Pat McFadden
MP for Wolverhampton South East · Labour · United Kingdom
“In his review Alan Milburn considered that issue and said that, “the UK’s NEET crisis is much more long-term and deep-seated than any decisions taken in the last few years.” As I said earlier, 400,000 more people are in work this year than last year, and the number of young people in employment is up since the election.”
“Since our last DWP questions, both Alan Milburn and the Pensions Commission have published their respective interim reports on young people and on the current state of saving for retirement. I look forward to receiving their final reports later in the year.”
“As Alan Milburn pointed out in his recent report, the UK’s NEET crisis is much more long-term and deep-seated than any decisions taken in the last few years. There are 400,000 more people in work than last year. The number of young people in employment is up by 74,000 since the election.”
“I thank the right hon. Gentleman and send him commiserations for whatever has left him reliant on his crutches today. I am happy to congratulate the businesses he mentioned in his constituency. He raises a serious point: it is important not only to come up with the right policy, but to make it simple for businesses to use.”
“My hon. Friend is right, and I thank Cardiff football club for being a partner. We are supporting nearly 1 million young people and creating up to half a million opportunities for jobs and training.”
“We are making strong progress on expanding youth hubs, with around 130 already in operation across Great Britain. In March, I announced the locations that we want to open in this year, and I have just announced a further 180 locations for the following two years.”
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“This is a fast-growing market. New accounts are being opened every day, and there is no reason to delay. This delay will mean that significant time has elapsed between the initial decision and the Government’s approval of the Woolard report and introduction of the regulations. My hon. Friend the Member for Walthamstow has spoken about the potential for the next few weeks to result in significantly more consumer debt, with both Black Friday and Christmas approaching. I endorse what she said: nobody here wants to dampen anyone’s enthusiasm for a bargain—although I caution people to check whether it really is a bargain—and of course, we want everyone to enjoy the festive season. In my house, it is pretty big business.”
“Chris Woolard’s review concluded that the buy now, pay later market “poses potential harms to consumers and needs to be brought within regulation to both protect consumers and ensure it is sustainable.” To their credit, the Government acted fast at first, taking an initial power last March during proceedings on the Financial Services Act 2021. Then, after a long period, Ministers issued the consultation on detailed regulations only last month. That consultation is still open and does not close until January. Why was there a delay of seven months or so between the initial legislation and the publication of the consultation? Why is the tone of that consultation quite unenthusiastic about regulating, seeking to minimise the scope of the regulation? It gives the appearance that the Government have been dragged into this.”
“The business model for buy now, pay later is a merchant fee for each purchase. The growth model is that more goods will be sold because payments can be spread over a period of time. Interest is not normally charged on the staggered payments, but that is not the end of the story, because the companies also raise revenue through late payment fees or penalties when consumers fail to meet payments. For some buy now, pay later providers, those late payment fees and penalties are a significant proportion of their overall revenue. We must remember that, in the end, this is a debt like any other, which attracts penalties if it is not paid in accordance with the agreed timescale.”
“Many of those people fell between different Government help schemes and were left under huge financial pressure. It is really important to understand that while overall savings grew, that was not true for everyone, and for many people debt grew instead. However buy now, pay later products are marketed, they are another form of consumer debt, pure and simple. The explosive growth in this type of debt in recent years, and the risks identified in the report that Chris Woolard wrote last year, mean that it is right that these products are properly regulated. That is in the interests of consumers, who have a right to know exactly how the products work and what the potential penalties for non-payment will be. Otherwise, regulation will fall behind innovation in the market and become hopelessly out of date.”
“Right across the country, and across the rest of the developed world, bank deposits increased markedly for that reason. People were still earning, but much normal spending was curtailed, so they had more money to save. That is the story of one Britain, but there is another Britain in which earnings were cut as work was lost, and where incomes declined and debt grew. For many people in that group, their costs increased because they were stuck at home with the heating on, their food bills went up because children were off school, and they could not earn what they had earned before. Those were families who had never had much disposable income in the first place, and who were often struggling with and juggling significant amounts of debt.”
“The Government consultation on the issue says that the use of that payment mechanism tripled last year, and that during the pandemic more than one in 10 consumers paid for goods in this way. We have heard other numbers in the debate that suggest that the true figure may be even higher. Whatever the exact figure is, I think we can all agree that the sector is growing fast. During the pandemic and the lockdowns, we saw an accelerated trend towards online shopping, and indeed online everything else, which helped to spur the growth of buy now, pay later products. As for the overall financial impact of the pandemic, it is really a tale of two Britains. For those in good work, who were still being paid full pay, the impact was often the ability to save more money.”
“It is a pleasure to serve under your chairmanship, Mr Robertson, and I begin by endorsing the remarks you made at the beginning of the debate. I attended the funeral mass this morning for Sir David Amess, and you are absolutely right that he is a colleague who will be greatly missed right across the House. I thank my hon. Friend the Member for Walthamstow (Stella Creasy) for securing this debate. I also thank our youngest member, who has attended the debate and been as good as gold throughout; we will see how we get on for the next 20 minutes. My hon. Friend has been a formidable campaigner for consumer rights and against high debt charges, particularly for those on modest incomes. We are focused this afternoon on the buy now, pay later sector, which has grown hugely in recent years.”
“What assessment have the Government made of the risk of terrorist financing as a result of the Taliban takeover of Afghanistan? I would be grateful for a response to those questions. Obviously, we will not oppose this statutory instrument, but it would be absurd to think that all we need to do is mirror the FATF list to have adequate defences on anti-money laundering. It is crucial for our financial system that we act to expose the nature of hidden asset ownership and empower Companies House and others to crack down on illicit finance. Right now, those promises are not being put into practice.”
“Where is the reform to empower Companies House to do more checks on who the owners and directors of companies actually are? Where is the implementation of the recommendations in the Intelligence and Security Committee’s Russia report? What do the Government propose to do to ensure that donations to political parties are not the proceeds of kleptocracy? Talking of individual countries, why is Russia not on the list we are discussing? Is it really the Government’s position that Turkey and Jordan, to take two random examples, are places that require extra due diligence for financial investments, but Russia is not? Similarly, in recent months there has been major change in Afghanistan, but it is not on the list. Why not?”
“It is a big advantage for the country to have a financial services sector with such global reach, but that means that it can be attractive to those who make their money through illicit means as well as legitimate ones. Since we debated the last such statutory instrument some months ago, we have had the publication of the Pandora papers. They set out a familiar story of the UK and its overseas territories—one or two of which are mentioned in the list we are debating—being used as a vehicle for hiding finance and concealing ownership. I would like the Minister to tell us where we are on some of the promised measures on that. For example, where is the registration of overseas entities Bill, which has been promised for years? In fact, 10 December marks the fourth birthday of the promise of that legislation. Where is it?”
“Specifically, it found that there were significant weaknesses in the risk-based approach to supervision among all the UK AML/CTF supervisors, with the exception of the Gambling Commission.” My first question to the Minister is, what has been done since the Treasury accepted that there were significant weaknesses in our approach? The same document states: “For the accountancy and legal sectors, weaknesses in supervision and sanctions are a significant issue which the UK has put steps in place to address.” I would be grateful if the Minister could update us on that. It matters for a number of reasons. The UK has a particular responsibility with regard to money laundering and terrorist financing because of the size of our financial services sector.”
“It is a pleasure to have your chairing our proceedings, Ms Elliott. I thank the Minister for her explanation. We debate these money laundering regulations quite regularly—as FATF changes its list, countries are added and removed. This particular statutory instrument removes Botswana and Mauritius from the list of high-risk countries, but adds Turkey, Jordan and Mali, which are now classed as high-risk countries that require extra due diligence. As the Minister said, those changes are based on periodic FATF reports. I refer to the Treasury’s own response to the FATF report, which states in paragraph 1.6: “Whilst the UK achieved a high rating, the FATF assessed the UK’s supervision regime to be only moderately effective.”
“Similarly, the Minister is right that plans have been announced—over and over again—to reform Companies House, but they have not been implemented in a way that would empower that body to be a guardian of propriety, rather than simply a library of data. The statutory instrument will go through, there is no question about that, but I would say to the Minister that we need a lot more urgency if we are to not just keep up with the FATF list but set an example around the world on how to tackle money laundering and terrorist financing. We should be taking enough pride in our country to want to set an example, rather than simply coming back here every few months to say that we have kept up with the FATF list. Question put and agreed to.”
“Is the Minister really telling us that the Treasury and the Government do not judge Russia to be as big a risk as the countries on this list? That seems to me to be a judgment that is franchising out our capacity to act on these important issues to another body, in a way that the Government have spent five years telling us they do not want to do any more. My plea to the Minister is to have the confidence to exercise some of her own judgments on such things, because the very size of our financial sector means that we must be far less passive than that. I am afraid it is not enough to say, on the registration of overseas entities Bill, that I will just have to ask another Department. The lack of urgency is not good enough given the risks posed in these repeated releases of papers.”
“The Minister’s closing statement, in a sense, sums up the problem. Yes, this list does keep us in line with the FATF list; nobody is disputing that. My point is that that is not enough. We should be capable of exercising our own judgments. The Minister says, on Afghanistan, that FATF is looking at it, so we will wait until it looks at it. Surely this country, with a financial sector of such a size and a Treasury as powerful as the one she is a Minister in, is capable of exercising its own judgment about the financial risks in other countries? We took a major decision a few years ago that was all about sovereignty, and here we are franchising out our judgment on high-risk countries to another body and saying that until they come up with a verdict, we will not add any country to this list. The same goes for Russia.”
“In both the public debates on the Bill and at briefings from the FCA, it has been estimated that, in terms of what it would mean as an actual interest rate, synthetic LIBOR will be about 12 basis points higher than actual LIBOR now. My first question for the Minister, therefore, is why should synthetic LIBOR be set at 12 basis points higher than actual LIBOR and what will that mean for the contracts involved?”
“In the debates in the other place on the Bill, the figure of about £450 billion was, I believe, mentioned as the worth of such outstanding contracts. If that estimate is correct, then there are still very substantial contracts that could be affected by the switch. The Bill empowers the FCA to produce a new benchmark, to be called synthetic LIBOR, which, as the Minister said, will be regarded as LIBOR for the purposes of the contracts involved. That will run alongside the Bank of England’s new benchmark, called SONIA—sterling overnight index average. If SONIA is the daughter of LIBOR, then synthetic LIBOR can be regarded as the ghost of LIBOR. The Bill sees the two walking together, travelling side by side.”
“However, that move away from LIBOR has been more difficult than first thought, because of the volume and the endurance of the contracts involved. As the Minister mentioned, it is thought that there are some $300 trillion-worth of contracts based on that benchmark. Some of those will not be transferred to new benchmarks by the deadline set at the end of this year, and that is where the Bill comes in. Clause 1 seeks to ensure continuity between LIBOR and its successor for contracts which have not managed to move to a new benchmark by the end of the year. There was an exchange during the Minister’s speech, between him and the SNP spokesperson, the hon. Member for Glenrothes (Peter Grant), where the question was asked: how much are we talking about here?”
“That left financial markets subject to corruption for private gain. Not surprisingly, in the wake of that there were inquiries, including a major cross-party one in this House on which I served. It opened the door to wider cultural issues in banking about risk and reward, and asked the question: for whose benefit exactly were those institutions being run? It also provided the spectacle of the chief executives of some of the banks, some of the highest paid people in the world, claiming, one after another, that they did not know what was going on in their organisations until they first learned about it through the newspapers. In the wake of all that, regulators around the world agreed to move away from a benchmark based on supposed expert judgments, to benchmarks based on actual trades.”
“The programme motion we approved a short time ago allocated up to six hours for this process. As I look around the Chamber, Madam Deputy Speaker, I feel that span of time may prove adequate for our purposes today, but one cannot be sure. I am grateful to the Minister for his explanation of the Bill and for the briefing he arranged prior to today’s debate. I am also grateful to the FCA for the briefing on the Bill that I requested a week or so ago. As the Minister said, we all know the background to the desire to move away from LIBOR as a benchmark for financial contracts. A decade or so ago, a scandal of LIBOR manipulation was uncovered, whereby traders who submitted estimates of borrowing rates were manipulating the submissions for the benefit of the institutions they worked for, and indeed for themselves and the accounts they managed.”
“I would be very grateful if the Minister could respond on exactly why this legislation was needed in the first place and how long it may last, and to the other questions that I have put to him this afternoon.”
“The Financial Services Act, which gives rise to the powers that we are debating, talked about a transitional period of up to 10 years while this new alternative benchmark might run alongside others that have succeeded LIBOR, so it is conceivable that it could take the best part of 20 years to go from the uncovering of the original scandal to the final move away from LIBOR. What is the likelihood that the Minister, who has been very long-serving in his post, or his successor will have to come back to the House with more legislation on this matter because, even after all that length of time, it is not enough to wind down all the contracts that we are talking about? We will not oppose the Bill today because we understand that continuity of contracts is in the public interest, but it is not clear to us how temporary a regime this is.”
“They are being sold by the Government as a transitionary process—a bridge from LIBOR to a world without LIBOR—but, as long as they are in place, we have SONIA, LIBOR’s replacement, operating alongside the ghost of LIBOR in the form of synthetic LIBOR. Is all this just kicking the can down the road or do the Government really have an exit plan for these tough legacy contracts? If they have not been able to move these contracts away from LIBOR now, when, for years, the regulators have been flagging that they should do so, why does the Minister think that they will move away from the ghost of LIBOR? It is now almost a decade since the original scandal of LIBOR rate manipulation was uncovered.”
“That Act, as we will both fondly remember, authorised the publication of the alternative benchmarks in the first place, so why, after our spending all those happy hours putting that Act through Parliament, have the Government concluded that they have to return with further legislation? What was it about the Financial Services Act that left the picture incomplete? How do we know that this is the last piece of the jigsaw and that the Treasury will not have to come back a third time to fill in other potential gaps? There is also the important issue of the timescale or longevity of these measures.”
“We can see the logic of insulating a public agency from legal action if it is carrying out a duty that stems directly from legislation, but the same clause states that it does not remove liability entirely—for example, over the exercise of discretion or timing of the publication of a benchmark. Will the Minister explain to the House, under clause 2, just how insulated from legal action are the FCA and the administrators that are authorised as a result of the Bill? Underlying all that is the question of why we need this legislation at all. Around a year ago, the Minister and I spent many a happy hour debating the Financial Services Act, both on the Floor of the House and in Committee.”
“In the equivalent American legislation—LIBOR is used all around the world—there is what is known as a safe harbour provision: a mechanism to prevent contracting parties from engaging in legal action as a result of these changes. Will the Minister explain why the Government rejected that option for the UK? What is the difference between the restrictions in proposed new article 23FA(6) in clause 1 and the safe harbour legislation that has been put on the statute book in the United States? Clause 2 also deals with legal action. It insulates from legal action the administrators of benchmarks, who in this case will work on behalf of the FCA, who, in turn, will work on behalf from Parliament, assuming that the Bill is passed.”
“As I understand it, proposed new article 23FA(6) in clause 1 attempts to close off the possibility of legal action as a result of a contract moving from LIBOR to synthetic LIBOR—the ghost of LIBOR—which, in this example, would close the door on any potential legal action from disgruntled mortgage holders. I would be grateful if the Minister confirmed that that is the correct interpretation of proposed new article 23FA(6). To make this matter even more complex, proposed new article 23FA(7) in clause 1 leaves open the possibility of legal action, as long as the basis for it is not action taken under clause 1 of this Bill—that is, it is not simply the move from LIBOR to another benchmark authorised by the FCA. Again, I would be grateful if the Minister confirmed that my understanding of that is correct.”
“That brings us to the potential for legal action over the changes envisaged in the Bill. That is the difference between this proposal and what the Minister referred to as changes in the Bank rate, because this change is being brought about through legislative action whereas Bank rate changes are as a result of a decision by the Monetary Policy Committee. The question of legal action arises because if contracting parties have agreed a contract on the basis of one benchmark, might they take legal action if the move to a new benchmark ends up costing them more?”
“The FCA published a Q&A on these matters earlier this week, which stated that “there may be a small increase in your mortgage payment in January 2022 compared with your mortgage payment in December 2021.” It looks as though a payment rise is on the way for those 200,000 mortgages. That, of course, comes alongside a very live debate in the Monetary Policy Committee about changes to the Bank rate. Does the Minister think that those who hold mortgages based on LIBOR, which, in the buy-to-let sector, means about one in 20 mortgages—that is not an insignificant proportion—realise that that change, which was flagged by the FCA the other day, is coming as a result of the Bill? Have the Treasury or the FCA estimated what the total cost of that might be to UK mortgage holders?”
“No, it does not mean that. It means just over one-tenth of 1%, as there are 100 basis points in 1%. Twelve basis points, or just over a tenth of 1%, might not sound like a huge margin, but when we are talking about contracts worth up to £450 billion, small differences in rates can add up to a lot of money. To illustrate that, let us consider the position of mortgage holders. There are an estimated 200,000 mortgages based on LIBOR. My next question to the Minister is why have those mortgages not moved away from LIBOR in the years since the regulator encouraged contracts to do so? What has left them stuck on LIBOR before the approaching deadline of the end of the year? Will the move to synthetic LIBOR mean that these mortgages will pay rates of 12 basis points higher than if the move had not taken place?”
“Is there anything more that can be done, other than encouragement, or are contracts not moving away from LIBOR because it is a better rate and, ultimately, what people care about is the interest rate they pay? I wonder how temporary this will be. Are we kicking this can down the road with nothing other than encouragement for a group of contracts that have stubbornly stuck to LIBOR despite all the regulator’s enthusiasm? Is there anything between the Minister’s encouragement and future legislation that might change this situation?”
“If there is a fall-back provision and it is not synthetic LIBOR, what will it be? If there is a fall-back provision that could have a different rate from synthetic LIBOR, how will contracting parties decide which one to use? Will the fall-back rate, if such a thing is specified in a contract, automatically take precedence over synthetic LIBOR, or might there be room for argument about which alternative rate to use? Finally, there is the question of timescale and how long this will last. The Minister talks about encouraging remaining contracts to move off what will now be synthetic LIBOR. Indeed he said that, if we have to, we could pass further legislation.”
“What estimate have the Government made of the Bill’s impact on those markets? Paragraph 6 of new article 23FA, which we have touched on a few times, tries to limit or define the scope of legal action taken as a result of the move from LIBOR to synthetic LIBOR. How might that influence any attempt at judicial review? How confident is the Minister that someone could not try a judicial review of this attempt to close down the option of legal actions taken as a result of a Government-mandated move in financial benchmarks? The Minister referred to the discussion of fall-back provisions on page 3 of the Bill. For clarity, does this mean that some contracts will not transfer to synthetic LIBOR but will transfer to something else, depending on whether there is a fall-back provision in the contract?”
“I am grateful to the Minister and have a few questions for him, all of which relate to clause 1. The methodology for calculating synthetic LIBOR is the five-year average picked by the FCA. Were other possible methods considered? What impact would they have had on the interest rate? Secondly, the Minister referred to the rate bouncing around: on one day it could be less than real LIBOR and on another day it could be more. I believe that the FCA has used the figure of 12 basis points. For clarity, is that a fixed-term difference going forward, or will synthetic LIBOR vary on a daily basis, just as real LIBOR can? On Second Reading, we talked about mortgages. However, as the Minister rightly said, a far greater sum of money based on LIBOR is in the derivative markets.”
“In layman’s terms, does that mean that a fall-back provision trumps synthetic LIBOR? That is what I am trying to get at. If there is a fall-back provision—some alternative already written into the contract—will these synthetic LIBOR continuity provisions not kick in?”
“When the Secretary of State was appointed, he talked about tackling the “disease of disparity” and the inequalities in healthcare that had been exposed by the covid pandemic. Today, the sickle cell and thalassaemia all-party parliamentary group, which I chair, has published a major report on the care of people with sickle cell. The report exposes major inequalities and disparities, leading to people having to fight for the pain relief to which they are entitled, constantly having to explain their condition and developing a degree of mistrust in the healthcare system that is there to help them. We will send the Secretary of State a copy. Will he agree to meet me and representatives of the Sickle Cell Society to discuss the report’s findings?”
“The challenger banks argue that if the threshold for requiring bail-in debt was higher, that would release more capital, which could be lent to the SMEs that are the subject of today’s debate. When the Minister winds up, I would be really interested in his reflections on the debate about challenger banks and the minimum requirement for own funds and eligible liabilities. For the purposes of clarity, I should say that this is not a Brexit issue. The differential balance sheet limits for MREL predate Brexit, but challenger banks have all made the point that it places a ceiling on their capacity to grow.”
“In this country, once a bank’s balance sheet increases above the range of £15 billion to £25 billion, the MREL bail-in rules kick in, although the Bank of England has indicated recently that the staircase for compliance will be shallower and over a longer period than was previously the case. The thresholds elsewhere are much higher. In the European Union, the threshold is €100 billion. In the United States, it is $250 billion. That means that bail-in in those jurisdictions is aimed at much bigger banks. There is another factor, which is related to the different ways that deposit insurance works in those jurisdictions, which has an impact on the risk appetite of regulators, but those are still much higher thresholds than in the UK and they allow medium-sized banks to grow before having to adapt to this new regime.”
“That is important, because there is an active debate between the banking sector and the Bank of England about how that operates. The concept of bail-in debt was introduced after the financial crisis to avoid the situation where the taxpayer has to step in if a bank goes belly up—or, as it was termed, privatising the gains and nationalising the losses. With bail-in debt the bondholders are supposed to be on the hook, not the taxpayers. That is the right thing from the public interest point of view, but inevitably it entails a cost that will be applied to those who are lending to banks under those circumstances.”
“Member for Darlington mentioned community development financial institutions in that regard and I believe they have an important role to play. I am familiar with the role of the Black Country Reinvestment Society, which operates in the area I represent. It has been able to step in at times and offer loans when the main high street banks have turned people down, and I believe it has helped around 1,500 businesses in the west midlands region over the years. I am sure it is a similar story in other parts of the country with other CDFIs. The debate has also seen some discussion about the challenger banks and their potential to do more. The Minister heard the points made by the hon. Member for Darlington about MREL funding.”
“As we recover from the pandemic, many SMEs are facing labour shortages, rising crises in materials and other effects, and our capacity to recover economically from the covid pandemic will depend to a large degree on how SMEs meet those challenges and manage to fare over the coming years. There are, as we have heard, particular traditions when it comes to access to finance for SMEs here in the UK. They include a dependence on loans from a relatively small number of traditional high street banks, a major focus from banks on mortgage and other property lending, a relatively new group of challenger banking entrants and less-developed non-bank sources of finance that are not always easily available to SMEs. The hon.”
“In that context, programmes such as the bounce back loan scheme and the coronavirus business interruption loan scheme were important and welcome. As we now unwind from that level of Government support, it is important that the repayment mechanisms and the schedule are realistic. The SNP spokesperson referred to the burden of debt that has been left. It is also important that we have a proper assessment of the level of fraud and the use of public money in those schemes. A lot of money went out of the door and it is important that the taxpayer gets good value for money in support schemes of that nature.”
“Thank you for your chairmanship, Mr Pritchard. I am grateful to the hon. Member for Darlington (Peter Gibson) for proposing the debate and to the hon. Member for Thirsk and Malton (Kevin Hollinrake) and the APPG on fair business banking for their work on the issue. As we have heard, small and medium-sized enterprises are at the heart of the economy. They employ millions of people and are responsible for much of the innovation and creativity that makes this country such a special place and such a dynamic economy. They have, of course, been through a tough time over the past 18 months or so. Many small businesses could not trade at all for much of the period, and others only in very restricted circumstances.”
“It is a contribution to the economic growth that the UK needs if it is to escape the high-tax, low-growth trap in which it finds itself, and for which households and businesses will have to pay the price in the tax rises recently announced, which will kick in over the next few years.”
“That could have lifted many small businesses out of paying business rates altogether, but that did not happen. Nor did the more fundamental reform needed to ensure that business property tax fits the economy of today and tomorrow, rather than the economy of yesterday. There will be other factors, too—not least our education system and whether we are equipping the workforce of tomorrow for the labour market of the future. Every time talent or potential goes unfulfilled, it is a drag anchor on economic growth, and that denial of opportunity is not just socially unjust, but economically destructive. We need to examine everything that can contribute to economic growth, and that means an SME sector firing on all cylinders. This debate calling for more access to finance for SMEs is timely, but access to finance is not an end in itself.”
“The country will become more prosperous and we will be able to pay our way. That is another reason why a healthy and properly financed SME sector is so important. Businesses need access to finance to be able to invest in expansion, to make the new idea happen, to be able to buy the new piece of equipment that might be able to do the job in a greener or more efficient way, to move into new premises, and to increase capacity to meet new orders. That is the foundation of economic growth, and right now we do not have enough economic growth. That of course is not the only thing that will impact growth. If we talk to many businesses, they will tell us about business rates. In advance of the Budget, we called for an increase in the threshold for small business rate relief from £15,000 to £25,000.”
“In fact, in that report it downgraded the long-term impact of the pandemic on GDP from 3% to 2%. Its estimate of the long-term impact of the Prime Minister’s Brexit deal was a hit to GDP twice as high as that from the pandemic. We are talking about the financial services industry today. It was hung out to dry in the Prime Minister’s Brexit deal. It is not that the Government fought for market access and lost—the Government did not even try. This is 10% of the UK economy, hundreds of thousands of jobs around the country. It was simply left by the wayside when the Government negotiated the Brexit deal. It is in everyone’s interests to address the issue of the UK’s sluggish economic growth. If the economy grows more, tax revenues will increase without tax rates having to rise.”
“Once we strip out the covid effects of huge plunging growth last year and a sharp bounce back this year and next, the recent report from the Office for Budget Responsibility, published at the same time as the Budget, predicts a return to those sluggish growth rates, averaging just 1.5% between 2024 and 2026. Let us be clear: taxes are increasing because economic growth has been low. It has been low for more than a decade, and the Government cannot continue to blame that on the past. This low growth has left the country less wealthy than it would have been, and it has made it harder to fund public services adequately without upward pressure on taxes. Low growth is the foundation for the series of tax rises that the Chancellor has announced over the past year. That is a much bigger factor than the pandemic; the OBR report makes that clear.”
“There is a potential tension here between competition and safety. The rules were brought in to insulate the taxpayer, but, at the same time, the Bank of England, the Treasury and the Government—everybody—subscribe to the idea of more competition in the UK banking sector, so I believe this discussion will continue. More broadly, the issue of access to finance is also related to the question of economic growth. Economic growth has been sluggish in the UK for the past decade, averaging just 1.8%, which is significantly lower than pre-financial crisis rates of growth.”
“I wish the Chancellor and my hon. Friend the Member for Ealing, Southall (Mr Sharma) a very happy Diwali. As well as all the tax rises on income and business that the Chancellor has announced in the past six months, buried in the Budget Red Book is a plan for a stealth tax on the self-employed of £1.7 billion over the next few years. After the past 18 months, in which many self-employed people have had no help at all, and when they are already being hit with the other tax rises he has announced, why are the self-employed now being hit with this extra tax rise, which he did not even mention in his Budget speech last week?”