Dame Harriett Baldwin
MP for West Worcestershire · Conservative · United Kingdom
“I welcome the Chancellor to his new role. I paid close attention yesterday to the long speech he made to reset the narrative and drive growth Britain. In paying tribute to his predecessor, will he recognise that she left the highest tax burden on record? Instead of postponing the words he could utter to my hon.”
“I welcome the new Prime Minister to the Dispatch Box. I note that in his statement he referred to the biggest issues facing the country as being “the economy and the cost of living crisis”. Will he accept that one of the things that has damaged our economy and caused prices to be higher is the tax-and-spend Budget in November 2024?”
“Could the Leader of the House make a commitment that the new Chancellor of the Exchequer will come to the House on the first day we are back from recess?”
“With a stroke of his Whitehall pen, the Secretary of State has just abolished Malvern Hills district council, Worcester city council, wonderful Wychavon district council and Worcestershire county council. He said in his statement that this is about making “real improvements to people’s lives and…communities”.”
“In recent weeks in West Worcestershire, I have met local police and the police and crime commissioner; the police and crime commissioner is being abolished, and the police are being reorganised. I have met the local health commissioners; they are being reorganised, and Healthwatch is being abolished.”
“Will the Leader of the House confirm that, given that the other place is sitting next week, there is nothing to stop him tabling a business statement to enable this House to sit next week? Given the enormity of the events happening in the Government next week, does he not think that would be a good idea?”
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“Obviously, when an independent regulator is involved, we need to ensure that the right people are doing the job. Last week the Chancellor announced a number of new appointments to the FCA board, including an excellent new chief executive. As the Chancellor said, Andrew Bailey was the outstanding candidate to be the next chief executive. He brings with him a wealth of experience of financial services regulation in the United Kingdom. He is simply the most respected, most experienced and most qualified person in the world to do the job. However, I want to put on record the Government’s gratitude to Tracey McDermott, the acting chief executive, for all her hard work over the past four months. Last week we also appointed four new non-executive directors: Bradley Fried, Baroness Hogg, Ruth Kelly and Tom Wright.”
“I am left with very little time to cover such a wide-ranging debate. I congratulate the Backbench Business Committee and my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this debate. I think we can all agree that it is important that in the Financial Conduct Authority we have an organisation to keep financial markets honest for our constituents and for markets, which play a crucial role in our economy. We all want financial services to be on the side of our constituents—the people who want to work hard, do the right thing and get on in life. It is therefore vital that financial services display and uphold the highest standards of behaviour and treat their customers fairly. The House will no doubt be aware that most small business lending is not regulated.”
“That is why it is essential that it is well prepared, well staffed and well equipped to do that job, and that it has the best leadership possible. I am confident that the FCA has the right mandate and team. Like my hon. Friend the Member for North East Somerset, I believe that today’s motion is neither well founded nor well timed, given that a new chief executive and a new team are in place. I strongly urge hon. Members to ignore the motion before us tonight.”
“It is vital that consumers and firms know that regulatory decisions are being taken in an objective and impartial way. Contrary to what the hon. Member for East Renfrewshire seems to think, I have met the acting chief executive of the FCA and her predecessor from time to time. I regret the fact that the hon. Lady has formed a different impression. The hon. Member for Salford and Eccles raised the question of operational matters. I am afraid that she cannot have this both ways. If she wants the Treasury to interfere in operational decisions at the FCA, she is asking for something that completely contradicts the spirit of independent regulation that I have supported this evening. No one is denying that the FCA has a tough job ahead.”
“Let me reassure the House that I expect to see the conclusions of the FCA’s investigation into this matter in the first quarter of the year. On the point made by the hon. Member for Ross, Skye and Lochaber and my hon. Friend the Member for Wyre Forest on Treasury Select Committee scrutiny of FCA appointments, we have agreed that the Committee will be able to carry out a pre-commencement hearing before the new CEO starts at the FCA. A number of questions have been raised about FCA independence. The FCA is of course operationally independent of the Government. We appoint the chief executive and the board, and the FCA’s objectives and duties were voted into statute during the last Parliament. I firmly believe in the independence of the FCA.”
“Member for East Renfrewshire and my hon. Friend the Member for South Suffolk. The Government and the FCA understand the serious financial difficulty and distress that this issue has caused to many investors. As hon. Members might be aware, the FCA published an update to investors on its website this week on Connaught Income Fund, series 1. The update highlights that a settlement agreement has been reached between the liquidators of the fund and Capita Financial Managers Ltd. The FCA has asked the liquidators of the fund to distribute the settlement sum to investors as soon as possible. The investigation that the FCA is pursuing will continue independently of the settlement. The Global Restructuring Group was mentioned by the hon. Member for Edinburgh West and my hon. Friend the Member for Hazel Grove.”
“So far the scheme has paid out on 18,000 cases, and more than £2 billion has been paid in redress, including £464 million to deal with consequential losses. [Official Report, 4 February 2016, Vol. 605, c. 8MC.] As we have heard tonight, there are still some cases outstanding. As at year end, these include 700 cases in which full refunds have yet to be accepted. Businesses that are considered larger and more sophisticated are not covered by the redress scheme, but they can of course take advantage of the first-class brains in our legal profession. The FCA considers that there is merit in holding a review of how the scheme has worked when these legal cases have been concluded. The question of Connaught was raised by the hon. Member for Motherwell and Wishaw, my hon. Friend the Member for Aberconwy, the hon.”
“No, because the hon. Gentleman was not even present for the debate. The hon. Member for Edinburgh West, my hon. Friend the Member for Aberconwy, the hon. Member for Ceredigion, my hon. Friend the Member for South West Devon and the hon. Member for Brentford and Isleworth also mentioned interest rate hedging products and businesses that were suffering as a result of interest rates that were lower than expected. The Government have made it clear from the beginning that mis-selling of financial products is unacceptable, and that businesses affected by it should be compensated. The FCA has established a redress scheme for small businesses that were mis-sold interest rate hedging products to ensure that eligible businesses are compensated.”
“Lady again for raising these issues, and stress that both the Government and the Financial Ombudsman Service understand their importance to her constituents. Question put and agreed to.”
“However, it is possible for parties to challenge the way in which an ombudsman has reached a decision by means of judicial review. It is also possible for them to take complaints about the level of service provided to the independent assessor. When a consumer does not accept the ombudsman’s decision, that consumer's right to pursue redress through the courts remains unaffected. The individuals who are affected in this particular case have concerns that need to be addressed. I shall be meeting the chief executive of the Financial Ombudsman Service later this week, and I will ask her to write to the hon. Lady responding to the concerns that she has rightly expressed this evening. Let me thank the hon.”
“Lady’s constituents have benefited from that service. Importantly, once the consumer accepts an ombudsman’s final decision, that decision becomes binding on the firm. As I have said, the Financial Ombudsman Service was specifically designed to provide a swift and relatively low-cost alternative to the courts, which is provided free of charge to consumers. There are many stages in its determination process, providing both parties the opportunities to make further representations before the complaint reaches the final stage of an ombudsman’s decision. Adding another level of appeal would make the process costlier and lengthier, which could deter consumers from using the service and would generate additional costs for firms.”
“Lady will understand that I am unable to comment on specific circumstances relating to the individual cases she has raised today, but I am able to explain the Financial Ombudsman Service model and what she can do when she is not happy with the outcome of that model. The model includes what routes there are to complain about the level of service in dealing with a complaint, as well as the further routes that may be available for seeking redress. The Financial Ombudsman Service was set up by Parliament in 2000—its duties were enshrined in law under the Financial Services and Markets Act 2000—to provide a proportionate, prompt and informal means of resolving disputes between a consumer and a financial service firm. It plays a valuable role in providing consumers with a swift and effective means of resolving disputes, and some of the hon.”
“Lady and her predecessor have been in contact with the Financial Ombudsman Service to ask it to re-examine some of the complaints that were not upheld. We all recognise that it is of the utmost importance that people are given suitable advice about their retirement savings and that, when things go wrong, they have access to a swift and low-cost means of redress. It is important to recognise that since these events occurred in the 1990s the Government have made changes to introduce a tough new financial regulator, the Financial Conduct Authority, to protect consumers and promote competition. We took that action because we were not prepared to tolerate the level of consumer detriment we have witnessed in the past. The hon.”
“Lady has set out, a number of Anderson Mining Group employees have raised concerns that they were not made aware in 1995 and 1996 that a transfer to a buy-out scheme could result in a loss of benefits, and that the advice provided used an assumed retirement age of 65, whereas benefits could have been taken from their occupational pension schemes at age 60. They have therefore complained to the Financial Ombudsman Service about the financial advice they received from Godwins Ltd between 1995 and 1996 to transfer their occupational pension schemes into buy-out policies. I understand that in many of these cases, but not all—she mentioned 50%— the ombudsman found in favour of the complainants. I know that both the hon.”
“It is only by displaying and upholding the highest standards of behaviour that the financial services industry can regain the public trust it lost following the financial crisis. I am therefore very sorry to hear about the problems that the hon. Lady’s constituents have been facing in this case. Understandably, given the importance we all attach to having savings to provide for our retirement, her constituents are very concerned about the issue. I would like to reassure her, and all other Members, that the Financial Ombudsman Service also takes the matter extremely seriously. As the hon.”
“Despite my Scottish grandmother, I will not be able to quote Burns quite as beautifully as the hon. Member for Motherwell and Wishaw (Marion Fellows) did tonight— [ Interruption. ] But I did have the haggis in the Tea Room. I congratulate the hon. Lady on securing the debate. She has expressed powerfully the issues surrounding the Strathclyde Mining Group pensions and the Financial Ombudsman Service. As Economic Secretary, my key priority is to ensure that financial services firms are on the side of people who work hard, do the right thing and get on in life. Financial services should be there to help them achieve their aspirations at every stage of their lives, whether that is saving for their first home, taking out a mortgage, buying a car or, as in this case, saving and investing for their retirement.”
“There is therefore a reason that we treat foreign PEPs differently under the existing regulations, and that is why families and close associates are also looked at in more detail.”
“Another striking example is that of the former Secretary for Transport and Public Works of Macau. He was convicted of 40 counts of corruption and 13 counts of money laundering and sentenced to 27 years’ imprisonment. Since then the UK alone has recovered over £28 million of his corrupt assets and returned them to Macau. Another example is that of the late Frederick Chiluba. He was Zambian President between 1991 and 2001. On 4 May 2007 he was found guilty of stealing $46 million of assets in a civil case in the Royal Courts of Justice, and used UK-based solicitors to launder money. In 2008 it was reported that about $60 million had been recovered by the Zambian authorities.”
“There is solid reasoning behind this when it comes to PEPs outside the European Union, because political corruption is something we have seen time and again across the world on a truly astonishing scale. Let me give three examples. The first is the James Ibori case. He was a state governor in Nigeria from 1999 to 2007. In that time he stole tens of millions of pounds of public money. With an official salary of £10,000 he was somehow able to buy a £2.2 million house in Hampstead, one in Regent’s Park, a house in Dorset and a flat in St John’s Wood, and it was not just Ibori himself who was ultimately convicted and imprisoned: so was his sister, as well as other associates including his UK solicitor. That is because they conspired with Ibori to conceal the origins of his wealth through a complex web of transactions and shell companies.”
“I turn now to the specific issue of domestic PEPs. I recognise that this is the key concern of the debate, and that it is a concern not only of my hon. Friend the Member for Broxbourne but of many others in this House and the other place. As he states, the current global rules on anti-money laundering require that, in cases of high risk, banks and regulated businesses carry out enhanced due diligence on all PEPs—that is, those individuals entrusted with a prominent public function, be it politicians, high-ranking members of the military, senior members of the judiciary or others. Indeed, I myself got caught by this when I held an account with an American firm.”
“The Government are also committed to securing the hard-won growth in our economy. In order to maintain this momentum, we need to create a business environment that fosters innovation and investment and that is supported, not hindered, by regulation. That is why it is so important to get the regulatory regime right, and why we are carrying out a red tape review of our current anti money laundering regime, seeking views from the private sector on areas of the regime that it finds unnecessarily burdensome. The aim of this is to help us to fine-tune our legislation so that we have an effective regime that works for our country. That review will report in the coming months, and I look forward to working with my colleague the Minister for Small Business, Industry and Enterprise and to receiving the analysis.”
“Friend the Minister for Small Business, Industry and Enterprise, who is present, I am keen to enhance the action that we are already taking to deal with this example of red tape. I shall return to that subject shortly, but let me begin by setting out the broader context of our anti-money laundering and counter-terrorist financing regime, of which the issue of domestic politically exposed persons is just one part. This year will see the most comprehensive review ever of our regime to deal with illicit finance. At a global level we are taking action to improve our response to the threats of organised crime, international corruption and new and evolving forms of terrorism. As the Prime Minister set out in Singapore last year, that is exactly why he will be hosting a major anti-corruption summit in the UK this May.”
“I warmly congratulate my hon. Friend the Member for Broxbourne (Mr Walker) on securing the debate. His speech featured both the clarity and the oratory that regularly win him awards as a parliamentarian. My hon. Friend has raised an issue that I know has caused a great deal of frustration and anger with our banks, particularly when not just we but our families, by association, experience the same difficulties. I am grateful to him for putting a range of examples on the record, because I regularly inform my officials and the bank representatives whom I meet that my ears are bent every time I go into the Tea Room or the Lobbies, and now they will know that I am not exaggerating. I hear Members’ frustration loud and clear, and I assure them that, along with my right hon.”
“My goal is to have a banking system that is hostile to illicit finance and to terrorists, but which allows ordinary law-abiding and law-making citizens to move easily from one bank to another for better rates and better service. This debate has been very valuable for getting on the record the heavy-handed way in which banks are already applying these new rules. I would like to reassure my hon. Friend, and all other colleagues, that I am on his side, and I am grateful to him for bringing this issue to the House’s attention. Question put and agreed to.”
“My officials discuss this issue with their international partners on a regular basis, and we are seeking views on this as part of our public consultation on the updated money laundering regulations and how we transpose the fourth anti-money laundering directive into UK law. I am already regularly raising this issue with not only the banks but the regulator. I have already mentioned the red tape review of our current anti-money laundering regime, and today’s debate is helpful in that context. I know this is an issue of significant concern in this House, as we have heard clearly this evening, so I will report back to hon. Members as this work develops over the coming months.”
“Despite the fact that the new regime does not come into effect until next year, I know that some banks—we have heard some examples and some names today—particularly international ones, have already chosen to implement these changes. They are very much applying a one-size-fits-all process, as we have seen in the examples we have heard this evening. I know that for some individuals affected this has caused enormous frustration. Let me be clear: this change should not prevent any Member of this House, or any other individual in this category, from gaining or maintaining a UK bank account. We are looking at exactly how we can encourage the banks to implement these measures domestically in the most risk-based manner possible.”
“The motivation for these global standards is that in many countries domestic PEPs actually present a higher risk than foreign PEPs, and so one person’s domestic PEP is another person’s foreign PEP. The level of risk is not the same for all countries or all individuals, as has been pointed out, which is why the risk-based approach set out in the standards is crucial. Of course the UK supports a risk-based approach across the EU to identify and deal with PEPs, especially domestic ones. That is why we were supportive of the fourth anti-money laundering directive, which enacts these global standards. We are now faced with transposing the EU directive into UK law by June 2017, and it will extend the regime so that domestic PEPs will also be subject to enhanced due diligence across the board.”
“The right hon. Lady is right to highlight that, and I will be coming on to it. Clearly the degree of risk in terms of political engagement will vary not only by country, which is one factor that needs to be taken into account, but also with reference to the role of the individual. We have heard how the regime works currently, but we have also heard from my hon. Friend the Member for Broxbourne that the regime will be changing in the coming year. The overarching framework is set at a global level by the Financial Action Task Force, which is a collection of 36 countries, including the US and Australia. It includes both domestic and foreign politically exposed persons in its standards.”
“The Financial Conduct Authority is an independent regulator. No Treasury Minister or official had any discussions with the FCA before it took the decision to discontinue the review.”
“I find it hard to take lectures from the Labour party on regulating the financial sector. In fact, since my right hon. Friend became Chancellor, we have set up the Financial Conduct Authority and moved on from the failed regulatory system under the Labour Government. We made it a criminal offence to manipulate the UK’s key benchmark, we brought in the toughest rules on bankers’ pay of any financial centre, and we are bringing in a new criminal offence so that senior managers whose reckless decisions bring down banks can face up to seven years in jail.”
“I completely agree with the hon. Lady that we need to see the highest levels of conduct from the banking sector. We also need to continue to take steps in terms of our long-term economic plan to secure access to funding for small businesses. That is why we have taken steps to back peer-to-peer lending and extended funding for lending for another two years. We continue to benefit from record low interest rates thanks to our prudent economic management.”
“My hon. Friend, who is a very constructive and engaged member of the Treasury Committee, will have the opportunity to ask questions of the acting chief executive and the chair of the FCA on Wednesday. I agree that it is very useful for such a Committee to have pre-appointment hearings with any executive of the FCA.”
“My hon. Friend asks a salient question. The FCA is investigating this matter, and he will be aware that new rules—the markets in financial instruments directive II—will require firms to keep information for a considerable period, but this is the subject of ongoing discussions.”
“I am sure the right hon. Gentleman will welcome the announcement we are expecting on Wednesday from the Bank of England, the FCA and the Prudential Regulation Authority about their working together to back innovation in the financial sector. A key part of our long-term economic plan is to back competition in the banking sector, which is why I am pleased there were eight new entrants to the banking sector in the last Parliament. In this Parliament, we are aiming for 15.”
“It was good of the hon. Gentleman to turn up for Treasury questions this time—I guess there was not a Stop the War march or a picket line to join today. I can assure him that the Treasury has the power to appoint both the board and the chief executive and to set its remit, but from then on it has operational independence.”
“I am glad the hon. Lady welcomes the fact that, from April this year, all employees in the United Kingdom who are over 25 will receive a significant pay rise. That is thanks to the strength of employment throughout the United Kingdom, which in turn is thanks to our long-term economic plan.”
“My hon. Friend makes an excellent point. In fact, it has been stated that not only will 2.5 million people benefit directly from the change in the national living wage in April, but up to 6 million whose salaries are very close to that hourly rate will benefit as well.”
“We believe that every worker in the country will benefit from the change in the national living wage, which is an important part of the long-term economic plan, but, as the hon. Gentleman will know, this year public sector workers received pay rises that were above inflation.”
“The Government are exploring options to ensure that the England and Wales illegal money lending teams have the funding they need to ensure that consumers continue to be protected from illegal loan sharks, and are confident of transitional arrangements being agreed.”
“Far from agreeing with the hon. Gentleman, I must say that the Government are finding ways to put the team on a sustainable basis to continue the valuable work it does to protect people from illegal money lending.”
“I am delighted to tell my constituency neighbour that at the end of last year we announced that all the major banks are now able to offer a basic bank account to customers who require one.”
“In answer to earlier questions I referred to the importance that we place on the team that will tackle illegal money lending. We have continued to support funding for debt advice, including through excellent organisations such as Christians Against Poverty, StepChange and Citizens Advice, to help individuals such as those mentioned by the hon. Lady.”
“I am delighted that my hon. Friend found his visit to Barclays in his constituency to be so helpful. I know that he, too, will welcome the fact that since 2014 financial education has been part of the national curriculum.”
“My other constituency neighbour is a fine advocate for the excellent credit unions industry. As he will know, we have backed the industry with £38 million of investment through the credit union expansion project, and we will continue to seek ways to back credit unions.”
“It is equally important that steps are taken to ensure that this situation does not arise again in the future. I reassure my hon. Friend and all other Members that the Financial Conduct Authority takes this matter extremely seriously.”
“I congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this debate, chairing the all-party group and raising the serious issues concerning the Connaught Income Fund. His constituents and, clearly, those of many other colleagues have been seriously affected by this event and have written to me many times. Many investors have lost substantial sums and, indeed, sometimes their life savings as a result of the events involving the Connaught funds. I am very much aware that that has caused real hardship for people across the country. It is important that the FCA and the all-party group get to the bottom of this matter and try to secure the best outcome for investors in these funds. Those who are responsible should face justice for their actions.”
“However, having extended the negotiations more than once, in March 2015 the FCA announced its decision to withdraw from them. The FCA decided that a further extension to the negotiation period was not in the best interests of investors. I am sure my hon. Friend will understand that as the negotiations were voluntary and confidential, the FCA cannot provide specific details on what happened during the negotiations.”
“In May 2011, the FCA, which was at the time the FSA, altered Tiuta’s permissions on issuing new regulated mortgage lending. Shortly thereafter, it wrote to investors who might have been mis-sold the fund and all financial advisers who sold the fund, asking them to review the sales and to contact customers where there may have been the risk of unsuitable advice. The FCA has continued to provide updates on the situation via its website. Once the funds were suspended and steps were taken to wind them down, the FCA announced on 16 July 2014 that it would support a negotiated settlement to address investor losses. As hon. Members may know, the FCA initially supported the negotiations between the parties involved, as it believed that doing so was in the best interests of investors.”
“In the case of Connaught investment funds, many of the usual protections and safeguards that protect investors in regulated funds were absent, owing to the unregulated nature of some of the entities involved. On this point, I want to touch on two main issues. The first concerns the actions taken by the FCA to try to protect consumers, despite most of the entities involved being unregulated. That includes the ongoing work to secure a fair and proper outcome for investors. The second involves the steps that can be taken to ensure that this sort of situation does not happen again. First, despite the schemes being unregulated, the FCA has taken a number of significant steps to try to protect customers right from when the first problems arose.”
“Given the lack of time, I will make a bit of progress. If I have time, I will come back to the hon. Lady. The FCA also knows that what happened with the Connaught funds has caused serious distress to many investors and continues to work closely on this case to secure the best possible outcome. As my hon. Friend the Member for Aberconwy said, the Connaught funds comprised three separate funds, income series 1, series 2 and series 3. In total, approximately £147 million was invested in the funds, which, as we know, were unregulated collective investment schemes. By definition, such schemes are not subject to direct regulation by the FCA or, previously, by the Financial Services Authority.”