormous bills. Household energy bills have increased by more than £230 since last winter and are set to increase even more early next year, and we have recently seen higher tax receipts from energy bills. Will the Minister back Labour’s policy of using this money to cut VAT on people’s energy bills to zero over the next six months?

[John Glen]

I welcome the hon. Lady to the Front Bench. I draw her attention to the answer that I just gave concerning the number of interventions that the Government have made, including the warm home discount and additional support through local authorities. Households in the lowest income decile receive on average more than £4 in public spending for every £1 that they pay in tax. The Government are acutely sensitised to the challenges that we face this winter.

[Kelly Tolhurst (Rochester and Strood) (Con)]

12. What assessment he has made of the effect on businesses of the Joint Money Laundering Steering Group guidance on pooled client bank accounts.

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

The Joint Money Laundering Steering Group guidance helps firms to meet their obligations under the money laundering regulations. Banks should take measures to assess risks presented by pooled client accounts to ensure that the accounts are not abused for criminal purposes.

[Kelly Tolhurst]

Yacht brokers have been using pooled client accounts for years to protect large sums of their clients’ money, without issue. Changes to the guidance have meant that banks are now closing some of these accounts, putting some of these professional, long-established businesses at risk. Will my hon. Friend meet me, UK Finance, and the Association of Brokers and Yacht Agents, to find a solution quickly? This is an important sector of the economy for some of our coastal communities, such as my constituency.

[John Glen]

My hon. Friend knows a lot about this matter and the industry, and I take her concerns very seriously. Although the Government will never insist on individual lending decisions and behaviours of banks, we will engage closely. I will meet her, and the Association of Brokers and Yacht Agents, and I will write to UK Finance to ensure that the guidance that is posted is being used effectively in the circumstances that she has raised.

[James Murray (Ealing North) (Lab/Co-op)]

The Pandora papers show how overseas shell companies secretly buy up luxury property in the UK. In 2018, the Government published draft legislation for a new register of such entities to crack down on the use of UK property for money laundering. This is a matter of law and order. Ministers promised to deliver that register in 2021, yet for some reason, since the current Prime Minister took office, that commitment seems to have been abandoned. Will the Minister now, four years since the UK anti-corruption strategy was published, finally admit that the promise of delivering a register in 2021 has been broken, and will he give us a firm date by which the register will be in place?

[John Glen]

I draw the hon. Gentleman’s attention to the financial action taskforce report in December 2018 that gave the UK the best ever evaluation in terms of anti-money laundering. There are two or three areas where we have taken action.

[James Murray]

Where is the register?

[John Glen]

The hon. Member keeps asking “Where is the register?” I will answer the question in a moment. What the Government have done is put in an additional £63 million in the last Budget to deal with Companies House reform, which is one of the areas. We have been the world’s leader in terms of common reporting standards. We were the first country, five years ago, to raise the standard in terms of transparency. We will implement that register when legislative time becomes available.

[Christine Jardine (Edinburgh West) (LD)]

T1. If he will make a statement on his departmental responsibilities.

--- Later in debate ---

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

Can the Chancellor confirm that, contrary to industry suggestions, the Government remain committed to legislating for access to cash as soon as possible?

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

Absolutely, I can. We will legislate, regardless of what the industry brings forward.

--- Later in debate ---

[Stephen Morgan (Portsmouth South) (Lab)]

The Minister will be aware that Viktor Fedotov, the secret co-owner of Aquind, has been implicated in a £72 million fraud scheme linked to Putin’s Russia. Can the Minister say what due diligence has been done on the project company and its owners, and if he and ministerial colleagues will protect our national infrastructure from these alleged fraudsters by stopping the disastrous project once and for all?

[John Glen]

The Government remain absolutely committed to protecting this country from illicit finance. We have been a leader in the global community, making this place the safest place to do business, and we will continue in that vein.

[Jacob Young (Redcar) (Con)]

A key way to support economic growth is to help level up our forgotten high streets, such as Eston Square, where the old precinct building is blocking key investment and preventing new businesses from moving in. When the Chancellor is next up in Teesside, will he come with me to Eston, and meet leaders at Redcar and Cleveland Borough Council to see what can be done to level up Eston Square?

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

The Chancellor of the Exchequer will be aware of the considerable public unease about the proposed demutualisation of Liverpool Victoria. Will he therefore consider sympathetically the cross-party letter he has received from over 100 parliamentarians calling for a review of the law governing mutuals?

[John Glen]

As the hon. Gentleman knows, we have had considerable engagement on this subject. This is a matter for the Financial Conduct Authority, and we have discussed it. Obviously, members will now vote on the proposal. On the broader issue of how this sector is treated, I remain willing to engage with him on further changes and reforms that may help it in future.

[Martin Vickers (Cleethorpes) (Con)]

Ministers will know of the importance of the Humber ports to the regional and national economy. Access to Immingham and Grimsby ports is in part via the A180, which has an old concrete surface that is crumbling and in need of urgent repair. This afternoon I will meet Highways England to discuss that. May I tell it that the Chancellor will fund those improvements?

Dormant Assets Bill [Lords]

John Glen Excerpts

2nd reading
Monday 6th December 2021 Commons Chamber

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

I beg to move, That the Bill be now read a Second time.

Over the past decade, the dormant assets scheme has released more than £800 million to tackle systemic social challenges and to support the communities that need help most. This Bill is estimated to unlock £880 million of additional funding to ensure that the dormant assets scheme can continue to support innovative, long-term programmes addressing some of our most pressing social and environmental challenges. The scheme is led by industry and backed by the Government. Its aim is to reunite owners with their financial assets; where that is not possible, the money supports vital social and environmental initiatives across the UK.

Consumer protection is at the heart of the scheme. Dormant assets remain the property of their owners, who can reclaim any money owed to them in full at any time. However, only a small percentage do so, meaning that the rest of the money lies dormant. The scheme responds to the imperative to put the money to better use.

The Bill marks the completion of a five-year review in collaboration with industry leaders, including an independent commission and a public consultation. The scheme’s success is down in no small part to the commitment and drive of the banks and building societies that have led the charge on unlocking dormant assets for the public good. However, it is only right that the scheme continues to grow and evolve.

Currently, only assets from dormant bank or building society accounts are eligible to be transferred into the dormant assets scheme. The Bill will enable Reclaim Fund Ltd, the scheme’s administrator, to accept a broader range of asset classes in the sectors of insurance and pensions, investment and wealth management, and securities. Of course, there could be even more dormant assets to unlock in future. The Bill will therefore introduce a new power to provide the flexibility to expand the scheme through regulations.

I stress that the four core principles that underpin the scheme—voluntary participation, reunification first, full restitution and the additionality principle—will remain unchanged by the Bill. The Bill will require the Secretary of State to

“carry out periodic reviews of…the operation of the dormant assets scheme and…any use made of the powers”

to extend the scheme.

[Jim Shannon (Strangford) (DUP)]

There are many worthwhile projects that local communities would like to bring forward. How can they feel that they are part of this project and gain advantage from dormant bank accounts?

[John Glen]

I thank the hon. Gentleman for his intervention. There will be a consultation; I or the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), will come to it later.

The Bill makes provision to reflect Reclaim Fund Ltd’s establishment as a Treasury non-departmental public body and names it as the scheme’s only authorised reclaim fund. In addition, the Bill includes a new power for the Treasury to designate additional authorised reclaim funds in future. To guarantee consumer protection, the Bill’s money resolution will enable the Government to cover the liability, in the form of a loan, for reclaims should any authorised reclaim fund face insolvency.

The Bill will amend the approach to distributing dormant assets funding in England, aligning it with the model used in the devolved Administrations, who have powers to focus funding through secondary legislation, provided that it is within the parameters of social or environmental purpose. In England, the Dormant Bank and Building Society Accounts Act 2008 restricts the English portion of funding to youth financial inclusion and social investment. The Bill will enable the current restrictions to be removed from primary legislation and put into secondary legislation so that the scheme can respond to changing needs over time. The Bill will require the Secretary of State, before making an order, to publicly consult on the social and environmental focus of the English portion of funds. No changes to the existing restrictions can be made until and unless a new order is laid.

After 10 years of operation, it is right that we carefully consider how the scheme can deliver the greatest impact once it has been expanded.

[Julian Knight (Solihull) (Con)]

With the expansion in the amount of money and the number of areas subject to the scheme, there is a danger that we could end up swamping the economy in those areas. We therefore need to broaden out the scope of the good causes towards which the scheme can work.

[John Glen]

I thank my hon. Friend for that point—a legitimate point that will be raised in different ways across the country during the consultation, and one on which the Secretary of State will need to reflect in due course before an order is laid.

It is vital that we afford everyone a fair and open opportunity to have their say, so the Government plan to launch the first public consultation, which will last for at least 12 weeks after the Bill receives Royal Assent. Until we have launched the consultation and fully considered the responses, the Government are not prepared to make decisions or commitments on the ways in which future funds will be used in England. To do so would clearly undermine the validity and transparency of the consultation exercise.

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

Under the current legislation—the Charities Act 2011—urban regeneration is one of the areas that distributions are allowed to go into, but it is not clear whether they can go to, for example, a regional mutual bank. As my hon. Friend knows, the all-party parliamentary group on fair business banking is strongly in favour of that. Could the point be clarified in the Bill to facilitate a quicker move to fund those regional mutuals?

[John Glen]

In short, no; that will not feature on the face of the Bill. However, my hon. Friend is a doughty advocate for that cause, and I am sure he will make a hearty contribution to the consultation which will inform the Government’s response in respect of those future parameters.

Mindful of time and the need for contributions from so many Members on both sides of the House, I will end by reiterating that the Government are committed to supporting industry efforts to reunite more owners with lost money, and to provide a practical way for unclaimed and unwanted funds to be put to good use. The dormant assets scheme has achieved that, and we are determined to ensure that it continues to be a success. I hope that the Bill will command cross-party support this evening, and that we will be able to work together on expanding the scheme to unlock hundreds of millions of pounds more for good causes throughout the country in the years to come. I commend the Bill to the House.

Community Debt Advice Services

John Glen Excerpts

Wednesday 1st December 2021 Westminster Hall

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

Thank you for the opportunity to respond, Ms Bardell. It is a pleasure to serve under your chairmanship and to speak in the debate on behalf of the Government.

I have listened intently and carefully to all seven Back-Bench speeches, which have revealed considerable understanding of the complexity of the service delivery in constituencies across this country. There has also been significant commentary around the context in which our constituents find themselves at this incredibly difficult time. I will endeavour to answer the specific concerns raised about the recommissioning exercise by the Money and Pensions Service in a few moments. I congratulate the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) on the constructive tone and content of her speech, and on securing the debate.

I will begin with a deliberately unambiguous statement: the Government are committed to supporting the financial wellbeing of the most vulnerable in society, and to tackling problem debt. As reflected in the contributions to the debate, hon. Members will be well aware of the scale and breadth of the package that we put in place to protect jobs and livelihoods during the pandemic. It was one of the most comprehensive support packages in the world, but I recognise that it was never going to be comprehensive for every single need.

We recognise that individuals in problem debt require extra support to get their finances back on track, especially during this challenging and, to a degree, uncertain time. For that reason, we agreed to provide additional funding to the Money and Pensions Service for debt advice provision in England in 2020-21 and this financial year, on top of our wider coronavirus support package.

Several speeches referred to the difficulties in predicting demand and its distribution; indeed, MaPS acknowledged that, in terms of what it ended up needing for the 2020-21 financial year. That will always be a judgment call that it has to make very carefully, but the additional funding enabled the recruitment of more than 500 new debt advisers to provide additional debt advice capacity to meet the anticipated demand arising from the pandemic. Part of that additional funding was also allocated to providers to cover lost income from a key voluntary funding stream known as “fair share”.

I will say a little more about debt advice in a moment, but first I will highlight some of the things that the Government have done to help people in financial difficulty, because some speeches referred to that wider context. In May 2021, as I think the right hon. Member for Wolverhampton South East (Mr McFadden) acknowledged, we launched the breathing space scheme, with cross-party support, where lenders agree to hold off with their fees and payment requests for 60 days. We have championed that scheme for many years and I am proud to see it up and running.

We will use similar principles of providing respite from bills and demands in the introduction of a statutory debt repayment plan, which is currently under development. Under that new plan, which will essentially give another mechanism for people to use when they are struggling with debt, people will enter formal agreements with creditors to repay their debts over a more manageable timeframe. We are obviously working very carefully with the sector to get that absolutely right.

As well as helping individuals to tackle problem debt, we are ensuring that they have access to fair and affordable credit. In the Budget, we introduced plans to provide £3.8 million for a pilot no-interest loans scheme, which Fair4All Finance is working with partners to design and deliver. It is my ambition, and that of the Government, that those loans will support people who are unable to access or afford existing forms of credit, and prevent them from falling into problem debt. During the debate, the uptick in buy now, pay later was mentioned. As I think we discussed in this Chamber last Tuesday afternoon, that is a priority for us as well, and I was grateful for the contributions from Members who were present.

The Treasury is working closely with the regulators and other Government Departments to help and protect people in financial difficulty. The Financial Conduct Authority regulates debt advisers, and recently published its consultation on debt packager firms. We believe that the FCA’s proposals will put a stop to bad practices in the sector and help to prevent consumer harm. We are also engaging closely with the Insolvency Service, which this summer raised the monetary eligibility limits for debt relief orders. Those changes will enable more people in financial difficulties to access a DRO and get a fresh start.

Let me turn to the specifics of MaPS’ debt advice commissioning exercise, which has occupied the lion’s share of time this morning. That exercise is an important step towards creating a better and more resilient debt advice sector. At the core of the contributions was a concern around the redistribution of face-to-face and online and other modes of delivery, and the outcome of the commissioning process. MaPS’ current commissioning model dates back many years, and some of its current grant agreements even predate its predecessor body, the Money Advice Service.

I listened carefully to the contributions on the complexity of the needs of individual constituents, and I respect the experience of the hon. Members for Kingston upon Hull East (Karl Turner) and for Makerfield (Yvonne Fovargue), who have personal professional expertise in this area. It is important that we aim to achieve an outcome from the commissioning exercise that gives MaPS a better opportunity to manage performance and drive improvement, innovation and efficiency—improving the service that customers are offered and offering greater value for money, but not failing to recognise the complexity of the needs of those populations. That is in line with the Government’s wider approach on the funding that they give to charities, 80% of which is now on a contract basis.

The hon. Member for Kingston upon Hull West and Hessle spoke of a number of concerns raised by the debt adviser community, individually, in representations to constituents and collectively through this process. A transition, such as the one proposed by MaPS, will require some changes and for the sector to adapt to them. The question is about to the pace and scale of those changes, which is the discussion that MaPS needs to resolve in the coming weeks. I am unable to comment on the specifics of the commissioning exercise. I do not run that, nor do my officials. There is a degree of commercial sensitivity around it.

This morning’s debate has put some detail on the nature of the concerns. I commit to ensuring that those concerns are represented fully to the leadership of MaPS as it undertakes this evaluation and moderation of the bids received. Once that is completed, MaPS will have a greater understanding of what the changes will mean to debt advice provision in England, including the proportion that will be delivered face to face. I can say that the Government have given MaPS a statutory duty to consider the needs of the most vulnerable.

Colleagues have raised issues of the unmet, or even undiagnosed, needs that come out of conversations, as well as case complexity and the concerns raised by the right hon. Member for Wolverhampton South East about literacy and privacy. All funded services must be able to handle those complex cases, and MaPS needs to demonstrate that the commissioning exercise will achieve that, irrespective of the channel the cases come through.

[Yvonne Fovargue]

Although we are discussing the MaPS contract, we have also heard a lot about clients’ mental health problems. Has the Minister had any discussions with other agencies—for example, clinical commissioning groups in the area of health—about commissioning services, such as Financial Shield, which help those in debt and with other problems? That will save the health service money as well.

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[John Glen]

I have not personally, but I am happy to look into that. We have to look holistically at the range of new providers and what insights we can gain to improve the services offered. MaPS has factored the concern about sensitivity to the mode of delivery and the complexity of customers’ needs into its commissioning process by requiring bidders to engage in effective promotion and outreach to customers who will most benefit from the service.

[Emma Hardy]

One thing I am keen for MaPS to look at is the move towards three regional models. I made the point in my speech that smaller providers simply cannot bid for those large contracts. It appears it is by choice, although it is not—they cannot continue to access the contracts because they are too small. The move is from nine to three.

[John Glen]

I am grateful to the hon. Lady for that point. The significant concern that the outcome of the commissioning exercise will leave a smaller number of providers that are somewhat detached from local communities and specific needs must be addressed through the process. It would be undesirable for that detachment to lead to a lack of confidence in the new configuration, and MaPS will need to address that directly in how it responds.

When the outcome is secure, it is important that customers’ needs are diagnosed, that they have tailored support, and that providers collaborate to ensure that customers can be referred in a seamless manner when they can be better served by another service within the provision available. I recognise the point that that is not always possible if there is a level of comfort in a specific physical location. How that will be transferred efficiently needs to be looked at. MaPS has not dictated the channel through which advice needs to be provided, although it has required local provision in its regional lots. That is to allow bidders to innovate and compose a service that is aligned to MaPS’ requirements but is also informed by that intimate local knowledge, skills and experience.

A few people mentioned potential adviser redundancies. I will not be able to say anything more until bids are evaluated, and I think colleagues will understand that. However, we strongly encourage MaPS to take all reasonable steps to support the process and use its role as a market steward. That means supporting, where possible, any transfer of undertaking activities that the organisations involved may need to carry out to ensure continuity of employment for debt advisers.

[Karl Turner]

I thank the Minister for his incredibly constructive approach to the debate—we have all seen that. I do not expect an answer, but would he please, at least, consider asking MaPS to pause the process? We are all worried that we do not know the effects of the pandemic.

[John Glen]

I will come on to that in my final remarks. I want to give the hon. Member for Kingston upon Hull West and Hessle a few minutes to speak, but I have a few more paragraphs, if I may.

Where transfer of undertakings regulation does not apply, MaPS must ensure that successful bidders are aware of, and connected with, any skilled advisers and project staff who might be made redundant so they can be considered for new roles. The Government acknowledge that wherever services are subject to commissioning, there may be elements of uncertainty and change for the sector, as is the case with any new policy. The Treasury and the Department for Work and Pensions will ensure that the outcome of the MaPS evaluation and moderation exercise achieves value for money and meets the needs of vulnerable customers, in line with statutory requirements.

On the point made by the hon. Member for Kingston upon Hull East about a pause, I will reflect carefully on that and talk to my officials. There has been a delay in the decision about what would come forward, last Friday. Clearly, this is an incredibly complex and delicate matter. We want to ensure that the new provision meets changes in consumer demand from a commissioning exercise that had not taken place yet under these conditions, but it must also take account of the fact that our experience of the last 18 months is distinct from anything experienced before. That does not mean that we will say that there will be no change, but it means that the change has to be carefully calibrated and justified on the basis of the very real concerns that have been raised. I thank hon. Members from across the Chamber for their insights, which will inform the way I take the matter forward.

Draft Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021

John Glen Excerpts

Wednesday 1st December 2021 General Committees

[The Chair]

Before we begin, I remind Members that they are expected to wear face coverings and to maintain social distancing as far as possible. This is in line with current Government guidance and that of the House of Commons Commission. Members are also expected to do lateral flow tests twice a week before coming on to the parliamentary estate.

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

I beg to move,

That the Committee has considered the draft Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021.

It is a pleasure to serve under your chairmanship, Ms Elliott. The regulations, among other things, support the implementation of the remaining Basel III standards and the investment firms prudential regime. As hon. Members will recall, after the 2008 financial crisis, the international community worked together to create new banking standards known as the Basel III accords. As a G20 member, the UK is committed to implementing the standards. The Government have legislated through the Financial Services Act 2021 to enable the Prudential Regulation Authority to update the UK’s capital requirements regime to implement the remaining Basel accords, subject to an accountability framework.

In September, the House approved the Capital Requirements Regulation (Amendment) Regulations 2021 under the 2021 Act, which revoked the provisions in the UK capital requirements regulation necessary for the PRA to make these updates. The Act also enabled the Financial Conduct Authority to introduce the investment firms prudential regime, which is the UK’s new tailored prudential regime for FCA-regulated investment firms. The regime carves FCA-regulated investment firms out of the UK CRR. The combination of these two prudential packages requires consequential changes to the statute book, and the regulations ensure that the changes mesh appropriately and provide a complete functioning legal regime for firms. Many of the measures in the regulations therefore update references in existing legislation to the UK CRR so that they now relate to the new rules made by the PRA, known as the CRR rules.

On the use of the Basel powers under the 2021 Act, the regulations revoke the reporting and disclosure requirements for the leverage ratio, which is a capital backstop that prevents banks from becoming excessively leveraged. To reassure hon. Members, the PRA was already able to set leverage-based capital requirements through PRA rules. The UK leverage ratio framework has been and continues to be set by the Financial Policy Committee, which recently reviewed it in its entirety. The regulations also remove a legacy equivalence determination on article 132, tied to an equivalence regime that was revoked as part of the Capital Requirements Regulation (Amendment) Regulations 2021 earlier this year. That change is simply tidying-up.

The regulations protect the status quo of CRR permissions by ensuring that firms do not have to reapply for permissions where the relevant article of the UK CRR is revoked and replaced with PRA rules. The regulations then make updates to support the effective implementation of the IFPR across the statute book. Some are straightforward, such as removing terminology that is now defunct due to changes made by the FCA through its IFPR rules. Initial capital requirements will no longer be set for some firms at €730,000, so references to such firms need to be deleted. Other updates, of which there are two notable instances, are more substantive where appropriate. First, the regulations extend the securitisation regulation’s due diligence requirements to all FCA investment firms. That ensures that all FCA investment firms buying securitisations must conduct due diligence, thereby helping to safeguard the integrity of the UK securitisation market.

Secondly, the regulations remove Financial Conduct Authority investment firms from the UK resolution regime. This reflects the Government’s view that the FCA’s existing toolkit, along with the measures the FCA will implement in future through IFPR and the investment bank special administration regime are more appropriate ways of managing the failure of such firms. Indeed, FCA investment firms would currently use the existing rules in the first place and go into insolvency proceedings. Therefore, keeping them within the resolution regime only serves to create administrative costs for those firms, for no benefit.

The instrument also contains a savings provision and a transitional provision for the IFPR. It enables the FCA to continue to modify, revoke or amend IFPR-relevant technical standards, and allows for transitional provisions that support the functioning of the UK securitisation market by extending the existing risk retention requirements for one year, before they change once the IFPR is introduced. Risk retention ensures that firms retain an economic interest in a portion of the risk that is being sold on to investors.

Finally, the instrument addresses a small number of deficiencies arising from the withdrawal of the UK from the European Union that have been identified in the process of making these Basel and IFPR amendments. The Treasury has worked closely with the Bank of England, the PRA, the FCA, industry and, on the resolution change, the Banking Liaison Panel in drafting this instrument. I hope that I have shed light on some of the main elements of the instrument, and that hon. Members have found the explanation helpful. In short, it plays an important part in our work to build a financial system that is both responsive to the UK’s specific needs and mindful of our responsibilities to the wider world.

I must inform hon. Members that a correction slip has been issued in relation to a typographical error in this draft instrument. The error is an incorrect cross-reference in the title of regulation 38. However, the operative provisions in that regulation are correct, and as a result the error has no legal effect and hon. Members can be assured that the change is minor. I therefore commend the order to the Committee.

--- Later in debate ---

[John Glen]

I thank the right hon. Gentleman for his points, and congratulate him on his elevation to his new position. I am surprised, given the talent in the Opposition ranks, that he is still doubling up and wants to do this job as well, but I am delighted to see him here today, and hope that I will not have to see him here again. He raised six substantive points, which I am happy to go through. His characterisation of the draft regulations as being the grandchildren of the EU directives is reasonable and, as ever, puts things in a clear frame of reference.

First, the right hon. Gentleman asked me for some reassurance concerning the equivalent supervisory authority of the regime to deal with Basel III. I can totally reassure him that the authorities will ensure that they are not sub-equivalent to Basel. That means the Treasury working with the PRA and the FCA to place great importance on international standing, which will help to ensure that baseline level of resilience. As he acknowledges, the UK was critical in shaping the Basel standards, and we will continue, even in the new regime, to ensure that safety and soundness are at the core of our objectives.

The right hon. Gentleman’s second point related to the point made yesterday in the other place with respect to the “have regard to” amendments to the FS Act. Obviously, our amendment to include a requirement to have regard to the net zero carbon target will apply after 1 January 2022. That means that the PRA does not need to have regard to climate change considerations in making the Basel III rules, nor the FCA in making the IFPR rules for 1 January 2022. That was done to ensure that there was no delay in implementing the Basel III reforms and the IFPR, but it will be for the regulators to determine going forward how the new duty will operate in practice. The Government anticipate that it should function in much the same way as other obligations during the PRA’s implementation of Basel III standards, such as the need to have regard to the ability of firms to continue to provide finance to business and consumers in the United Kingdom. The key point is that, subsequent to the implementation agreed in the Act, they will have an ongoing obligation to have regard to these matters.

[Mr McFadden]

That sounds like quite an important omission. We do not need to go over the history of it, but the Government themselves tabled an amendment saying that the regulators had to have regard to our net zero obligations. If I understand the Minister correctly, he is saying that it does not apply to the draft regulations, which implement the Basel III regulations—the main international post-financial-crisis measure of regulating banks to ensure that the taxpayer is not on the hook in the future. Is that not quite an important omission from the green direction that both of us want to see for financial regulation?

[John Glen]

No, I do not think so. I think the Opposition accepted the Government’s amendment with respect to its provisions on the timescale. That should not withdraw the urgent need to implement the Basel standards and the consultation process, which would have to have been repeated should we have had to wait until 1 January. That does not mean to say that on an enduring basis that will not be a consideration that the PRA and the FCA will need to have regard to.

Thirdly, the right hon. Gentleman’s asked about the ongoing discussions around MREL for challenger banks. The Bank of England is leading that review, and is currently considering the responses to its consultation. I have received a number of representations and discussed the matter with several challenger banks. I am grateful to the industry for its engagement on that review. The Bank will respond in due course, but I should not imagine that it will be too far away.

The right hon. Gentleman moved on to ask about the classification of systemic and non-systemic banks, and used the expression “too big to fail” around how those definitions will work. There is no attempt to somehow manipulate those classifications for deregulatory effect; it is simply the case that there are much smaller firms that do not have that systemic risk. Therefore, it would be appropriate, within the context of the rules and frameworks of the FCA, for them to be under its jurisdiction. The same will not be true of those that are larger, but there is no motivation behind that other than to find the most appropriate regulator to do the most appropriate regulation.

The right hon. Gentleman then asked about the capacity of the FCA to deal with the new obligations, in the context of the outcomes of some of the challenges that it faced after LC&F. I obviously keep in regular contact with the chief executive of the FCA; indeed, I am speaking to him tomorrow afternoon. There is no question of its resourcing being somehow challenged to take on that responsibility. We discussed the matter with the FCA at length prior to the passage of the Financial Services Act earlier this year. That is a matter for the FCA, but I am convinced that it is in a good place to continue.

The right hon. Gentleman then asked a broader question about competitiveness, and characterised the motivation of the Chancellor and the Government as to perhaps offer a deregulatory pathway to industry. I know that the right hon. Gentleman was able to attend the UK Finance dinner last week. I hope that he noted the emphasis that I placed in my speech on the need not to differentiate our position on deregulation. Indeed, the consultation on a secondary growth and competitiveness objective does not in any way undermine, or seek to undermine, the primacy of high regulatory standards, which have distinguished our regulators and financial system for a very long time.

I hope that that addresses the points that the right hon. Gentleman raised, and I will conclude by briefly reiterating the purposes of the instrument. It enables the implementation of Basel III standards, which is key to the UK’s international standing. It updates and accounts for the new IFPR definitions and takes FCA investment firms out of the scope of the UK resolution regime to reflect the new proportionate IFPR regime. Finally, it irons out some of the wrinkles of existing EU regulation. The measures will give UK firms certainty over the final elements of the Basel III standards and IFPR regimes, and I therefore commend the order to the Committee.

Question put and agreed to.