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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“The challenge for the Government is clear: define what levelling up is; ensure that the definition includes people as well as bricks and mortar; and have a genuine local voice in how this is done, rather than the centralised approach that has been adopted so far. If Ministers do that, we might make some progress, but if they continue on the current path, the danger is that the verdict of their Industrial Strategy Council is what comes to pass.”
“Reports suggest that the Government Whips have threatened to withhold funding from Conservative MPs’ constituencies as a mechanism for stamping out potential dissent on the Government Back Benches. The Chief Whip is alleged to have said, “My pen hovered over your name,” to one potential rebel. Why should MPs’ constituents lose out because their MPs had the temerity to exercise their own judgment or the gall to stand up for what they believed in? Public money should not be used in that way. Whips have always tried to get MPs to vote the party line. That is their job. But the allocation of public funds should not come into it. That shows the inherent flaws in trying to do this in such a centralised way.”
“Evidence, historical and international, suggests this is unlikely to be a recipe for success. Sustained local growth needs to be rooted in local strategies, covering not only infrastructure but skills, sectors, education and culture. These strategies need to be locally designed and focussed”. The truth is that the Government do not want this to be locally led. They want it to be centralised, controlled by Ministers and given out solely at their discretion—the subject of Friday visits in high-vis jackets. They are not talking about skills and education, because those things are not tangible enough for press releases and election leaflets. They want physical projects that they can point to. We read today that the agenda may even be used as an instrument of political control inside the Conservative party.”
“A true levelling-up agenda would focus on people, not just capital expenditure. Unless we help people to succeed—help them to deal with the costs that they face, for example in relation to childcare and the early years, and enable them to make the most of their talent through properly funded, excellent schools and great second-chance education later in life—true levelling up will not happen. We will have some extra infrastructure spending, but that is what it will be. Let us take the verdict of the Government’s own Industrial Strategy Council, issued shortly before it was abolished by Ministers. It said that “the proposed approach appears over-reliant on infrastructure spending and the continued use of centrally controlled funding pots thinly spread across a range of initiatives.”
“The Government would like the public to believe that they have been in power for only two years, but that is not the case; they have been in power for 11 years. What of levelling up itself? We welcome every new pound of investment and every new job created. We want every part of the country to succeed. We want the best possible opportunities for people, no matter where they live or the circumstances into which they were born. But that will not be achieved by pots of capital expenditure alone. Even when it comes to the money, the new levelling-up fund replaces a local growth fund that was actually worth more, and half of its budget this year is taken from the towns fund. It is the reannouncement of the same money over and over again. Then there is the basic concept itself, and this is the heart of it.”
“Levelling up has to be considered alongside what local areas have lost over the past decade: billions of pounds cut from local authority budgets; 773 libraries closed in England; 750 youth centres closed; 1,300 children’s centres closed; and school funding per pupil cut by 9% over the past decade, the biggest fall in 40 years, a direct attack on the opportunities and life chances of the very young people who need education the most. There is no greater leveller up than education. It is more powerful than any new road, building or bus lane. It is the platform upon which barriers are torn away. It is the weapon through which glass ceilings are broken. And on this most fundamental of issues, opportunity has been taken away and not enhanced, so before we talk about levelling up, we need to ask: who did the levelling down?”
“These were abolished by the coalition Government and replaced by local enterprise partnerships, which we were told would lead to regeneration through private sector-led boards. Who ever hears about LEPs now? How did they become the poor, unloved children of the Conservative Government, created and then ignored by Ministers? What is the Government’s problem with the LEPs they created? Is their crime being too local?”
“In the Government that I served, we launched the new deal for communities. My own constituency received £53 million from this for the All Saints and Blakenhall area, more than twice what the whole city has received under its recent towns fund bid, more than a decade on. We had Sure Start, the Building Schools for the Future programme, rising investment in the NHS, falling waiting times and major cuts in child poverty. We introduced tax credits to help lower paid working people. We did not cut their incomes by £20 a week, as the Government will do next month, a cut that will affect 12,000 families in my constituency and millions of families across the country. We had regional development agencies covering the whole of England.”
“Thank you for your chairmanship today, Mr Robertson. I thank my hon. Friend the Member for Barnsley Central (Dan Jarvis) for tabling this debate. As he said, he comes to this issue not just from the perspective of a local MP but as the Mayor of South Yorkshire. He spoke eloquently about the challenges facing his area, which are shared by many areas across the country. I do not propose to use the time available to go over the familiar ground of what area has been allocated what fund. Those issues have been well aired and the disparities are there for everyone to see. Instead, I want to look at the wider picture and to begin by asking the Minister to define levelling up. What do the Government mean by it? Can she define it in clear and simple terms? There is a long history to efforts and attempts to tackle regional inequality.”
“We do not want to do things that hurt the Afghan people, but what will the Treasury, regulators and, indeed, the Government as a whole do to ensure that funds are not channelled to terrorist organisations as a result of the Taliban takeover?”
“Is that because the measure was drafted in July, before the Taliban takeover? If so, have the Government taken measures on money laundering and terrorist financing since the Taliban assumed control on 15 August? A brief look at the Government’s consolidated list of financial sanctions targets shows that there are 135 Afghans on it, a number of whom have assumed positions of significant power in the Afghan Government. Sirajuddin Haqqani, the new Afghan Government’s interior Minister, is on the UK consolidated sanctions list. He is also on the FBI’s most wanted list, because—according to Reuters—of his links to suicide attacks and al-Qaeda. There are others, too. How do the Government intend to respond to the formation of the Afghan Government and money laundering and terrorist financing?”
“Anything that suggest slackness on our part—anything that involves UK institutions and anything where it appears that the regulators have taken their eye off the ball—is bad for public confidence in the UK’s financial services sector. Sadly, UK institutions have been named quite a lot in recent years in stories about illicit finance. We see from the regulations that the picture changes over time, with some countries coming off the list and others being put on to it. For example, Ghana has been removed from the list, but Haiti, Malta, the Philippines and South Sudan have been added. Malta is an EU member state. One would hope that high standards of governance and supervision were in place. Can the Minister explain further why Malta has been added to the list? More notably, Afghanistan is not on the list.”
“Thank you for your chairmanship today, Sir Graham. I am grateful for the Minister’s explanation of the measure and of the criteria for including countries on the list, which is updated periodically and relies heavily on the work of the Financial Action Task Force. We shall not, of course, oppose this today because we believe that it is important to have the strongest anti-money laundering regime and to take the strongest measures possible. That is very much in the public interest. It is not easy, because regulators have to keep track of evolving practice among those who try to get round the law. There is a particular duty on the UK to take the issue seriously given the size and global reach of our financial services sector.”
“If we were to think of a country at greatest risk of being used for terrorist financing, Afghanistan and its new Government would be high in our thoughts. The Minister tells the Committee that the list is based on FATF’s work. I understand that, but presumably the Government have the power to go beyond FATF and say, “We think Afghanistan should be on the list.” Is there anything to stop the Government adding Afghanistan to the list, according to their own timetable, before FATF looks at the issue again?”
“Our troops did a great job at Kabul airport, but the events of recent weeks have exposed the limitations of our ability to act outwith the umbrella of the United States, even if we wanted to choose a different path. What is the Prime Minister’s response to the exposure of those limitations?”
“Are we going to pretend that they matter less because we do not feel we own them? What is our message to oppressed people around the world after this? Are we going to console ourselves with tweets of solidarity which offer them nothing? That is not a foreign policy, it is not a moral stand; it is just a pose, and the oppressed people around the country—around the world—deserve better than that. So where do we stand in the world now? What does rhetoric about global Britain mean in the face of what has happened in the past few weeks? Where do we stand with the United States, when the limitations of our ability to act have been so brutally exposed? This is the question that will be asked of the west now. It is about trust in our word and trust in our faith, and recent weeks have been a major setback to both.”
“There was not peace in the whole country, and violence still killed many, but undoubtedly great gains were made. Let us be clear that the Taliban are in control of Afghanistan today not because we intervened in 2001, but because we abandoned it in 2021. The defence of the position that has been adopted is that we cannot go on forever, but our role had radically changed. Far fewer troops, less frontline fighting and more of a support role. The question has to be: was this withdrawal necessary now? Was this outcome inevitable? Many times in this House we have debated intervention. It is a difficult choice and when it happens, we know that ownership of the consequences follows. But be in no doubt: the events of recent weeks show that not intervening has consequences too, and those consequences are just as real for the Afghan people.”
“I visited the Pul-i-Charkhi refugee processing centre many years ago, shortly after the Taliban had fallen. I spoke to people there and asked them why they had come home. They answered, “Because there is hope for our country.” The measure of what has been gained will now be seen in what is lost. It can be seen in the desperation of people clinging to the undercarriage of planes leaving the country. It can be seen in the palpable fear of those who feel their freedom and safety are now under threat. All these gains were made possible only because of the commitment we made, and because of the 457 members of our armed forces who never came home. Members on both sides of the House served alongside them. All those soldiers made a huge and positive difference to the lives of the Afghan people.”
“The actions of our armed forces, those of the United States and other allies, and the Afghan forces themselves have made a big difference to the lives of people in Afghanistan over the past 20 years. We have heard a lot today about the importance of education for millions of girls, about the value of the freedom that allowed women to work, about the political representation, the elections and the diversity of representation that would have been unthinkable under the Taliban, and much more. To suggest that the last 20 years were a mistake, that none of it should have happened, is to dismiss the importance of those fundamental gains. It is to dismiss the importance of one of the biggest movements of refugees back into a country in living memory.”
“In particular, the Government should reconsider the cut of £20 a week that they plan to make for the 6 million poorest households in the country in just a few months’ time. This issue, perhaps more than any other, points to the need to come out of this pandemic in a better position than when we went into it. We need to tackle inequalities, which, although not created by the experience of the last 18 months, have certainly been exposed by it. We have to be more ambitious than just trying to recreate what went before. If build back better means anything, it means tackling some of those problems and building something that really is better for the future. That is what we have to do, starting with household debt.”
“How can the Government talk about levelling up when they are about to proceed with a cut in income that will hit the poorest hardest and will hit the north and the midlands hardest? Equality is not just about a few new buildings or a few pots for capital spending; it is about incomes and opportunities, too. It is not just about bricks and mortar; it is about families who are struggling to pay the bills. Although some of the Government’s interventions have made a big difference overall, for some people the past year has meant debt increases and a big strain on household budgets. It would be grossly complacent of the Government or anyone else to look just at the overall figures and averages. The Government must get underneath these figures and consider the impact on those who have the lowest incomes.”
“Leaving aside the callous implication that poverty has to be increased to persuade people to work, we have to remember that two in five universal credit claimants are already in work, and the proportion of in-work households dependent on universal credit is expected to rise over the course of this Parliament. It is a myth to portray universal credit as just an out-of-work benefit. It supports many people who are in work, too. The regional impact of the proposed £20 a week cut is deeply uneven. In the region I represent in the west midlands, the cut is expected to hit one third of households. Similar proportions of households will be affected in Yorkshire and the north-east.”
“Their letter says: “A failure to act would mean not grasping this opportunity to invest in a future with more work and less poverty and would damage living standards, health and opportunities for some of the families that need our support most as we emerge from the pandemic.” That is what the Chancellor’s own former colleagues are saying. Going ahead with this cut would mean a loss of £1,000 a year in income for 6 million of the lowest income households in the country. On the radio this morning the Chancellor tried to justify the cut by referring to incentives to work.”
“The number of renters on universal credit has already doubled during the pandemic. There has quite rightly been a focus on universal credit today. I acknowledge that the Government’s support has helped household incomes during the pandemic. The furlough scheme, grants for small businesses and the £20 a week uplift have all made a big difference until now, but as even the Prime Minister confirmed earlier this week, although restrictions will be lifted in the coming weeks, we cannot say the pandemic is over. That is why six former Conservative Secretaries of State for Work and Pensions have taken the step of writing to their own Chancellor to say that the £20 a week universal credit uplift should not be withdrawn in September.”
“There was also a rise in this figure among some ethnic minority-led households, where often there is just one income earner. The charity StepChange, which we have heard a lot about today, reports that 11 million people have built up debts of £25 billion during the pandemic and that 4.3 million are now behind on things such as council tax, rent and fuel. It reports a 40% increase in the number of people facing severe debt problems, and that half a million private renters are now in arrears—that is twice as many as before the first national lockdown—at a time when the ban on evictions has just come to an end. Combined, those effects have led to the campaigning organisation Generation Rent to fear that thousands of tenants could face eviction just as the country tries to emerge from the pandemic.”
“For many people on low incomes who had nothing to spend on holidays or restaurants in the first place, the cost of essentials has gone up over the past year. Families have been spending more time at home. That has seen heating bills rise. There have been increased food bills from children spending long periods off school. And there have been other extra costs. This morning’s report from the Institute for Fiscal Studies says that the proportion of low-income households in arrears with their bills rose from 15% to 22% in the early months of the pandemic. Among the self-employed, the rise was even more stark. The proportion of the self-employed falling behind on household bills rose from just 2%, at the start of the pandemic, to 13%.”
“For those on secure incomes who have continued to be paid their full salary—or most of it through furlough—long periods of lockdown and the inability to spend on travel, tourism and so on during the pandemic have resulted in rising levels of savings. We hear some big numbers from the Bank of England—up to £200 billion in the course of the pandemic. That of course has led to a big increase in bank deposits, not only in this country but in most developed countries. However, behind the overall figures lies a tale of two cities—or perhaps this week, we should say “a game of two halves”. The biggest increases in savings have come for those who were better off in the first place and for retirees. Those on low incomes and the unemployed have seen savings decrease, and that is if they had any savings at all in the first place.”
“Thank you for your chairmanship, Mr Bone. I begin by paying tribute to my hon. Friend the Member for Makerfield (Yvonne Fovargue) and the hon. Member for Blackpool North and Cleveleys (Paul Maynard) for tabling this debate. I also welcome the contributions from all the right hon. and hon. Members who have taken part. As my hon. Friend the Member for Makerfield said at the start, any consideration of the pandemic’s impact on household finances and debt has to take into account not just the overall effects that we are hearing about, but the impact on particular income groups. In this case more than many others, averages and overall outcomes can conceal very different outcomes for different groups of people.”
“Will that actually make any difference to the amount of capital that a bank is expected to hold in relation to its overall loan book? My third and final question is more fundamental. Is the Government’s policy intention that financial institutions should be required to hold less capital now that we are outside the EU than if we had remained inside?”
“That is important, because it acts as what could be called a “backstop” over and above the various risk-weighted activities that are dealt with in the Basel rules. Of course, leverage, or the lack of overall capital, were at the heart of the financial crisis. Since then, the rules have been changed to make financial companies more resilient, decreasing the likelihood of the taxpayer being on the hook and having to bail out systemically important firms in the event of a future crisis. I want to ask the Minister about that overall leverage ratio. What difference will the SI make to the way that the overall leverage ratio will be dealt with? What is the effect of excluding the balances held by the Bank of England?”
“First, paragraph 8.1 of the explanatory memorandum states that “This instrument does not relate to withdrawal from the European Union”, but did the new powers given to the PRA, which the order relates to, not result from the onshoring of the EU capital requirements regulation? If what we are doing is squaring one set of regulations with something in the 2021 Act that arose from withdrawal, does that not also relate to our ongoing and seemingly never-ending process of onshoring EU regulation? That is my first question: is this part of the onshoring process or not? The second thing the regulations do is to make changes in relation to the total exposure measure, or the overall leverage ratio, of financial companies.”
“It is a pleasure to serve under your chairmanship, Mr Efford. The regulations will potentially do two things. The first is to square the FPC’s powers with the changes made to the PRA’s powers in the Financial Services Act 2021, which the Minister and I spent many a happy hour debating—I think it was in this Room—about six months ago. That Act gave the PRA new powers, as a result of our departure from the EU, in relation to various macro-prudential measures, specifically the capital requirements regulation. The order gives the FPC the power to direct the PRA on matters relating to holding companies. I have three questions for the Minister about the order.”
“I thank the Minister for that explanation. Does the instrument and what it does on excluding the Bank of England balances make any difference to what he has just outlined and what the leverage ratio is? I think the answer is no.”
“I want to press the Minister a bit on this. Does the Government have a view on these capital requirements that is any different outside the EU from when we were in the EU?”
“I cannot predict the Minister’s future and personally I wish him well, but it is certainly within realistic possibility that a different Economic Secretary to the Treasury and Opposition spokesperson will be standing here in two years’ time debating the rollover to the rollover to the rollover. We do not oppose the substance of the regulations, but we are casting a wry eye over the process of legislative long Brexit.”
“I do not know whether you were listening to the news this morning, Mr Robertson. There was a report about long covid, which is defined as people having symptoms for 12 weeks or more after they have been diagnosed. What we are dealing with here is long Brexit: the legislative process that never ends of extensions to transition measures, where British regulations were supposed to be replacing the ones that we were leaving. On the substance, I should say that of course we are not going to oppose something designed to contribute to financial stability and avoid the kind of financial chain reaction that can come with an insolvency in one part of the system. But the broader point is about how long the process is going to go on.”
“I appreciate why the Minister has gone for two years: he does not want to be doing this every six months, and there is some rationale in that. Brexit was sold as being an end to red tape—nobody said it would be replaced with all this red, white and blue tape that we are debating today. I am not just talking about this instrument. Yesterday, the Financial Secretary to the Treasury was in a room somewhere along this corridor doing exactly the same thing to the extension process for customs safety and procedures—that was supposed to be for six months and is now having to be rolled over again. It will not be just these two financial instruments; there will be others too. This is the legislative process that keeps on giving—the rollover of the rollover, but no EuroMillions prize at the end.”
“As the Minister said, the regulations are about protecting assets in mid-transaction from being clawed back in the event of an insolvency, increasing confidence in the financial system and contributing to its stability. Such fire breaks in clearing and transactions are an established part of the system. They are important because they are designed to stop an insolvency in one company from leading to a chain reaction right through other parts of the system. That much is uncontroversial. The original form of the regulations was to offer protection for up to six months after the end of the transition period to firms that were part of the EEA processes; as the Minister said, the timetable runs out next Wednesday. But not all firms have completed the transfer to a new system, so we have this further extension for a two-year period.”
“Thank you for your chairmanship this morning, Mr Robertson. I have a feeling of déjà vu—in fact, Mr Robertson, it might be déjà vu all over again: not only have we been in this movie before, but we might be in it again in the future. But if I have a feeling of déjà vu, it must be nothing compared with the Minister’s. He has spent a large part of the last couple of years taking through these statutory instruments. He mentioned that there were 65 from the Treasury; I do not know what proportion of those he took through—a large proportion, I would guess. A lot of that was the rolling over of particular European regimes. Now he is back doing that again.”
“Financial services were not even part of the Brexit agreement that the Government negotiated, because they never made them a priority. Equivalence arrangements are nowhere in sight, £1 trillion-worth of assets have been moved abroad, and now food and drink exports to the EU have fallen by 47% in the first three months of the year. The Government estimate their new trade deal will add just 0.02% to our GDP. Is the sight of Ministers doing a lap of honour for that trade deal not the equivalent of asking our export industries to give thanks for losing a pound and finding a penny? When will the Government actually help our industries with the red tape that is baked into the agreement that they negotiated?”
“Here at the FSCS it is triggered in relation to authorised firms that go bust and regulated activities, whereas the fraud compensation scheme is triggered by dishonesty in occupational pension schemes. There will be differences, but the mis-selling we see is through authorised financial advisers as well as unregulated firms.”
“Q I thank all the witnesses for appearing before us this morning. I would like to begin with a question for the witnesses from the Financial Services Compensation Scheme. Clause 2 of the Bill authorises a Government loan in the case of pension fraud and mis-selling. Simon, what is your estimate of the level of fraud and mis-selling in pensions and investments? Do you think that phenomenon is growing or has it always been with us? Simon Wilson: Thank you for the question. If it is okay, I will pass it over to my colleague, James Darbyshire. James Darbyshire: It is difficult to put a figure on the extent of pension mis-selling going on at the moment. We are certainly seeing an increase, and certainly an increase through the covid crisis. It is important to make it clear that there is a clear distinction between the two compensation schemes.”
“Q Can you tell us a bit more about how it works? Give us a picture of the common mis-selling techniques and scams that are out there. How do these people operate? James Darbyshire: The typical cases of mis-selling that we see at the FSCS involve scenarios in which somebody has been misadvised to transfer from a vanilla pension into a self-invested personal pension and, within that, invest in illiquid, esoteric and high-risk investments. Sometimes there is a fraud element as well, but they are certainly very high risk and often lead to that person losing all their pension savings. That is our most typical scenario.”
“We work very closely with the FCA and last year, for example, we signed a memorandum of understanding with the Serious Fraud Office to ensure that we share information in the right way.”
“Q Do you think that online advertising and selling exacerbates the problem because it might remove the kind of face-to-face discussion that you would have with an adviser? Or should we not look at it that way because the advisers might sometimes be part of the problem? James Darbyshire: We are triggered because a regulated firm is involved, so there is an adviser who has mis-sold. But we have also seen an increase in pure scams, if we can call them that, that relate to investments that have been advertised through search engines. They are scams and not genuine investments. As part of the FSCS’s strategic role for prevention and our strategies for the 2020s, we are identifying those kinds of scams and ensuring that we pass the information, data and insights that we see on to the relevant enforcement agencies so that they can take action.”
“It has identified a range of issues and mistakes that the FCA made, for which we are profoundly sorry. We know that it has had a devastating impact on many people. We embarked on a range of initiatives and interventions as a result. We have done a significant amount of work on mini-bonds, in particular, and on other high-risk investments in the investment space and financial promotions arena. Actions are under way in all of them: some are closed, some are ongoing and some will take some time to be sustainable and to embed. Financial firms do fail due to a variety of circumstances. We are investing heavily in an ongoing transformations programme, but can I give you an absolute assurance that something will not happen again? Sitting here today, I cannot give that absolute assurance, no.”
“Q Thank you. I now have a couple of questions for the FCA’s representatives. The findings in the Gloster report are pretty damning in a number of ways. I will not go through them all but they include repeated phone calls about what was happening in London Capital & Finance not being acted on, interventions by the financial promotions team not being passed up the line, different bits of the organisation not speaking to one another and so on. After this report, I suppose the most important question is this: how confidently can you say that this could not happen again? Sheree Howard: Thank you for the question. Obviously you are correct that Dame Elizabeth Gloster undertook a very thorough and detailed investigation and produced a detailed report.”
“If you are asking whether we have changed, for example, our approach to financial promotions, we now escalate much earlier—we have a much clearer escalation process with a clear route through it. We have changed policies—for example, our contact centre policy—around areas highlighted in Dame Elizabeth’s report.”
“Q You are right that financial firms fail, but the issue is not just their failure. The reason for the Bill is that the Government judge that such was the degree of regulatory failure that a compensation scheme is in order. The question is not whether financial firms can fail—of course they can—but whether, following Dame Elizabeth’s report, there has been such a degree of change in the FCA’s operations that that degree of regulatory failure could not happen again. Sheree Howard: A significant range of action has already been undertaken and is still under way to ensure that we make the embedded change that makes the FCA fit for the digitised future. A huge amount has been done.”
“The report is clear about the state of supervision within the FCA at that point and the changes that were implemented by the then executive members of supervision and others in the light of issues that they identified when they came into the organisation. It was a very substantial change of responsibilities, and it came from a regime where there was not a supervisory regime.”