Banking Reform
Debate between Mark Hoban and Baroness Primarolo(11 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
With permission, Mr Speaker, I would like to make a statement on banking reform.
The financial crisis exposed a great many flaws in the system. Banks borrowed too much, took risks they did not understand and bought securities that proved to be far from secure. Banking groups became too complex and interconnected to be managed effectively, regulators failed to identify the risks and taxpayers paid the price. Between October 2008 and December 2010, European taxpayers provided almost €300 billion to prop up their banks, with liquidity and lending support in the trillions. In the UK, the bail-out of RBS was the biggest banking bail-out in the world.
Just as the crisis revealed many flaws, there is no single solution. The Government are reforming the substance and structure of the financial architecture, putting the Bank of England in charge of prudential regulation. We have created the Financial Policy Committee to look at risks across the financial system. Our permanent bank levy penalises short-term wholesale funding, and we have introduced the toughest and most transparent pay regime of any major financial centre in the world. We have worked with our international partners to deliver robust, consistent prudential standards for banks and markets.
The White Paper that we are publishing today sets out how we will implement the recommendations of the Independent Commission on Banking. The Government’s reforms will form a key part of our broader programme of reform. In the same way that the action we have taken on the deficit has meant that UK debt is currently seen as a safe-haven asset by investors around the world, we will ensure that British banks will be resilient, stable and competitive, and so attractive to investors at home and abroad.
The eurozone crisis makes reform more, not less important. The link between the strength of a country’s banking sector and that country’s stability could not be clearer. At the same time, our proposals reflect the progress that has been made in European and international regulation since December. The Government welcome the European Commission’s bank recovery and resolution directive, which will improve member states’ ability to resolve cross-border banks without imposing costs on taxpayers. We will also continue to press for full Basel III implementation in Europe.
The goals of today’s White Paper are clear. First, since financial crises rarely repeat the pattern of the past, we must ensure that banks are more resilient to shocks. Secondly, we must make our banks more resolvable, so that if they fail, they do not threaten the provision of vital services to the real economy. Seeing through those two goals will achieve our third—to curb risk-taking in financial markets. It must be clear that investors reap rewards when banks do well, but take the pain if banks fail.
The Government will ring-fence retail deposits from the risks posed by international wholesale and investment banking. A ring-fenced bank will be economically and legally separate from the rest of its group and run by an independent board. The ring fence will not in itself prevent a bank from failing, but it will insulate the deposits of families and businesses, and if a bank does fail those essential parts of the banking system can continue without recourse to the taxpayer.
The deposits and overdrafts of individuals and of small and medium-sized businesses will, in general, be placed in ring-fenced banks. To minimise the risks that a ring-fenced bank is exposed to, it will be prohibited from conducting the vast majority of international wholesale and investment banking. It will not be permitted to carry out activities through branches or subsidiaries outside the European economic area, or, except in limited circumstances, with financial institutions. Beyond that, and within certain constraints, firms may decide what to put inside the ring fence. Ring-fencing will provide customers with flexibility, but not at the cost of financial stability.
The Government also propose to strengthen the ICB’s recommendations by applying strict controls to the use of derivatives by a ring-fenced bank to hedge its balance sheet. That will ensure that a ring-fenced bank does not take excessive risks when managing its own risks, as was the case with J. P. Morgan’s much-publicised trading loss.
Governance of the ring-fenced banks will be important. The Government propose to strengthen the ICB recommendations in that area, establishing separate risk committees and possibly also separate remuneration committees. However, it is important to focus these reforms where they will have the biggest impact, which is on the biggest, too-big-too-fail banks. We therefore propose that smaller banks, with less than £25 billion of mandated deposits, will be exempt from those requirements. Large, systemically important banks gain a competitive advantage from the perceived implicit guarantee. Our targeted reforms will remove that advantage, helping smaller banks and new entrants.
One of the clearest lessons from the crisis is that investors and creditors, not taxpayers, should bear the costs of failure. That is why we have supported Basel III, which increases bank capital to 7%, with a top-up for systemically important banks, and why we have pressed for that to be implemented across Europe, but to protect taxpayers, the Government will go further. The largest UK ring-fenced banks should hold an additional 3% of equity on top of the Basel III minimum numbers. The Government also strongly endorse the introduction of a binding minimum leverage ratio. The White Paper supports the Basel proposal of a 3% leverage ratio for all banks, including UK ring-fenced banks, and we will continue to press for the implementation of the Basel standard through EU law.
Large ring-fenced banks should hold a minimum amount of loss-absorbing capacity—made up of debt or equity—of 17% of risk-weighted assets. Their overseas operations should be exempt from that requirement unless they pose a risk to financial stability. For smaller UK banks, as the ICB recommends, the minimum requirement should be lower.
To deliver those proposals, the authorities need a way to “bail in” bank liabilities so that bondholders, not taxpayers, bear the losses. The Government will work with European partners to ensure that the ICB recommendations on bail-in are credibly and consistently applied across Europe through the recovery and resolution directive. We intend to introduce the principle of depositor preference for insured deposits. Unsecured lenders to banks are better placed to monitor the risks that banks are taking and should take losses ahead of ordinary depositors.
Our proposals on financial stability also improve competition in UK banking. The implicit guarantee to large banks distorts competition; its reduction will help to create a level playing field. However, we want to do more to encourage new entrants and promote competition. We will shortly issue a consultation on reform to the payments system. I welcome the reviews by the Bank of England and the FSA into the prudential and conduct requirements for new entrants to ensure that they are appropriate and not disproportionate. We strongly support the need for a stronger challenger bank to emerge from the Lloyds Banking Group divestment. We are engaged with Lloyds and the European Commission to ensure that the divestment process creates as strong a challenger as possible. A more competitive banking system will work only—[Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. Government Members do not need assistance from the Opposition on where they should sit. The Minister is making a serious statement to the House. Perhaps Opposition Members could hear what he has to say.
Mr Hoban
That really sums up the Opposition. All they can talk about is who sits where. They have no ideas on how to resolve this banking crisis.
I welcome the reviews by the Bank of England and the Financial Services Authority into the prudential and conduct requirements for new entrants to ensure that they are appropriate and not disproportionate. However, as I have said, a more competitive banking market will work only if consumers are prepared to change banks. The Government are pleased with the progress on the industry-led initiative to make current account switching faster and easier for customers. Providers covering 97% of the current account market have signed up and the scheme is on track to be launched next September. However, to switch, customers need better information, so the Government welcome the fact that the Office of Fair Trading and the Financial Conduct Authority will take forward the ICB recommendation to improve transparency across all retail banking products. Work is already under way on a number of projects, such as making account data available to customers electronically, to enable them to shop around.
Financial stability is a prerequisite for growth. Our analysis suggests that the proposals in the White Paper will cost, in gross domestic product terms, in the region of £0.6 billion to £1.4 billion per annum. However, that should be compared with the estimate that the 2007 to 2009 crisis has already cost the UK economy £140 billion, which is one hundred times the maximum cost estimate of our proposals.
The proposals, although ambitious in scale, are proportionate in impact. They will promote financial stability while supporting sustainable growth and making the UK’s role as the world’s leading international financial centre secure. The reforms we are announcing today, together with the changes we are making to the regulatory architecture, demonstrate that the Government are determined to take action to deliver a stable and sustainable banking sector that underpins rather than undermines economic growth. I commend this statement to the House.
Financial Services Bill
Debate between Mark Hoban and Baroness Primarolo(12 years, 1 month ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss the following:
New clause 5—Amendments to Tribunals, Courts and Enforcement Act 2007
‘(1) Section 124 of the Tribunals, Courts and Enforcement Act 2007 (charges by operator of approved scheme) is amended as follows.
(2) In subsection (1) for “costs’ substitute “charges”.
(3) In subsection (2)—
(a) for “costs”, in the first instance, substitute “charges”,
(b) after “scheme”, insert “along with any charges made by the operator”, and
(c) after “those costs” insert “and charges”.’.
New clause 9—Debt management plan regulation
‘The FCA shall bring forward recommendations within a year of the commencement of this Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.’.
New clause 10—Mortgage rate forewarning
‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.
New clause 12—Prepayment schemes
‘(1) The FPC must carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.
(2) The FPC must make recommendations under subsection (1) within one year of this section coming into force;
(3) Any report produced by the FPC under subsection (1) shall include an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets of the company operating such schemes in the event of insolvency.’.
Government amendments 2 and 3.
Amendment 37, page 37, line 42, in clause 5, at end insert ‘and targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.’.
Amendment 55, page 38, line 6, at end add—
‘(h) supporting the provision of legal advice on all areas of law related to personal debt, including but not limited to—
(i) issues covered under Schedule 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012,
(ii) remedies under the Insolvency Act 1986 and Tribunals, Courts and Enforcement Act 2007,
(iii) protections under the Consumer Credit Act 1974 and Consumer Credit Act 2006,
(iv) consumer redress schemes under the Financial Services and Markets Act 2000,
(v) debt limitation under the Limitation Act 1980, and
(vi) enforcement action for specified debts pursuant to a county court judgement, a High Court writ or warrant issued by a Magistrates’ Court.
(4A) For the purposes of subparagraphs (h)(i) to (vi) above the consumer financial education body may enter into arrangements with the Ministry of Justice to direct appropriate levels of funding for these purposes.’.
Government amendment 4.
Amendment 40, page 80, line 2, in clause 22, at end insert—
‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.
Government amendments 11 and 18 to 21.
Mr Hoban
New clause 4, which is the most significant of the Government new clauses and amendments in the group, provides a framework for implementation of the Government’s proposal to retain the important rights and protections of the Consumer Credit Act 1974 to ensure that consumers do not lose out as a result of the transfer. For example, we are likely to retain section 75 of the Act, which provides for the joint liability of creditors for misrepresentation or breaches by suppliers.
The Government’s preferred approach to the implementation of the transfer of responsibility for consumer credit from the Office of Fair Trading to the Financial Conduct Authority is to ensure that the Consumer Credit Act protections are replicated in the FCA’s consumer credit rule book, and that the relevant sections of the Act are repealed. That approach is in line with the intention to move to a more responsive, rules-based regime than the current statutory framework.
However, there are limitations to the type of rules that the FCA can make, which means that it will not be able to replicate in its rules all the CCA protections that we want to retain, including protections that impose rights directly on consumers and those that affect unauthorised third parties. That means that some CCA protections will need to be kept in the CCA itself, and that certain provisions of the CCA will therefore need to remain in force following the transfer. As a result, a number of changes will need to be made to both the CCA and the FSMA as part of the transition, to reflect the fact that the FCA will be responsible for regulating consumer credit and to ensure that the FCA, as well as local trading standards, can effectively enforce the retained CCA provisions. For example, it will be necessary to replace references in the Consumer Credit Act to the Office of Fair Trading with references to the FCA. We will also need to apply certain features of the FSMA, such as references to the FCA’s objectives, statutory immunity and fee-raising powers, to the FCA’s new functions under the Consumer Credit Act, and enable the FCA to use FSMA supervision and enforcement powers that would normally be used in relation to breaches of FCA rules for breaches of CCA requirements. New clause 4 enables the Treasury to make those changes and other necessary amendments to the CCA and the FSMA by order.
I should also draw attention to the addendum to the delegated powers memorandum, which the Department has prepared and provided to the delegated powers Committee. The memorandum sets out in more detail how this power is intended to operate and why it is necessary. Copies are available in both the Printed Paper Office and the Vote Office. The order to be made under this provision will be subject to further consultation following Royal Assent to the Bill. Government amendment 11 provides that any order under new clause 4 will be subject to the affirmative procedure and so can be made only with prior approval of both this House and the other place.
Government amendment 2 supports effective collaboration between the FCA and local trading standards following the transfer, enabling the FCA to contract trading standards for the provision of services in the same way that the OFT does now—for example, to undertake local inspections and follow up on enforcement action, including by local illegal money-lending teams. Government amendment 21, and related amendments 18, 19 and 20, insert into the Bill provision for the transfer of the OFT property, rights and liabilities, including staff, to the FCA.
I hope Members will agree that the Government amendments in relation to consumer credit are sensible and practical provisions to support an effective transfer of regulation to the FCA. The new clause and related amendments sit within a process of regulatory reform that seeks to tackle some of the issues raised by Members on both sides of the House about the functioning of the credit market. We believe the FCA will have much stronger powers and greater resources than the OFT has had in order to tackle detrimental practices in the consumer credit market. Unlike the OFT, the FCA will be able to make binding rules on firms to ban specific products or product features that cause harm, to issue unlimited fines, and to require firms to pay redress when things go wrong. It will also be able to apply greater scrutiny to applications for credit licences and make it more difficult for rogue firms to enter the market.
As a consequence of the transfer we have introduced into the Bill, there will be a fundamental change in the regulation of firms such as payday lenders and debt management companies. I am pleased that the provisions enabling that transfer were welcomed in Committee.
There are a number of Opposition amendments relating to consumer credit and debt management plans, and I want to say a few words about them now. On new clauses 5 and 9, I made it clear in Committee that I sympathise with concerns about some of the practices in the fee-charging debt management sector. That is why clause 6 enables the regulation of debt management companies to be transferred to the FCA. That is also why we have chosen to leave on the statute book the enabling powers of the Tribunals, Courts and Enforcement Act 2007.
More immediately, we are working with the industry to develop a protocol of best practice for debt management plans, which should cover, among other things, the nature and timing of fees. Indeed, on 14 June the Minister with responsibility for consumer affairs, my hon. Friend the Member for North Norfolk (Norman Lamb), will chair the first industry-wide meeting to discuss and take forward the protocol. That will follow several months of meetings with a smaller, representative group of stakeholders, which has talked through processes, commercial terms and advice, to reach an agreed position.
I also wish to refer the House to new guidance for the debt management sector recently published by the Office of Fair Trading, which sets out in substantial detail the standards expected of firms. I believe that it is appropriate that we give time and focus to current efforts to improve standards in the debt management sector, and take account of the significant changes to the wider regulatory regime enabled by the Bill, before we start talking about changes to a potential statutory scheme under new clause 5.
As I said in Committee, I do not think that we should throw the baby out with the bath water and shut down the market for fee-charging debt management services, as proposed by new clause 9, before fully exploring better regulation. Where suppliers of credit are aware of people who are suffering financial distress in repaying their debt, I encourage them to signpost their customers to fee-free debt advice services so that they can get the best possible advice to meet their needs.
On amendment 40 and new clause 10, I wish to reassure hon. Members that the Bill already enables the FCA to make the kind of rules proposed in those two provisions. Indeed, in relation to new clause 10, the Financial Services Authority already places a number of requirements on firms to ensure that borrowers are informed if their mortgage repayments are subject to change. I know that some hon. Members may wish to challenge the approach, saying, “But if the FCA can already make the proposed rules, what is the harm in accepting these proposals?” The point is that there are significant risks to specifying in great detail in the Bill the precise type of rules that the FCA may make. First, in doing so, we risk distracting the regulator from using its expertise and judgment to identify and address the risks that it considers pose the greatest risks to its objectives. As parliamentarians, we should be creating a framework within which technical experts can exercise their discretion, in a suitably constrained way. We should leave them to get on with the job, not provide a long laundry list of everything that we want them to do.
By specifying in detail what rules should or should not cover, we also risk creating the opportunity for challenge to the regulator’s ability to make rules that are not specified in the Bill. The lack of specific provision in the Bill does not, in any way, reflect on how seriously the Government take these issues. For example, in relation to high-cost credit, a number of initiatives are under way to improve standards in the sector. Those include work to improve industry codes on payday lending; research commissioned by the Department for Business, Innovation and Skills into the impact of a cap on total cost of credit; and a review by the OFT of payday lenders’ compliance with its irresponsible lending guidance. As well as raising standards now, the findings of those pieces of work will feed into the FCA’s approach to regulating the sector following the transfer, including on the type of rules it may make regarding these charges.
Connecting Europe Facility
Debate between Mark Hoban and Baroness Primarolo(12 years, 4 months ago)
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Mr Hoban
We have made it absolutely clear that the rebate is there to stay, and that is one of the key parts of our negotiating strategy.
I want to say a few words about infrastructure spending. The Government have made it clear that focused infrastructure improvements are a domestic priority. When undertaken wisely, it is clear they can boost growth, protect the environment and improve lives. In his autumn statement, my right hon. Friend the Chancellor announced investment of £100 million in the creation of up to 10 super-connected cities across the UK with 80 to 100 megabits per second broadband and city-wide, high-speed mobile connectivity. Last week, the Secretary of State for Transport announced details of the new high-speed rail network.
However, the key is having carefully focused investment. When prioritising spending for infrastructure, the Government have taken the wider economic context into account. The urgent need to reduce our domestic deficit has meant that we have had to choose our investments carefully and focus infrastructure spending on where it can have the most positive effect.
That is the approach the Commission needs to take to European infrastructure spending, focusing affordable levels of spending where they will make most difference. Therefore, while the Government will, first and foremost, argue for a reduction in the overall size of the connecting Europe facility budget, we will endeavour to ensure that the final settlement agreed is focused on spending money where it will add most value. That means spending money only where neither the market nor domestic Governments are better placed to act—the point the hon. Member for Luton North (Kelvin Hopkins) made in his first intervention.
We will be pushing the Commission for additional information to allow us to judge where the money will best aid growth and support our environmental objectives. That is consistent with the Government’s desire to see spending that promotes sustainable growth take a bigger share of a tighter budget in the next financial framework. The ambition of the connecting Europe facility, while laudable, must respect the fiscal realities of Europe.
The Opposition have tabled an amendment to today’s motion. It is rather incredible, in a week when Labour’s policy on deficit reduction has become ever more confused, that the hon. Member for Nottingham East has tabled an amendment calling for an effective deficit reduction strategy. Ever since the shadow Chancellor said on Saturday that
“we are going to have keep all these cuts”,
the Labour party has been totally confused, with its deputy leader later saying:
“We’re not accepting the Government’s austerity cuts, we are totally opposing them”.
So Labour Members accept the cuts, but then oppose them.
Labour Members cannot say they are credible on the budget, because of the legacy they have left. Despite our entering the downturn with the largest structural deficit in the G7, the Labour leader told Andrew Marr this weekend that he did not think Labour spent too much. Let us remind him that it is because of Labour’s record on spending that our triple A rating was on negative outlook when the Labour party left office. That downgrade threat has been lifted because this Government have a credible and effective deficit reduction strategy. One would think that the Labour party would have learned from that, but, no—its five-point plan would add £20 billion to the deficit this year. Rather than seeing an effective debt reduction strategy from Labour, all we have is more of the same: more spending, more borrowing and more debt. So before Labour lectures anybody else on the deficit reduction strategy, it had better get its own house in order.
If that was not bad enough, the hon. Member for Nottingham East has scored another own goal in his amendment by calling for reform of the common agricultural policy—we touched on that earlier. We have heard brave words before from Labour politicians about CAP reform. Tony Blair said that
“the rebate remains because the reason for the rebate remains. Of course, if we get rid of the common agricultural policy and we change the reason why the rebate is there, the case for the rebate changes.”—[Official Report, 29 June 2005; Vol. 435, c. 1293.]
Those were tough words, but as we know, he gave way to the French, sacrificing €2 billion in our rebate a year, which will cost the country €10 billion over the lifetime of this Parliament. In the current financial framework, CAP spending has not fallen, as Labour said that it would, but increased by €3 billion. So it is all very well the hon. Gentleman talking tough in his amendment, but we have heard it before from Labour—all bark and no bite.
Achieving the priorities that the House has supported in the next financial framework will not be an easy task. The Government need to defend the rebate, resist EU taxes and restrain the budget size. The UK can deliver results in Europe, as outcomes in the 2011 and 2012 annual budget negotiations have shown, but to achieve our overall aims we must be constant and vigilant in our resistance to increases in the budget. A 400% increase to infrastructure spending in the EU budget, without any corresponding reductions elsewhere, is unacceptable in the current economic environment. We will work with our allies to cut this programme down to size, delivering fiscal restraint and value for money. Although we are clear that we need infrastructure investment to boost productivity and growth, projects need to be effective and affordable, but the plans in the connecting Europe facility proposed by the Commission are neither. I therefore urge my hon. Friends to support the motion.
Madam Deputy Speaker (Dawn Primarolo)
I inform the House that Mr Speaker has selected amendment (a), in the name of the hon. Member for Nottingham East (Chris Leslie). I call him to move the amendment.
Loans to Ireland Bill
Debate between Mark Hoban and Baroness Primarolo(13 years, 5 months ago)
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Mr Hoban
I beg to move manuscript amendment (a), page 2, line 16, at end insert—
‘(d) the remaining term of each Irish loan which is outstanding at the end of that period, and
(e) the original term of each Irish loan in respect of which a payment was made by the Treasury by way of an Irish loan in that period.’.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to consider the following:
Amendment 1, page 2, line 16, at end insert
‘, and
(d) the original term for any Irish loan and remaining terms for any outstanding Irish loans.’.
Amendment 5, page 2, leave out lines 17 to 26.
Amendment 2, page 2, leave out lines 18 and 19.
Clause 2 stand part.
Mr Hoban
In dealing with the issues emerging in Ireland, we have sought to keep the House informed as much as possible about the progress that was being made as the crisis emerged, and the role that the UK Government felt they should play in helping to resolve it and responding to the Irish Government’s request for help at the end of last month. We have done that through statements to the House and the publication of the Bill last week, and to aid debate, we ensured that before today’s debate started a copy of the loan agreement was placed in the Vote Office. I hope that hon. Members will recognise that we were not able to place the summary document in the Vote Office earlier—or, indeed, to place the full signed agreement there—because negotiations are still ongoing with the Irish Government. However, the principles that have been agreed were set out in the summary of key terms.
I think hon. Members would say, “Well, it’s all very well that you’ve been transparent and open in the run-up to the loan process, but what’s the next stage? Are you going to be transparent during the life of the loan? How are you going to keep the House informed of what’s happening, whether the Irish Government are drawing down each of the eight tranches, how far they’ve got with repayments, and so on?” For that reason, we decided that there should be a clause to deal solely with reporting. It states that the Treasury will
“prepare a report about Irish loans and lay it before the House as soon as practicable after the end of that period.”
The first period will end on 31 March 2011 and a report will be published for each subsequent six-month period. The clause states that those reports will include details of
“any payments made by the Treasury by way of”
the loan, and details of
“any sums received by the Treasury in that period by way of repayment of principal or the payment of interest”
and
“the aggregate amount of principal and interest in respect of…loans which is outstanding at the end of that period.”
Mr Cash
Perhaps a little bit of irritation, which is not usual in my case, is beginning to burgeon, because a number of questions that I tabled weeks ago about the legal advice regarding the stabilisation mechanism still have not been answered, and when I use the word “stonewall” I mean just that. When I do not get an answer, and I am told that I will get the answer as soon as possible but I still do not get it, and I have to put in a reminder but I still do not get it, there is something going on; I know that. They do not want to disclose the legal advice; they do not want even to disclose whether in fact it was given, or when it was given. I would like to know the answer to those questions because as Chairman of the European Scrutiny Committee—
The Second Deputy Chairman
Order. This is an intervention. It is a very long intervention. The hon. Gentleman has clarified what he meant by stonewalling, but perhaps we might leave the considerations about the European Scrutiny Committee for another day, because it is not particularly relevant to the amendment that we are discussing now.
Mr Hoban
It is right that the duty to report is extinguished when there is no principal outstanding, and that is the purpose of subsections (4) and (5).
I hope that, with that explanation, hon. Members will accept manuscript amendment (a) and will not seek to press amendments 1, 5 and 2.
Manuscript amendment (a) agreed to.
Clause 2, as amended, ordered to stand part of the Bill.
Clause 3
Short title, commencement and extent
Question proposed, That the clause stand part of the Bill.
Equitable Life (Payments) Bill
Debate between Mark Hoban and Baroness Primarolo(13 years, 6 months ago)
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The Second Deputy Chairman
Order. There has been a very expansive debate so far, so there will not be a clause stand part debate. If the Minister wants to say anything, I would encourage him to say it now.
Mr Hoban
You are right, Ms Primarolo, we have had an extensive debate, so I will ensure that I now have my notes to hand for the clause stand part debate. I should clarify the treatment of the payments under the tax and benefits system. They will not be treated as income for tax purposes, and will not be taken into account in the calculation of tax credits, which is a benefit for policyholders. In terms of benefits, they will be treated as capital rather than income, and given the beneficial nature of the treatment of capital in the benefits system, that helps policyholders. We have sought in the design of the scheme, through measures such as the tax and benefits treatment, to maximise the value so that policyholders will receive the full amount.