Emma Reynolds MP: speeches

Speeches

• 30 Jan 2025 · Finance Bill (Fourth sitting) · Hansard source

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  Clause 79 closes a known route for tax avoidance by making changes to the taxation of chargeable gains when a limited liability partnership is in liquidation, and clause 80 closes a loophole through which some taxpayers have attempted to avoid the company tax charge known as section 455. On clause 79, the Government have become aware of a scheme that is being exploited by tax-avoidance promoters involving the transfer of assets into an LLP that is then liquidated. At the time a member contributes an asset to the LLP, they are not charged tax on the gain accrued since the asset was acquired. This is because it is intended that they are taxed when the asset is disposed of, rather than the LLP itself. This is similar to the position for conventional hardships. However, when an LLP is liquidated, it ceases to be tax transparent and becomes treated like a company, but the LLP is only charged tax on its gains since the contribution of the asset. As part of the liquidation, the liquidator could dispose of the LLP’s assets back to the contributing member or to a party connected to them, washing out the gains made prior to the asset being contributed to the LLP. The changes made by clause 79 will create the new occasion when a deemed disposal arises for chargeable gains purposes, and will have effect where an LLP enters liquidation on or after 30 October 2024. This will ensure that, where a member contributes an asset to an LLP that subsequently enters liquidation, and the LLP disposes of the asset back to the member or to a person connected to them, they are taxed on the gains on the asset up to the time of its contribution to the LLP. The gain will be treated as accruing at the time that the LLP disposes of the asset. On clause 80, a close company is a company owned and run by a small number of people. In a close company, there are fewer restrictions and less accountability around how the company and its owners interact. The tax charge known as section 455 is a charge on loans to shareholders left outstanding after the company’s year end. The charge is remitted if the loan is repaid. The Government are aware of the attempted use of co-ordinated or circular loan arrangements by shareholders in close companies to avoid the section 455 charge and thereby extract funds from their companies untaxed instead of receiving taxable earnings. As a result of the changes made by clause 80, where shareholders use circular loan arrangements to extract value from their companies, a tax charge will be applied on the relevant amount withdrawn. This will ensure that such arrangements do not avoid a tax charge. The targeted anti-avoidance rule will also be updated to protect against future exploitation. In summary, clause 79 makes changes to ensure that LLPs are not used to avoid tax chargeable gains. It forms part of a package of measures announced at the autumn Budget 2024 that are aimed at closing the tax gap, cracking down on avoidance and evasion and strengthening the powers of His Majesty’s Revenue and Customs to tackle promoters of avoidance schemes. The changes made by clause 80 will close a loophole that is exploited by a minority and ensure that anti-avoidance rules are more robust. I should be clear the vast majority of close companies and their participators are compliant and pay any tax due. Clause 80 makes a sensible change that is proportionate, ensures fairness and will affect only those few who seek to avoid tax. Our commitment is to ensure a fair and just tax system, and this measure is a step towards upholding that promise.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  Clause 56 introduces a power enabling changes to be made to stamp duty and stamp duty reserve tax in relation to financial market infrastructure sandboxes. The Government are committed to developing the UK’s capital markets and, as part of that, have announced that they will take forward the private intermittent securities and capital exchange system, known as PISCES. That power will be used to provide an exemption from stamp duty and stamp duty reserve tax for PISCES transactions. This will be a carefully targeted exemption, representing a cost-effective approach to boosting growing private companies and supporting our capital markets. PISCES is a new type of trading platform that will allow private companies to have their shares traded intermittently, supporting private companies to scale and grow, and boosting the pipeline of future initial public offerings in the UK. Using powers from the Financial Services and Markets Act 2023, which was introduced by the previous Government, this Government will establish the regulatory framework for PISCES in a financial market infrastructure sandbox. That will allow the Treasury to temporarily modify or disapply certain pieces of legislation, to support market operators to trial new or developing technologies or practices, while still achieving appropriate regulatory outcomes. The Government published a response to the PISCES consultation paper at Mansion House on 14 November 2024. As part of this, the Government will lay a statutory instrument to establish the PISCES sandbox by May this year. Clause 56 will allow the Treasury to make stamp duty and stamp duty reserve tax changes by statutory instrument, in connection with any exercise of the time-limited FMI sandbox power in the Financial Services and Markets Act 2023. The power will be used to introduce an exemption from stamp duty and stamp duty reserve tax for PISCES transactions, as announced at the autumn Budget. That exemption will boost the attractiveness of PISCES, incentivising investors and private companies to participate, and it demonstrates the Government’s commitment to the success of PISCES as part of our wider ambitions to reinvigorate UK capital markets and to deliver growth. The Government will introduce this exemption ahead of the first PISCES trading events. The effect of the exemption will be time-limited, in line with the duration of the PISCES sandbox. Clause 56 introduces a stamp duty and stamp duty reserve tax power in relation to financial market infra-structure sandboxes that will be used to provide an exemption for PISCES transactions. This will increase the attractiveness of PISCES and demonstrates the Government’s commitment to ensuring its success. The announcement of the exemption has been welcomed by stakeholders.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  These clauses make changes to pension schemes established in, or administered by, persons resident in European economic area states and bring them in line the rest of the world. Currently, individuals can transfer some or all of their UK pension savings to an overseas pension scheme, provided it is a qualifying recognised overseas pension scheme. Certain transfers to such schemes are subject to the overseas transfer charge, which is a 25% tax charge on the value of the transfer. However, provided they do not exceed the overseas transfer allowance, UK or EEA residents are excluded from this charge for transfers to qualifying overseas pension schemes in the EEA and Gibraltar. That exclusion was introduced to comply with EU fundamental freedoms that were in place at the time. As a result, some pension scheme members can benefit from double tax-free allowances by taking tax-free entitlements from both their UK scheme and their qualifying overseas pension schemes. The changes made by clause 32 remove that exclusion from the overseas transfer charge for transfers from 30 October 2024. As a result, transfers will be subject to the overseas transfer charge unless another exclusion applies—for example, if the transfer is to a scheme established in a country where the member is a resident. That will reduce the number of tax-free transfers made and help to keep up to £1 billion of pension savings in the UK over the next five years. Clause 33 concerns the requirements for schemes to be considered as overseas pension schemes and recognised overseas pension schemes. When the UK was a member of the EU, the requirements for schemes based in the EEA were different from those for schemes based in the rest of the world. The changes made by clause 33 mean that a non-occupational pension scheme established in the EEA must be regulated by a pension schemes regulator in that country—provided there is such a regulator—to be considered an overseas pension scheme. If there is no such regulator, the scheme provider must be regulated for the establishment and provision of the scheme. Furthermore, to be considered a recognised overseas pension scheme, a scheme based in the EEA must be established in a country with which the UK has either a double tax agreement that allows for exchange of information or a tax information exchange agreement. The changes will take effect from 6 April 2025. They will align the requirements for schemes in the EEA with those for the rest of the world, and bring the requirements for non-occupational schemes in line with those for occupational ones. Clause 34 concerns the requirements on administrators of UK registered pension schemes. Under the existing rules for such schemes, the scheme administrator can be a resident in the EEA, which can make enforcement of tax debts from the scheme difficult and costly for HMRC. The changes made by clause 34 would mean that, from 6 April 2026, all scheme administrators of UK registered pension schemes will need to be UK residents. That requirement will support HMRC’s enforcement activities, as there will be a UK resident for it to engage with. In conclusion, the changes made by these clauses will bring the tax treatment of transfers to EEA and Gibraltar pension schemes, the conditions that EEA overseas schemes need to meet, and the requirements for EEA administrators of UK schemes in line with the rest of the world. I commend the clauses to the Committee.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister for his questions. I hope to answer all of them and, if I do not, I promise to write to him with clarification. He asked some questions about the number of individuals. I can tell him that in 2023-24, there were 7,100 transfers to qualifying recognised overseas pension schemes, and the value of those transfers was £1.14 billion. There is an increasing risk that these transfers were being made tax free and that some of these individuals would have been benefiting from the double tax-free allowances. I note the hon. Gentleman’s support for eliminating the risk of that and not allowing people to benefit from double tax-free allowances, which is obviously the main intention of these clauses. He asked about HMRC being prepared and the operational challenges that it might face as a result of the changes. Treasury Ministers and officials work very closely with HMRC—we are in the same building—and these changes have been drafted and consulted on with HMRC, so I suspect that I can reassure him that everything is in order.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister for the way he has approached this subject. He is correct, of course, that the previous Government consulted on PISCES in March last year. We responded to the consultation in November, alongside the Mansion House speech delivered by my right hon. Friend the Chancellor. I am glad that there is cross-party agreement on these issues. When we were in opposition, we were very constructive in our feedback on such proposals. The shadow Minister is right that there are other reforms in this area, which came from the Lord Hill listings review and others—there were other reviews pertinent to capital markets when the Conservative party was in government. The shadow Minister asked me a number of questions. On estimating the impact, it is really important to note that many stakeholders in the City and across financial services, not least the Investment Association, have welcomed this innovation. We know that investors and those in the market are interested in it, and I think there is great optimism about the demand for shares on PISCES. We still have to lay the statutory instrument, but the innovation is of interest to Members across the House, so I am very happy to update it on the development of PISCES. On the shadow Minister’s questions about the FCA, we stress to the financial services regulators at every opportunity that any new rules should be proportionate, and I assure him that that is how I will approach my work with the FCA. On his final question, although I am quite new to this position, I am familiar with the demands for the simplification of stamp duty and stamp duty reserve tax—we might make it a little bit easier to say, let alone to pay. I will absolutely prioritise looking at simplification, because any kind of simplification is good for the market and helps to get things going. I am happy to look at that, but I cannot give the shadow Minister an exact answer now. Question put and agreed to. Clause 56 accordingly ordered to stand part of the Bill. Clause 57 Rate bands etc for tax years 2028-29 and 2029-30 Question proposed, That the clause stand part of the Bill.

• 23 Jan 2025 · High Streets: Autumn Budget 2024 · Hansard source

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  I congratulate the hon. Member for Harpenden and Berkhamsted (Victoria Collins) on securing the debate and thank her for sharing her story of working in her mum’s gift shop. It was very moving to hear that she has had direct experience of working in a shop on the high street. I also thank her for her survey of local small businesses on her seven high streets, which is an impressive number. She outlined very well the importance of the businesses there; I think she said that there are 197 retail, hospitality and leisure businesses, employing some 6,000 people. I thank her for sharing those statistics, and the feedback from those businesses. I share the hon. Member’s passion for the regeneration of our high streets. I think it is a concern for Members across the House. High streets are focal points of economic activity, but most importantly—she said this in her speech—they are often a key part of the unique character of our communities. We know that high street businesses are contending with a range of challenges. She listed some of them, but I will list a couple: changing consumer shopping habits and the rise of online shopping, and a series of economic headwinds, including the pandemic, which we know was particularly difficult for small, independent businesses on the high street. The Government are committed to reforming Britain’s economy to bring about a decade of national renewal. Creating an environment in which our high streets are able to flourish is critical to that commitment. In her speech, the hon. Member recognised the Government’s dire economic inheritance from the Conservatives, none of whom are in the Chamber. We had some very difficult decisions to make in the Budget, but it was necessary to wipe the slate clean to deliver the economic stability that high street businesses need.

• 23 Jan 2025 · High Streets: Autumn Budget 2024 · Hansard source

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  We need to treat all small businesses equally. I understand the hon. Lady’s perspective, but I do not think that it would be fair or easy to have a business rates system that distinguished between rural and non-rural. What is rural? I know the constituency of the hon. Member for Harpenden and Berkhamsted rather well because I live not too far away. Tring is a town there, but other places in her constituency would be quite difficult to categorise as rural or non-rural, so I do not think that we can go down that route, although I understand why the hon. Member for Glastonbury and Somerton (Sarah Dyke) is trying to tempt us down it; I do not think that would work.

• 23 Jan 2025 · High Streets: Autumn Budget 2024 · Hansard source

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  The hon. Member pre-empts my next sentence, so I thank him for that. We have committed to reforming business rates, because we need a fairer system, fit for the 21st century. That important part of our reforms and plans will, I hope, benefit the businesses that the hon. Member for Harpenden and Berkhamsted spoke about.

• 23 Jan 2025 · High Streets: Autumn Budget 2024 · Hansard source

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  Indeed. The point of the reforms is to better protect small businesses. As the hon. Gentleman says, there are already small businesses that are protected, but we want to ensure that those small businesses that are above the current thresholds are also protected, and do not pay the rates that they pay at the moment. We want to make sure that small businesses on the high street are better supported—that is the whole point of the reforms—so I can reassure him that it will not get worse for small businesses. It may be the Exchequer Secretary’s area, but I know that much, so I thank the hon. Gentleman for the opportunity to respond to that question. We look forward to further engagement with businesses over the coming months on delivering a business rates system fit for the future. I congratulate the hon. Member for Harpenden and Berkhamsted again on her first Adjournment debate in the House—it is also the first Adjournment debate that I have responded to as a Minister—and thank her for raising this important issue. This Government have delivered the economic stability that high-street businesses need to thrive, and we are committed to delivering the business rates reforms that will support high streets up and down the country. Question put and agreed to.

• 23 Jan 2025 · High Streets: Autumn Budget 2024 · Hansard source

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  Ministers are always happy to hear from hon. Members. I suggest that the hon. Member writes to the Exchequer Secretary to the Treasury with that feedback. I should note that this is not my policy area; the Exchequer Secretary is visiting small businesses as we speak, so I am standing in for him, but I am sure that he will welcome that feedback from the hon. Lady. I have listened carefully to the hon. Member for Harpenden and Berkhamsted and tried to note down all her questions, but if I do not get to all of them, I am happy to write to her after the debate; I hope that is helpful. She asked whether there were any mitigations, and I think she asked us to cancel some of the plans in the Budget. I am afraid that I cannot give her that assurance. The changes to national insurance will come into force on 1 April. As I said, we had to make difficult decisions, and that was one of the most difficult. The hon. Member asked whether we were meeting small businesses. The Exchequer Secretary is meeting a range of small businesses, as are Treasury officials, before formulating our plan to reform business rates, which I will talk about briefly. She asked questions about inheritance tax; I will write to her on that, to ensure she gets the right answer. She also asked about local government. I was not entirely sure about the question, so perhaps we can clarify that, and I will write to her on that as well. Turning in more detail to the hon. Member’s points about national insurance, one of the toughest decisions we took in the Budget was to raise the rate of employer national insurance contributions from 13.8% to 15%, but we recognised the need to protect the smallest businesses. The Federation of Small Businesses asked us specifically about that, which is why we have more than doubled the employment allowance to £10,500. That means that more than half of businesses with national insurance contribution liabilities will either see no change at all or be taken out of paying national insurance contributions. As I said, that was a key demand from small businesses. To support businesses, including those on the high street, the Budget honoured the manifesto commitment to not raise corporation tax; it set out the tax road map for this Parliament, in which we will not change corporation tax, which means we have the lowest rate in the G7. All that will support businesses, from restaurants to retailers, to invest. On the high street, we announced at the Budget major support for pubs; we are cutting alcohol duty on qualifying draught products, which make up approximately 60% of the alcoholic drinks sold in pubs. That represents an overall reduction in duty bills of over £85 million a year, and is equivalent to a 1p duty reduction on a typical pint. The hon. Member raised concerns about the business rate system; let me address those in more detail. We very much believe that for too long, the business rates system has placed an unfair burden on high-street retail, hospitality and leisure businesses, as she mentioned. To support those sectors, we intend to introduce permanently lower tax rates for retail, hospitality and leisure properties with rateable values of less than £500,000 from 2026-27. That will allow us to provide stability after the ongoing uncertainty of the one-year retail and hospitality leisure relief, which has been extended year by year since the pandemic. That tax cut will be sustainably funded not by increases in taxes on working people, which we promised not to introduce, but through a higher tax rate on the most valuable 1% of business properties in the country. That will capture the majority of large distribution warehouses, including those used by online giants, as well as other out-of-town businesses that draw footfall away from high streets. Those business rates reforms provide the certainty that businesses need to invest while protecting the public finances. The Government have already introduced to the House primary legislation that will provide the underpinning of those reforms, and the exact rates for the new multipliers will be confirmed later this year in the autumn Budget.

• 23 Jan 2025 · High Streets: Autumn Budget 2024 · Hansard source

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  I am here in my ministerial capacity, of course, but I also represent High Wycombe in the south-east, so I understand her point, and promise to take it back to the Department, and to the Exchequer Secretary to the Treasury. Levelling the playing field for the high street is just the start, and we are committed to transforming the whole system in the longer term. As we set out in the “Transforming Business Rates” policy paper that we published alongside the Budget, the Government will create a fairer business rates system that protects the high street, supports investment and is fit for the 21st century. It is important that we work in partnership with high-street businesses to get the reforms right. I thank the hon. Member for Harpenden and Berkhamsted for bringing the voice of small businesses in her constituency to our proceedings. Government officials have undertaken a series of roundtable events to understand from businesses across all sectors and sizes how they think reform of the system can best be delivered. Over 200 businesses have already given their feedback at those roundtables. The Exchequer Secretary to the Treasury is leading that work and engaging with a broad range of high-street businesses, as are officials in my Department.

• 22 Jan 2025 · Bank Resolution (Recapitalisation) Bill [Lords] · Hansard source

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  I can tell I am going to enjoy discussing these matters with the right hon. Gentleman. I have looked into this since our exchange on Monday, and I want to clarify what happened on the Friday before the Monday in March 2023. The Bank of England issued a statement on the Friday evening saying that it intended to apply to the court to place SVB UK Ltd into a bank insolvency procedure, absent any meaningful further information. However, a buyer came forward over the weekend, which is what changed between the Friday and the Monday. It was judged to be both in the public interest and in the interest of SVB UK customers that this resolution on the Monday morning was preferable to the insolvency procedure that had been announced on the Friday.

• 22 Jan 2025 · Bank Resolution (Recapitalisation) Bill [Lords] · Hansard source

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  I agree with the hon. Gentleman, who puts it very well. He will know that there was a different order in the case of Credit Suisse, but the then Government said at the time that that would not be their order of priority. We are seeking to protect the taxpayer in this Bill, and he is right: had there been a cost associated with the transfer of SVB, it would have fallen first to those people before falling to the taxpayer. If we pass this legislation, for which I hope there is cross-party support, we will avoid that eventuality, because if we follow the order of priority and get to the financial services compensation scheme, the cost will be paid through a levy on the banks in that scheme. I thank the hon. Gentleman for his question. The resolution regime is a critical source of stability when banks fail, because it ensures that public funds and taxpayer money are protected. This Bill delivers a proportionate and targeted enhancement to the resolution regime to ensure that it continues to provide that important stability. As I said at the start of this debate, it is therefore an important Bill that underpins the Government’s vision for economic growth, and I commend it to the House.

• 22 Jan 2025 · Bank Resolution (Recapitalisation) Bill [Lords] · Hansard source

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  My hon. Friend flatters me. It is not that easy to explain in simple terms, but I will do my best. Essentially, if a small bank is in trouble, it is better for it not to go into insolvency but instead to go through resolution to protect its depositors. In the case of SVB, only 14% of deposits were covered by the financial services compensation scheme, because the scheme only covers deposits up to the £85,000 threshold. Had public funds been required to facilitate the sale of SVB to another purchaser—in this case it was HSBC, but it could have been another institution—it would have had recourse to public funds. We are seeking to avoid a situation in which taxpayers in all our constituencies are on the hook for the failures of small banks. Where a bank has high-quality assets, which was the case for SVB, we can avoid the insolvency situation and pay out to depositors who have deposits above the £85,000 threshold. That resolution would be funded by the financial services compensation scheme and ultimately the banks, which contribute to the scheme through a levy. I hope that answer helps my hon. Friend—I am sorry that it was a bit long. Stability is at the heart of the Government’s agenda for economic growth, because when we do not have economic and financial stability, it is working people who pay the price. We have to bear in mind what we are seeking to do, which is ultimately to protect the interests of the taxpayer and to ensure that we do not have to have recourse to public funds.

• 22 Jan 2025 · Bank Resolution (Recapitalisation) Bill [Lords] · Hansard source

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  I beg to move, That the Bill be now read a Second time. The Bank Resolution (Recapitalisation) Bill will enhance the UK’s resolution regime by giving the Bank of England a more flexible toolkit to respond to bank failures. The Bill creates a recapitalisation mechanism that ensures that certain costs of managing the failure of banking institutions do not fall to the taxpayer. It strengthens protections for public funds and financial stability, while supporting the competitiveness and growth of the UK financial sector by avoiding placing new up-front costs on the banking sector. It is therefore an important Bill that underpins this Government’s vision to promote growth and economic stability. The policy in the Bill builds on the proposals set out in consultation by the previous Government. I thank the previous Government—I do not always do that, by the way—for the work they did with the Bank of England on the consultation and on the resolution of Silicon Valley Bank UK, back in March 2023. The Bill provides the Bank of England with greater flexibility to manage the failure of small banks, and thereby embeds lessons learned from the volatility in the UK banking sector in 2023, notably that arising from the failure of SVB UK. I hope, given their origins, that these proposals will be welcomed by hon. Members from across the House. The resolution regime was created by the Banking Act 2009 in the wake of the global financial crisis. It provides the Bank of England with a set of tools to manage the failure of financial institutions in a way that limits risks to financial stability, public funds and the UK economy. The regime was introduced in recognition of the global consensus that reforms were needed to end “too big to fail” and to ensure that, where necessary, financial institutions can be supported to fail in an orderly fashion. This regime has been developed and steadily added to by a series of successive governments over the past decade. That work has given the UK a robust regime that reflects relevant international standards and supports the UK’s role and reputation as a leader in financial regulation, enhancing confidence in our financial system and making the UK a more secure and attractive place in which to invest. The resolution regime was last used to resolve Silicon Valley Bank UK, the UK subsidiary of the US firm that collapsed in March 2023. The Bank of England used its transfer powers under the Banking Act 2009 to effect the sale of Silicon Valley Bank UK to HSBC. That delivered good outcomes for financial stability, customers and taxpayers. All the bank’s customers were able to continue accessing their bank accounts and other facilities, and all deposits remained safe, secure and accessible. The Bank of England achieved the continuity of banking services, and maintained public confidence in the stability of the UK financial system. The case of Silicon Valley Bank UK demonstrated the effectiveness and robustness of the resolution regime. However, as would be appropriate following any bank failure, the Treasury, the Bank of England and their international counterparts reflected carefully following this period of banking sector volatility, and following that reflection, the Government concluded that there was a case for a targeted enhancement to give the Bank of England greater flexibility to manage the failure of smaller banks such as Silicon Valley Bank UK. At this point, I should explain that the Bank of England generally expects to place failing small banks into insolvency under the bank insolvency procedure, because their failures are not generally expected to meet the conditions that must be satisfied for the Bank of England to exercise its resolution powers. One of those conditions is that winding up the bank would not achieve the resolution objectives to the same extent as they would be achieved through the use of the resolution powers. Those objectives include protecting UK financial stability, covered depositors and public funds. When a failing firm enters insolvency, its eligible depositors are paid out up to £85,000 each within seven days by the Financial Services Compensation Scheme, with higher limits for temporary high balances. This compensation is funded initially through a levy on the banking sector, and then, to the extent possible, recovered from the estate of the failed firm. As was seen in the case of the Silicon Valley Bank, it is the Government’s view that in some cases of small bank failure, the public interest and resolution objectives are better served by the use of the resolution powers than by placing the firm into insolvency. Smaller banks are not required to hold additional funds and liabilities that could be bailed in during a resolution, so in a case in which a small bank does need to be resolved, additional capital may be required to support a successful resolution. For example, funds may be required for the bank in resolution to meet the minimum capital requirements for authorisation, or to sustain market confidence. At present, these recapitalisation costs have to be borne by public funds. The Government believe that that situation should be avoided to protect taxpayers from bearing those costs, and I hope that the Opposition agree; we shall see very shortly. To that end, the Bill aims to strengthen the protections for public funds when a small bank is placed into resolution. Overall, this is a prudent set of reforms to ensure that the resolution regime continues to effectively limit risks to financial stability and, indeed, to taxpayers. The Bill does not make widespread changes to a regime that is working well, and it is important to emphasise that the bank insolvency procedure will continue to play an important role in managing the failure of small banks. That said, the Bill reflects the Government’s belief that a targeted set of changes is needed to ensure that, if necessary, existing resolution powers can be applied to small banks to achieve good outcomes for financial stability, while also protecting taxpayers. It achieves that by introducing a new recapitalisation mechanism, which allows the Bank of England to use funds provided by the banking sector to cover certain costs associated with resolving a failing banking institution. The Bill does four main things. First, it expands the statutory functions of the Financial Services Compensation Scheme, giving the Bank of England the power to require the FSCS to provide it with funds to be used to support the resolution of a failing bank. Secondly, it allows the FSCS to recover the funds provided to the Bank by charging levies on the banking sector. This mirrors the arrangements for funding payouts to covered depositors in insolvency, with the exception of the treatment of credit unions, to which I will return. Thirdly, the Bill gives the Bank of England an express ability to require a bank in resolution to issue new shares, facilitating the use of industry funds to meet a failing bank’s recapitalisation costs. Finally, following constructive debate in the other place, the Bill sets out a number of accountability measures that apply when the Bank of England uses the recapitalisation mechanism. The Bill consists of eight clauses to deliver those key components. Clause 1 inserts a new section into the Financial Services and Markets Act 2000, which introduces the new mechanism. It allows the Bank of England to require the Financial Services Compensation Scheme to provide the Bank with funds when using its resolution powers to transfer a failing firm to a private sector purchaser or bridge bank. It sets out what these funds can be used for, namely to cover the costs of recapitalising the firm and the expenses of the Bank of England or “relevant persons” in taking the resolution action. “Relevant persons”, for this purpose, means the Treasury, or a bridge bank or asset management vehicle operated by the Bank of England. The clause also allows the Financial Services Compensation Scheme to recover the funds provided through levies. Clause 2 sets out the reporting requirements for the Bank of England when it uses the recapitalisation mechanism, added to the Bill by the Government in the other place. The Bank must report to the Chancellor on the use of the recapitalisation mechanism and the stabilisation option that it was used in connection with. The Treasury can specify the content and timing of these reports, although if a final report is not produced within three months, the Bank of England must produce an interim report within that three-month period. The Chancellor must lay all reports before Parliament, although the clause allows discretion to omit any information that it would not be in the public interest to publish. Clause 3, added by the Government in the other place, requires the Bank of England to notify the Chairs of the relevant parliamentary Committees in this House and the other place—the Treasury Committee in the House of Commons, and the Financial Services Regulations Committee in the House of Lords—as soon as reasonably practicable after using the mechanism. Clause 4 requires the Bank of England to reimburse the Financial Services Compensation Scheme for any funds it provides that were not needed. Clause 5, also added by the Government in the other place, states that the Treasury must include guidance on the contents of reports on use of the mechanism in the code of practice, a statutory document that the Treasury must publish and to which the Bank of England must have regard, which explains how the resolution regime is intended to work in practice. Clauses 6 and 7 make several consequential amendments to reflect the introduction of the new mechanism. Clause 6 primarily ensures that existing provisions relating to the Financial Services Compensation Scheme apply to the new mechanism in the same way. The most substantive provision specifies that the FSCS cannot levy credit unions to recoup funds provided under this mechanism, and was added to the Bill before its introduction to Parliament in response to valid concerns raised by industry. In clause 7, which contains mostly technical consequential amendments, the most substantive change gives the Bank of England the power to require a failing firm to issue new shares. That will make it easier for the Bank of England to use the funds provided by the FSCS to recapitalise the firm, by using the funds to buy the new shares. Clause 8 deals with procedural matters, including the provision that the Treasury may make regulations to commence the provisions in the Bill. I am grateful to the Financial Secretary to the Treasury for shepherding the Bill through its successful passage in the other place. As I have mentioned, the Government made a number of amendments to the Bill in the other place following constructive debate, feedback and engagement. They include the insertion of the requirements for the Bank of England to report to the Treasury and notify parliamentary committees. The Government also amended the Bill to ensure that there was clarity over whose expenses could be covered by funds provided through the mechanism. In addition, the Government published a number of important documents during the early stages of the Bill’s passage, including a draft update to their code of practice setting out how the mechanism is expected to be used in practice. There remains one area of the Bill that will require the attention of this House, namely the question of the scope of the mechanism—that is, which firms the Bank of England can use the mechanism on to support their failure. This was heavily debated in the other place, and reflects concerns about the risk of the mechanism being used on a wide range of firms, with the potential for large levies as a consequence. Those concerns led to an amendment to the Bill, intended to exclude from the scope of the mechanism those banks that already hold the full set of equity and debt resources—the so-called MREL, or minimum requirement for own funds and eligible liabilities—necessary to manage their own failure. The intent was to limit the scope to banks that are not required to hold additional capital resources, or banks that have not yet raised the full amount of additional resources to fully support their own failure. As I have alluded to, the Government note and appreciate the concerns being raised on this point, but as the Financial Secretary to the Treasury made clear during the Bill’s passage in the other place, the Government are clear that this Bill is primarily intended for smaller banks. My predecessor made a written statement to the House on 15 October to reiterate this policy position. However, after careful reflection, the Government continue to believe that some flexibility should remain in the legislation on this point, in order to avoid constraining the Bank of England’s ability to use the mechanism in a highly uncertain crisis scenario. Narrowing the scope would constrain the Bank of England’s optionality, particularly where it might be necessary to supplement the bail-in of a firm’s own resources with additional capital resources. I note that this is considered an unlikely outcome, rather than a central case. Nevertheless, the Government consider it important to avoid constraining that optionality, given that the alternative may be to use public funds. Ultimately, we want to protect the taxpayer. The Government will therefore table an amendment in Committee to remove the constraint on the scope of the application of the new mechanism. More broadly, I want to express my gratitude to the banking sector, with which the Government have engaged proactively and constructively both before and since the Bill was introduced. The Government appreciate the feedback from industry, and we have reflected on it carefully to ensure that the Bill delivers a proportionate reform. As alluded to earlier, in response to feedback from industry, the Government carved out credit unions from levy contributions to recoup funds provided by the financial services compensation scheme under the recapitalisation mechanism. That was deemed appropriate because credit unions are out of scope of the resolution powers. It would therefore be disproportionate to require them to contribute towards costs under the mechanism. The Government have also sought to provide reassurances to industry on the impact of this Bill. For example, by modelling the mechanism on the existing funding framework for depositor payouts, industry will be liable to pay levies only after the point of failure, avoiding new up-front costs to firms. Alongside the Bill, the Government also published a cost-benefit analysis that sets out our general expectation that lifetime costs for levy payers will generally be lower under the mechanism outlined in the Bill, compared with insolvency. I note again the draft updates to the code of practice, which the Government have published to provide additional transparency to industry and Parliament on how the mechanism is expected to be used in practice.

• 21 Jan 2025 · Money Laundering in Retail Businesses · Hansard source

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  It is right that we take a robust approach to money laundering, and we have a tailored approach to cash deposit limits to reflect the differences in needs and risk profiles across businesses’ customer bases. I am committed to working with the Financial Conduct Authority and others to ensure we strike the right balance—one that allows businesses to continue their operations but also ensures that we assess the risk posed by those who might be using their businesses to launder money.

• 21 Jan 2025 · Money Laundering in Retail Businesses · Hansard source

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  This Government are committed to tackling money laundering. Money laundering through cash-based high street businesses is a known issue, and the Treasury works closely with law enforcement agencies to monitor trends in criminality and ensure resources are deployed towards the most significant threats.

• 21 Jan 2025 · Money Laundering in Retail Businesses · Hansard source

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  We take this issue very seriously. The Treasury owns the money laundering regulations, but the FCA has a key role as a major supervisor, and we work very closely with the criminal enforcement agencies. Of course, those agencies are independent, but we are absolutely committed to clamping down on money laundering.

• 21 Jan 2025 · Topical Questions · Hansard source

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  I am always happy to meet my hon. Friend, who is a near constituency neighbour. We absolutely agree that retail investment is crucial. I want more progress on the advice guidance boundary and targeted support. I will be working closely, in my new role, with the Financial Conduct Authority to take that forward.

• 21 Jan 2025 · Topical Questions · Hansard source

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  It is our view that it is absolutely right that the Bank of England has operational independence. That is in line with international standards and what is happening in jurisdictions around the world, including in the United States and the eurozone.

• 20 Jan 2025 · Draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024 · Hansard source

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  I cannot speak for the independent Bank of England, so I gently suggest to the right hon. Gentleman that if he has questions or concerns about the timing of the issuing of a press release on the Friday in March 2023, he should convey them to the Bank of England. I will take up the right hon. Gentleman’s recommendation to look into the issue more closely, but I also gently say to him that—due to the work of officials in the PRA, the Bank of England and indeed the Treasury—overall we had a good outcome, because by the Monday morning, before the markets opened, we had a smooth transfer from SVB UK into HSBC. My point is that in the end depositors were in a much better position on the Monday morning than they had been on the Friday; regardless of the choreography, we got to the right outcome in the end. I think that there has been consideration of the resolution process, although not necessarily of the timing of the events mentioned by the right hon. Gentleman. Indeed, on Wednesday, myself, the shadow Minister—the hon. Member for Wyre Forest—and other hon. Members here present will debate the Bank Resolution (Recapitalisation) Bill on Second Reading. That Bill has already been through the Lords. It seeks to ensure that in cases such as this one, we are protecting taxpayers. Indeed, what was good about this case was that SVB UK was in a relatively good economic position, but I could envisage a situation where that was not the case, and we will discuss such issues on Wednesday. I commend the order to the Committee. Question put and agreed to.

• 20 Jan 2025 · Draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024 · Hansard source

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  I beg to move, That the Committee has considered the draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024. It is a pleasure to serve under your chairmanship, Mrs Harris. The draft order relates to the 2023 resolution of Silicon Valley Bank UK. It confirms that the former shareholder of SVB UK, which was the Silicon Valley Bank US parent entity, is not entitled to compensation following the transfer of the bank’s shares to HSBC UK Bank plc. The order has already been approved in the House of Lords. In early March 2023, SVB UK experienced severe financial distress, resulting in rapid deposit outflows. That crisis, originating from its US parent entity, quickly spread to its UK subsidiary. By Friday 10 March, the Bank of England, acting as the resolution authority, declared its intention to place SVB UK into a bank insolvency procedure, absent any meaningful new information. Over the subsequent weekend, a private sector purchaser was identified. On Monday 13 March, the Bank of England exercised its power under the Banking Act 2009 to transfer the shares of SVB UK to HSBC UK Bank plc. The action was taken following consultation, with the Prudential Regulation Authority, the Financial Conduct Authority, His Majesty’s Treasury and the Bank of England reaching the judgment that the resolution conditions set out in the Banking Act had been met. The Banking Act requires HM Treasury to make a compensation scheme order when the private sector purchaser power is exercised. This order is a mechanism to establish in law what compensation, if any, is due to former shareholders of the resolved firm. The Bank of England undertook a provisional valuation when placing SVB UK into resolution. That valuation found that SVB UK’s shareholder would not have made any recoveries had the firm been placed into a bank insolvency procedure. The shares had no value at the point that the firm was transferred and therefore no compensation is due to SVB UK’s former shareholder. The Bank of England then commissioned an independent valuation of SVB UK, which confirmed that no compensation is due to the previous shareholder of SVB UK. The order before us today confirms in law the findings of those valuations: that the former shareholder of SVB UK is not due any compensation. I thank all staff of the PRA and the Bank of England’s resolution directorate for the swift and effective action they took regarding SVB UK, and indeed officials and Ministers at HM Treasury at the time. They worked tirelessly over the course of that weekend to deliver a solution that protected financial stability and achieved the objectives of the special resolution regime. The resolution of SVB UK shows that the UK’s resolution regime works well, as well as the importance of the UK having the necessary tools to handle bank failures effectively. The transfer of the firm to HSBC UK was a good result for SVB UK’s customers, who retained access to their money and the banking services they relied on; for taxpayers, with the firm being stabilised without any use of taxpayer support; and indeed for the UK economy, with the UK’s vibrant technology and innovation sector protected from severe disruption. The compensation scheme order for SVB UK is a necessary step to formalise and conclude the resolution process, and to confirm that no compensation is due to the former shareholder. This decision is based on thorough valuations and adheres to the legal framework established by the Banking Act 2009. I thank the Committee for its attention and welcome any questions that the shadow Minister or other hon. Members may have regarding this matter.

• 20 Jan 2025 · Draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024 · Hansard source

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  I thank the shadow Minister, the hon. Member for Wyre Forest, for his kind words—we will be spending a lot of time together this week. I also thank him for what he said about shareholders and the principle of risk and return. We know that there is a correlation between the risk taken and the return due, but that does not always work out. Proportionate regulation encourages considered risk-taking, which we are in favour of; we want to see entrepreneurship in our economy. Maybe this is a more philosophical debate that we could have on another occasion, but I agree with a lot of what he said about shareholders providing scrutiny. We certainly should not criticise them for being shareholders, because we need good shareholders for the functioning of the economy. Let me turn to the remarks of the right hon. Member for North West Hampshire and attempt to answer all of his questions. Obviously, I was not in the Treasury that weekend—one of his colleagues was—so if he wants a very detailed description of those events, he probably should speak to the shadow Business Secretary, the hon. Member for Arundel and South Downs (Andrew Griffith). That is my first recommendation. Secondly, there is certainly no litigation in this case. It is for the Bank of England, as the independent regulator, to weigh up and balance the different trade-offs involved in this sort of decision making. I cannot speak for the Bank of England, but I point out to him that only 14% of deposits would have been covered by the financial services compensation scheme. He might think that that would have been a better eventuality.

• 16 Dec 2024 · Inflation: Pensioner Living Standards · Hansard source

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  Due to the Government’s steadfast commitment to the triple lock, pensioners will see an above-inflation increase of 4.1% in their state pension next year, which means that they will be up to £470 better off—and, over the course of this Parliament, over £1,900 better off.

• 16 Dec 2024 · Inflation: Pensioner Living Standards · Hansard source

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  We will not reconsider that decision, because as a result of the £22 billion black hole that we inherited from the Conservative party, we have had to take tough decisions in a very tight fiscal environment. However, my hon. Friend has given me the opportunity to remind people that they have until Saturday to make a pension credit claim, which can be backdated and will passport them to winter fuel payments and other related benefits.