Emma Reynolds MP: speeches 2025

Speeches

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  Growth and competitiveness are fundamental priorities for this Government. Financial and economic stability are essential for growth and lie at the heart of the Bill. Risks to financial stability arising from bank failures, and the disruption they cause to continuity of critical services, can be seriously detrimental to growth and competitiveness. It is an obvious point, but one of the principal ways in which the authorities can impact economic growth is by maintaining financial stability. Amendment 4, tabled by the hon. Member for Wokingham, seeks to ensure that the Bank of England considers competitiveness and growth when using the new mechanism in the Bill. It does so by introducing a new objective that the Bank of England would need to consider alongside the special resolution objectives. This objective would be to facilitate the international competitiveness and growth of the UK economy, subject to aligning with relevant international standards. The Government resist the amendment because we believe that, while well-intentioned, it may have profound consequences. I should start by noting that the aim of the Bill is to enhance the resolution regime, but in a way that avoids making more fundamental changes to the regime and the way in which the Bank of England exercises its resolution powers. As I said to the hon. Member for Dorking and Horley previously, this is more of a significant tweak than an overhaul, which it certainly is not. That is because the Government consider that, broadly, the regime works well, as demonstrated by the successful resolution of Silicon Valley Bank UK. The Government believe that attaching a new objective such as this to the use of the mechanism in the Bill could complicate matters for the Bank of England in using the mechanism alongside its stabilisation powers. This is the key argument: we know that, when managing a firm failure, the Bank of England may need to take a decision at pace in a highly complex and uncertain environment. That is distinct from the regular policymaking of the Prudential Regulation Authority and the Financial Conduct Authority, which of course have a secondary growth and competitiveness objective—for which there is cross-party support—but one that is applicable in the context of their general rule-making and policymaking roles. It would be quite different to say that this objective should apply to the Bank of England when taking urgent crisis management action in relation to an individual distressed or failing firm. That reflects the different nature of the decisions that regulators take compared with the resolution authority, which has to act quickly and decisively in a crisis. It is therefore important that the Bank of England, as the resolution authority, has a clear and unambiguous basis on which to make such decisions. The Government believe that the special resolution objectives already provide that. As Members will appreciate, it is important to strike the right balance between ensuring that the Bank of England can respond quickly and flexibly to a firm failure, and that any impacts on growth and competitiveness are properly considered. The Government believe that the existing framework strikes the right balance. I would add that the question around how the Bank of England and others support growth and competitiveness is a complex matter, and it is not one that the Government believe should be, or can be, addressed in the Bill. I hope that I have provided a helpful explanation of the Government’s view on this issue, and I respectfully ask that the hon. Member for Wokingham withdraws his amendment.

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  As we have already discussed in considering Government amendment 1, as well as amendments 3 and 4, clauses 1 and 4 introduce the recapitalisation payment mechanism that is the core of the Bill. Clause 1 inserts a proposed new section into the Financial Services and Markets Act 2000, which will allow the Bank of England to use funds provided by the FSCS to cover certain costs associated with resolving a failing banking institution. This proposed new section also allows the FSCS to levy the banking sector to recover such funds. Finally, the proposed new section requires the Bank of England to consult the FSCS before requesting funds, and it specifies the type of firms in the scope of the Bill. Clause 1 therefore gives the Bank of England the necessary power to protect taxpayers from risk when certain banking institutions fail. In turn, that will allow the Bank of England to protect financial stability, which of course supports the Government’s top priority of growth, by strengthening our economic stability. As has already been debated, clause 1 has been amended to remove a limitation on the scope of the mechanism, which was introduced in the other place. The Government are of the firm belief that, while this mechanism is not intended to be used for large banks, the unpredictable nature of bank failures warrants appropriate flexibility for the Bank of England to ensure that taxpayers and financial stability continue to be comprehensively protected. Clause 4 sets out that the Bank of England must reimburse the FSCS for any funds the latter provided that are not needed to cover the relevant costs of resolving an institution. This includes funds that were not required, either because the costs and expenses were lower than the Bank of England expected or because the Bank of England recovered some funds during the resolution—for example, through the sale of the institution. This will provide clarity on how excess and recovered funds should be dealt with, and it provides a mechanism for ensuring that the FSCS does not contribute more than is necessary in support of the resolution. This is important to ensure that the mechanism works as intended, and that there is a process for returning funds to industry where possible. Together, clauses 1 and 4 form the backbone of the Bill and put in place the mechanism to further protect taxpayers from risk. I therefore commend both clauses, as they now stand, to the Committee. Question put and agreed to. Clause 1, as amended, accordingly ordered to stand part of the Bill. Clause 2 Reporting Question proposed, That the clause stand part of the Bill.

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  I think we will get on to the amendment on growth and competitiveness i n the next stage of line-by-line consideration of the Bill. Question put, That the amendment be made.

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  May I also take the opportunity to thank the officials of the House and you, Ms Jardine, as well as the Treasury officials who have worked so hard on the Bill? We still have some stages to go, but it is an opportune moment to do that. Question put and agreed to. Bill, as amended, to be reported.

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  Clauses 2, 3 and 5 relate to the reporting and accountability requirements on the Bank of England when it uses the recapitalisation mechanism. The Government added these clauses to the Bill in the other place, reflecting the understandable concerns raised about how the Bank of England will be held to account when using the new mechanism. Together, they aim to ensure that there is effective transparency and scrutiny when the mechanism is used, helping to provide important assurances following a resolution to the Chancellor, Parliament, industry and the public. Clause 2 requires the Bank of England to report to the Chancellor following its use of the mechanism. These reports must relate both to the exercise of the mechanism and the stabilisation option it is used in connection with. The “final report” produced by the Bank of England is intended to be a comprehensive account of the use of the mechanism, with the content and timing of the report to be specified by the Treasury. As alluded to in the published draft updates to the Bank of England’s code of practice, the Government expect such final reports to include a number of important points: first, an explanation of the choice to use the new mechanism; secondly, how the resolution conditions and objectives were considered and given regard to; thirdly, an assessment of the costs of using the mechanism compared with placing the firm into insolvency; and finally, an explanation of why any ancillary costs were considered reasonable and necessary. Clause 2 also requires the Bank of England to produce an interim report within three months of using the mechanism, if the final report has not been provided within that period. This guarantees that scrutiny of the Bank of England’s actions takes place in short order after a resolution involving the mechanism. The Chancellor will be required to lay any reports before Parliament, ensuring that there is appropriate transparency and accountability regarding the use of the mechanism. The Chancellor, however, will have the discretion to omit certain information from such reports when they are published if doing so is deemed to be in the public interest—for example, if reports contain commercially confidential information, or if disclosure could potentially frustrate an ongoing resolution process. Clause 3 requires the Bank of England to notify the Chairs of the Treasury Committee of this House and the Financial Services Regulation Committee of the other place as soon as is reasonably practicable after the recapitalisation mechanism has been used. This means that Parliament will be engaged promptly following the use of the mechanism. Finally, clause 5 requires the Government’s code of practice, which sets out how the resolution regime is expected to work in practice, to include guidance on the contents of the reports of the Bank of England, which it is required to produce under clause 2. Clause 5 places an important obligation on the Treasury to ensure that there is transparency over what the Bank of England should expect to include in such reports. At this point, I note that the Government published draft updates to the code of practice, which set out the sorts of things that are expected to be included in reports by the Bank of England. For example, reports would be expected to include an explanation of the choice to use the recapitalisation mechanism, as well as an assessment of the costs of using the mechanism compared with putting the failing firm into insolvency. The Government will issue a full update to the code of conduct in line with the provisions in the Bill that are coming into force. As mentioned at the start, these clauses provide important clarity for the Bank of England, industry and Parliament on the accountability mechanisms that apply when the recapitalisation mechanism is used. I therefore commend clauses 2, 3 and 5 to the Committee.

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  It is a pleasure to serve under your chairmanship for the first time, but I am sure not the last, Ms Jardine. Government amendment 1 ensures that the Bank of England will have the flexibility to use the mechanism provided in this Bill in a broad range of circumstances. It does that by removing the provision added in the other place that prevents the Bank of England from using the new mechanism in relation to firms that have been directed to hold additional loss-absorbing resources, also known as MREL, or minimum requirement for own funds and eligible liabilities. I will also speak to amendment 3, tabled by the hon. Member for Wokingham, which aims to ensure that the mechanism is used only for small banks. I appreciate that this issue is of interest to many hon. Members, as we discussed it on Second Reading, and also to those in the other place, where it was debated. However, the Government’s position on the matter is clear: as I set out on Second Reading, the intention is for the mechanism to be used primarily to support the resolution of smaller banks. The Government reaffirmed that position in their draft updates to the code of practice to which the Bank of England must have regard when using its resolution powers, and in the written statement that my predecessor, my hon. Friend the Member for Hampstead and Highgate (Tulip Siddiq), made to the House on 15 October 2024. The Government appreciate the intent of the amendment passed in the other place and of amendment 3, and are conscious of the intent to preserve flexibility to use the mechanism on firms transitioning towards holding their full allocation of MREL. I also appreciate the remaining key concern that, without restriction on the scope of the mechanism, the Bank of England could use it on the largest banks. I make it absolutely clear that that is not the Government’s primary policy intention. The Bank of England should always, first and foremost, rely on a firm’s MREL resources, ensuring that its shareholders and investors bear the losses, rather than turning to this mechanism. However, having considered the matter carefully, the Government believe that it is still not desirable to limit the mechanism’s scope in the Bill. That would in effect hardwire in legislation the principle that the mechanism is unavailable for larger banks, and it is that hardwiring that the Government are concerned about. As we have seen and experienced, bank failures are highly unpredictable. The Government’s concern is that if the legislation is overly restrictive, that might mean that the mechanism is unavailable in the very unlikely circumstances of large bank failures in which public funds may still be exposed. We must remember, in relation to this Bill, that the primary objective is to protect the taxpayer. The Government consider it important that the mechanism’s use is not overly constrained in the legislation, ensuring that it provides comprehensive protection for public funds—that is, the taxpayer. To explain the Government’s thinking on this issue in more detail, I will make three points. First, there may be very limited circumstances in which the flexibility to use the mechanism on larger firms would help to protect public funds. The largest and most complex firms are required to hold additional resources to be bailed in—known as MREL—which aim to provide a robust level of self-insurance for larger firms. The Bill’s mechanism can be used only where a firm is transferred to a buyer or a bridge bank upon failure—something that is not envisaged for a large bank, which is expected to be bailed in instead. To take the points together, large banks should therefore have sufficient of their own resources to meet their recapitalisation costs, and the mechanism is unlikely to be available for use on large banks, even with the scope in the Bill remaining broad. However, it is theoretically possible that circumstances could emerge for which a larger bank is not sufficiently resourced, although these are highly unlikely. One example would be if the firm were subject to a large redress claim, resulting in a higher recapitalisation amount than envisaged. Another example would be if the market value of the firm’s assets changed over time. That could result in more losses than expected at the point of failure—again, resulting in a higher amount of recapitalisation. Those examples, however unlikely they may be, show that there is a clear benefit in having the flexibility to source additional resources from the mechanism, having already written down the firm’s available MREL. Restricting the scope in the Bill would prevent the mechanism from being available in these types of scenario, leaving public funds and therefore the taxpayer exposed instead. Secondly, I reiterate that the Bank of England would first look to write down or otherwise expose to loss available MREL and would then consider use of the mechanism only if a sale to a buyer or transfer to a bridge bank were needed. Funds from industry are therefore not expected to be used to cover a large bank’s full recapitalisation amount. Instead, they are expected to be needed only for an additional shortfall over and above that which the firm’s resources could fulfil and once these resources have been written down or exposed to loss. Use of the mechanism would simply be a “top-up” to achieve recapitalisation, rather than covering all of a firm’s recapitalisation costs. Thirdly and finally, the Government agree with the intent behind amendment 3, in that it is important for there to be sufficient safeguards to prevent any inappropriate use of the new mechanism on larger firms. I reassure the hon. Member for Wokingham that a range of safeguards is already in place, which the Government believe provide the necessary checks and balances. For example, the Treasury is involved in the exercise of any resolution powers through being consulted about whether conditions for resolution have been met. The Treasury would also need to approve any resolution action with implications for public funds. If the Bank of England requested a large sum from the financial services compensation scheme, which it could not provide through its own resources, it would have implications for public funds, as the financial services compensation scheme would need to borrow from the Treasury. This means that, in practice, Treasury consent would be required if the Bank of England had requested a large sum. The Bill also includes some important mechanisms to ensure transparency and parliamentary scrutiny. For example, the Bill now requires the Bank of England to report to the Chancellor on the use of the new mechanism, and it requires the Chancellor to lay those reports in Parliament. The Bill also requires the Bank of England to notify the Chairs of the relevant parliamentary Committees—namely, the Treasury Committee and the House of Lords Financial Services Regulation Committee—following the use of the mechanism. Those measures will ensure that Parliament can scrutinise the Bank of England’s actions in relation to the new mechanism. They were added to the Bill during the debate in the other place. I hope that my explanations go some way to providing reassurance that the Government’s approach is the right one, and that ultimately, flexibility in the legislation is better for economic and financial stability, and for limiting the risk to public funds, which is what the Bill is all about. As a result, I hope that hon. Members can support the Government’s amendment, and I ask the hon. Member for Wokingham not to press his amendment.

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  Coming on to the amendment, I am a little bit confused by the shadow Minister, because he rightly says—I agree with him about this—that it would not have been possible to use a negative SI, for example, during the weekend when everything was happening with Silicon Valley Bank. The Government at the time and the Bank of England rightly moved during that weekend to reassure the markets and everything was sorted, really—well, I say everything was sorted, but there was still more to do. However, the big decisions were made over that weekend. If the Government had to lay an SI in order to give the Bank the permission to do that, it would not have been a good scenario. I think the shadow Minister is saying that he will back the other amendment, but not this one. I am a bit confused by his position.

• 11 Feb 2025 · Bank Resolution (Recapitalisation) Bill [ Lords ] (First sitting) · Hansard source

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  I thank the hon. Members for Wyre Forest and for Dorking and Horley for their contributions. Let me turn to the last point made by the hon. Member for Dorking and Horley and the first made by the hon. Member for Wyre Forest, the shadow Minister: the Government continue to have confidence in the regime for managing the failure of larger, more complex banks. The bail-in regime remains the right strategy for such firms to ensure that a firm’s shareholders and investors, rather than taxpayers, are on the hook if it fails. The hon. Member for Dorking and Horley asked why we are doing this now, The reason we are doing this now is, first, the lot opposite started it—and we agree with them. [ Laughter. ] No, to put it more formally: the previous Government started down this track of reviewing what happened with Silicon Valley Bank. Rightly, in our view, they looked at what happened over that weekend; the shadow Minister has mentioned this. The case of Silicon Valley Bank shows us a couple of things, and we were keen to learn lessons from it. First, the resolution regime works pretty well. However, we were fortunate that Silicon Valley Bank was an attractive proposition to HSBC. In the end, therefore, although these things are never easy, there were officials in the Treasury and the Bank who worked all weekend, and Ministers were involved; one of them is now a shadow Minister and one of them is a Back Bencher. However, if SVB had not been an attractive proposition, things might have been different. And this measure is to protect the taxpayer in that scenario. We do not wish to throw all the pieces up in the air and see where they land; we are not doing a wholesale reform of the resolution regime. This is an important tweak but, in the scheme of things, a relatively minor tweak to what is a much broader regime to deal with these circumstances. I hope that reassures the hon. Member for Dorking and Horley. And we note that he had nothing to do with the global financial crash. [ Laughter . ]

• 6 Feb 2025 · Low-income Countries: Debt Cancellation · Hansard source

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  I am not sure that is something we are actively considering, but I will check and write to the hon. Gentleman. In December 2024, we were the first country to publish our self-assessment against the G20’s operational guidelines for sustainable financing. In line with those guidelines, we publish annual reports on the total stock of debt owed to the UK, including reports on our new sovereign lending transactions. Finally, we are committed to provide sovereign financing on sustainable terms, adhering to the OECD’s sustainable lending principles. My hon. Friend the Member for Southgate and Wood Green also suggested creating a private sector transparency register. The UK supports all initiatives to improve debt transparency and is open to considering proposals for such a register. We also acknowledge the ongoing work by Georgetown University in this area. The UK has led the way in promoting debt resilience through the introduction of contractual innovations, an approach that the IMF has found to be working well. Under our G7 presidency in 2021, the UK developed two contractual innovations together with private sector stakeholders. The first relates to external shocks, which my hon. Friend the Member for Southgate and Wood Green mentioned in his speech. Climate resilient debt clauses help to strengthen the resilience of vulnerable countries by suspending debt repayments in the wake of external shocks, which frees up fiscal space for the country. The UK has led the way by including CRDCs in our own lending and calling for all lenders to adopt CRDCs by the end of this year. Second, the UK helped to develop majority voting provisions, which are for use by the private sector specifically for syndicated lending. MVPs allow a majority of creditors to bind the minority to the terms of a restructuring and thereby mitigate the risk of a minority of creditors holding out in a restructuring scenario, which hon. Members mentioned in their contributions, and enable more efficient debt restructuring processes. On Monday, at her speech at the London Stock Exchange, the Minister for Development, my right hon. Friend the Member for Oxford East (Anneliese Dodds), announced that the FCDO will provide technical assistance for borrower countries that intend to include majority voting provisions in their contractual agreements with private sector lenders. I will now turn to a couple of questions that were asked during the debate. I apologise if I do not get to answer all the questions in the time available; I promise to write to hon. Members if I do not get to all of them. My hon. Friend the Member for Southgate and Wood Green asked about reforming the governance of international organisations. We agree that more needs to be done. First, we must change the international financial system in order to deliver a fairer deal for developing countries, including by using our board seats at the IMF and the World Bank, for a bolder approach on unsustainable debt. Secondly, we need to ensure that our system is more representative of those most in need, so we will make the case for not only fairer outcomes, but fairer representation in how we represent them. The Liberal Democrat spokesperson, the hon. Member for Esher and Walton, asked whether the Government would return to spending 0.7% of GDP on development, which the last Labour Government were very proud to commit to and reach. This Government remain committed to restoring ODA spending to 0.7% as soon as fiscal circumstances allow. Although the Office for Budget Responsibility forecasts show that the tests have not yet been met, we continue to monitor these forecasts closely and remain one of the top ODA providers in the G7. There were a number of questions about climate, including from my hon. Friend the Member for Clapham and Brixton Hill, and I want to make a few comments about that. To strengthen the resilience of vulnerable countries and free up fiscal space when responding to shocks caused by climate change, the UK has led the way in encouraging the broader adoption of climate resilient debt clauses, which suspend debt repayments, on a cost-neutral basis, in the wake of exogenous shocks. We welcome creditors who have committed to providing CRDCs, and encourage others to follow suit. My hon. Friend also said that the common framework should be expanded to middle-income countries and offer an automatic suspension for countries that apply for restructuring. The UK is fully committed to making the common framework a success. We support expansion of the framework to middle-income countries and providing automatic debt standstills for countries that apply for restructuring under the framework. We continue to push for those reforms in the G20. I hope that answers her question on that point. I thank the shadow Minister, the hon. Member for Romford, for his contribution—I think this is the first time that we have debated this way. He asked about reassurance on sound economic policy and preventing corruption. We agree that any lending and policy must be agreed on a sustainable basis. First, the scale of debt treatments is set under the IMF’s debt sustainability analysis. Secondly, the UK is committed to acting in an open and transparent way, as we have shown by publishing our own self-assessment against G20 guidelines. The hon. Gentleman asked a number of other questions. He was talking about open-ended commitments and sustainability. I think we all agree we want to reduce the reliance of low-income countries on foreign debt. That is what this debate is about, and we want a sustainable solution. He asked about the role of China specifically. I am happy to write to him, in a follow-up to his questions, on that. All I will say now is that it is really important that we work with all international partners on this issue, because only by working multilaterally will we have success in the sense of providing sustainable solutions. We do not think we can act alone. I thank all hon. Members for their thoughtful contributions during today’s important debate. Together with the international community, we must work actively and urgently in order to address the significant debt challenges faced by vulnerable countries, and the Government are committed to doing just that.

• 6 Feb 2025 · Low-income Countries: Debt Cancellation · Hansard source

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  Thank you for calling me, Ms McVey. It is a pleasure to serve under your chairmanship for the first time, and I am sure not the last. I thank the hon. Member for Southgate and Wood Green (Bambos Charalambous) for drawing attention to these issues and for bringing this debate on debt cancellation to Westminster Hall today. I also thank the other Members, whose speeches have made for a rich discussion on this issue. I will mention them briefly and then hope to come to everyone’s questions, should time allow. I thank the hon. Member for Strangford (Jim Shannon) for his kind words about my appointment—I am still early in my time in this role. I also thank him for underlining the importance of the role of charities in the development work that they do in low-income and vulnerable countries. My hon. Friend the Member for Loughborough (Dr Sandher) spoke with great passion about his experience working in Somaliland. He brings great insights to the House after working in that capacity previously. I thank the hon. Members for Melksham and Devizes (Brian Mathew) and for Esher and Walton (Monica Harding) for stressing that the UK needs to restore our leadership on international development. I will come to some of their questions later in my contribution. I also want to thank my hon. Friend the Member for Clapham and Brixton Hill (Bell Ribeiro-Addy) for raising crucial points about the situation that many low-income countries vulnerable to the impacts of climate change find themselves in. I will say a little more about that, too. The Government are highly concerned by the debt challenges faced by many low and middle-income countries, with 3.3 billion people living in countries that spend more on servicing their debt than on health or education—a point made by many hon. Members. Among low-income countries, 10 are currently in debt distress and 25 are at high risk, and there is an urgent need to address the vulnerabilities. As a Government, we are fully committed to tackling unsustainable debt burdens in a way that supports development needs and helps countries address those vulnerabilities. We are acting in three key ways. I will attempt to answer questions, particularly from my hon. Friend the Member for Southgate and Wood Green who secured the debate, when discussing the three key ways. The first is on addressing liquidity challenges; the second is on ensuring effective debt restructurings; and the third is on promoting debt resilience. First, on addressing liquidity challenges, we are working with international partners to address immediate liquidity pressures facing many countries, which are crowding out vital spending on climate, health and education. We support the IMF and World Bank’s three-pillar approach, which is designed to support countries with high debt repayments. The first pillar is focused on action from vulnerable countries to improve revenue mobilisation and implement sound economic policies. The second focuses on ensuring that countries receive new flows of finance at concessional rates from international financial institutions and other development partners. The final pillar looks at providing case-by-case action to reduce the cost of existing debt burdens where needed. Secondly, we are working to address debt vulnerabilities through improving the effectiveness of debt restructurings for countries in debt distress. The G20 common framework remains the best mechanism for co-ordinating debt restructurings to address unsustainable debt burdens, but further progress is needed. The UK is working closely with the G20 and other international partners to ensure the framework delivers more timely, orderly and predictable debt restructurings. I know that is high on the priority list of the South African G20 presidency this year. The UK will be pressing for rapid implementation of the lessons learned from the common framework, which were agreed under the Brazilian presidency of the G20 last year. The private sector, which has been mentioned by many hon. Members, must also play its part in debt restructuring efforts. We are actively engaging with private sector partners—for example, through the global sovereign debt roundtable—to ensure continued private sector support for addressing the debt challenges faced by countries, leveraging the City of London’s leading role in sovereign debt markets. Several Members, including my hon. Friend the Member for Southgate and Wood Green, mentioned the issue of private creditors and whether we needed legislation to force them to participate. The Government are not currently seeing evidence that private creditors are refusing to participate in debt restructurings. Recently, private bondholders have agreed to debt treatments for common framework countries, including Zambia and Ghana. We are working closely with the private sector through bilateral meetings, engagement with representative institutions and Paris club discussions. Hon. Members also raised the issue of comparable treatment by private creditors. I reiterate that both Zambia and Ghana have reached agreements on debt restructurings with their private bondholders. Official creditors have deemed these comparable with their own restructurings. My hon. Friend the Member for Southgate and Wood Green raised the need for UK leadership on debt relief, and we heard that from others, too. I highlight that the UK has a strong track record of pushing for effective and holistic solutions to debt challenges, including supporting the IMF’s three-pillar approach for countries facing liquidity challenges and pushing for more effective co-operation and co-ordination under the G20’s common framework. The UK also co-ordinates debt treatment through our membership of the Paris club and our commitments to the G20 common framework in partnership with other creditors. This is a key point: unilaterally writing off debt owed to the UK would not be in the interests of the UK taxpayer—the shadow Minister, the hon. Member for Romford (Andrew Rosindell), mentioned the UK taxpayer, of course—which would be subsidising ongoing payments to other creditors if done unilaterally. The Government are therefore working closely with borrowers, official and private creditors, and the IMF and World Bank to strengthen the wider debt architecture and provide timely and co-ordinated restructurings for countries, where needed to support holistic debt sustainability for low-income countries. The third way that the Government are pursuing this issue is through tackling unsustainable debt by promoting greater resilience in debt markets. In response to the shadow Minister, I mention that the UK is committed to provide sovereign financing on sustainable terms and to act in an open and transparent manner to support global debt sustainability. We are playing a leadership role internationally in several key ways. The hon. Members for Melksham and Devizes and for Esher and Walton asked what the UK was doing to provide leadership.

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

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  I thank the hon. Lady for her intervention, but I am not entirely sure that I follow the logic. The purpose of CBAM, as I have said, is to ensure that if a product is produced using carbon in another country, we do not have leakage across the border. The overall impact will vary depending on the sector’s exposure to CBAM imports relative to the overall input costs and the extent to which it can substitute them. CBAM imports make up only a small proportion—about 1%—of average UK industry input costs. CBAM liabilities are expected to be small initially, and reliance on inputs of goods within scope across the economy is limited overall. I am not sure that I follow the logic that imposing CBAM on imported fertilisers will somehow have the effect that the hon. Lady suggests. The UK emissions trading scheme is the UK’s primary carbon pricing mechanism. The scheme was established to increase the climate ambition of the UK’s carbon pricing policy while protecting the competitiveness of UK businesses. The UK CBAM will be implemented only in sectors where it will effectively mitigate carbon leakage risk and where delivery is deemed feasible. Other sectors that give rise to carbon leakage will be considered for future inclusion.

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

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  Clause 78 legislates for the new rates of the soft drinks industry levy, to apply from 1 April 2025. The levy came into effect in April 2018—it was introduced by the previous Government, with cross-party support—and is considered a successful mechanism for changing behaviour and encouraging reformulation of packaged soft drinks, resulting in reduced sugar content. That is seen through the levy’s significant success in reducing the sugar content in UK soft drinks by 46%. The levy applies to packaged soft drinks containing added sugar. It has a lower rate, which applies to drinks with a total sugar content of 5 grams to 7.9 grams per 100 ml, and a higher rate for drinks with 8 grams or more per 100 ml. Producers, manufacturers and importers of liable soft drinks must register, report, and pay the levy on the volume of liable soft drinks packaged in and imported into the UK. The levy rates have not been increased since their introduction many years ago, in 2018, and so have gradually reduced in value against inflation. In 2018, SDIL made up approximately 11% of the price of a 330 ml can of full-sugar Coca-Cola; in January 2025, it makes up only 6%. Uprating the levy in line with inflation will ensure that it remains effective and continues to encourage reformulation, by protecting its value in real terms. Clause 78 amends section 36(1) of the Finance Act 2017 to reflect the new rates of the levy to apply from 1 April 2025. Those are £1.94 and £2.59, per 10 litres of prepared drink, for the lower and higher bands respectively. The new rates reflect forecasted changes in the consumer prices index in the year to 1 April 2025, as well as an additional increment to help to catch up for previous inflation. The catch-up reflects the 27% CPI change between 2018 and 2024 and will be spread evenly over the five rate increases from 2025 to 2029. That is to support soft drink manufacturers to adjust to the higher rates. The rates have also been adjusted to apply per 10 litres rather than per litre, so that rate changes can be made in smaller increments to reflect changes in CPI inflation more precisely. To illustrate using the current lower rate, 18p per litre becomes £1.80 per 10 litres—I think people could have probably worked that one out. We do not accept new clause 9, which would require the Chancellor to make an additional statement about the impacts of the measure. The Government do not consider that necessary, as a tax information and impact note detailing the anticipated effects of the measure was published at autumn Budget. I would also highlight that the Government are taking a gradual approach to restoring the original real-terms value of the soft drinks industry levy. From 1 April, the levy will still be worth significantly less, compared with general prices, than it was in 2018. Clause 78 will protect the real-terms value of the levy and build on its significant success, by increasing both the lower and higher rates in line with inflation.

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

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  In my view, a cryptocurrency is a type of cryptoasset, but I will check that. Question put and agreed to. Clause 81 accordingly ordered to stand part of the Bill. Clause 82 Duty on vaping products

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

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  I welcome the Opposition’s support for the clause. For quite some time there has been cross-party support for the CCA scheme. I welcome what the shadow Minister said about the Opposition’s support for the extension of that scheme for energy-intensive industries. The shadow Minister asked me about the UK chemicals industry. As he said, it is a very valuable sector of our economy. It is obviously included in the climate change agreement scheme, which exists to ensure that businesses for which energy makes up a larger proportion of their operating costs, and that are at higher risk of carbon leakage, are supported to make changes to their processes to reduce their energy intensity. The example he provided is concerning, but we have introduced measures to help such industries to cope with the fact that they are energy intensive. I hope that answers his question. I do not know whether the Chancellor has met representatives of the sector, but I am happy to write to him on that. The hon. Member for Inverness, Skye and West Ross-shire spoke about the cost of energy for people in his constituency. As I said, the rates on kerosene are frozen, which is why we are not uprating the rates on LPG. That will go someway towards helping those in rural areas. I declare an interest: I am not on the gas either, so we also rely on this form of energy.

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

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  I thank the shadow Minister for reiterating that there was indeed cross-party support in 2018 when the previous Government introduced the soft drinks industry levy. I say gently to him that if the previous Government had kept the levy in line with CPI, we would not be in this situation. The shadow Minister asked what considerations have been made about the impact of the measure. As I said in my opening speech about the clause, the catch-up reflects the 27% CPI change between 2018 and 2024. Because we have considered the impact on soft drinks manufacturers, it will be spread evenly over the five rate increases from 2025 to 2029. The shadow Minister should consider the fact that we are gradually spreading the increase. It is worth considering the views of those who have supported the Government’s change. For example, Barbara Crowther, the children’s food campaign manager at Sustain, has said: “It’s absolutely right that after six years, the government should now increase the penalties for all the companies who have not done enough to reduce the sugar levels in drinks, and we urge them to ensure all money raised by the levy is reinvested in children’s health.” The levy has been globally recognised as a transformative health tax intervention. Modelling studies have associated it with up to 5,000 fewer cases of obesity in girls aged 10 to 11 and a 28.6% reduction in hospital admissions for tooth extractions for children under the age of five. Our Government take children’s health very seriously, particularly given the worrying levels of obesity in our society and the issues with children’s dental health. That is why we are bringing forward the change.

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

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  I am coming to that. It is an exaggeration to infer from that that it becomes a new norm. It does not. I am certainly not going to write next year’s Budget or the year after’s Budget—that would be way above my pay grade in any case—but we are introducing this clause precisely because the former Government failed to keep the levy in line with inflation. Question put and agreed to. Clause 78 accordingly ordered to stand part of the Bill. Clause 79 Limited liability partnerships Question proposed , That the clause stand part of the Bill.

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

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  It is a great pleasure to serve under your chairmanship, Ms Vaz. The clause makes changes to the main rates of the climate change levy, or CCL, with effect from 1 April 2026. The Government are increasing the main rates of CCL on gas, electricity and solid fuels by the retail prices index to maintain the incentive for businesses and the public sector to be more energy efficient. Since 2001, the CCL has encouraged businesses and the public sector to be energy efficient by adding a tax on the non-domestic supply of energy. The Government have announced a national mission to make Britain a clean energy superpower and accelerate our journey to net zero, and improvements in energy and resource efficiency will play a significant role in reducing industrial emissions in the 2020s. Delivering on this mission will help to make the UK energy independent, protect billpayers, create good jobs and tackle the climate crisis. The previous Government followed a trajectory of rebalancing the gas and electricity rates over a five-year period to reflect that electricity emissions are progressively lowering due to the increasing contribution of renewable and lower-emission energy in electricity generation. The CCL rates for electricity and gas equalised in April 2024, and at the autumn statement 2023, under the last Government, rates were frozen for the year 2025-26. Now that the rebalancing has been achieved, uprating the main rates on gas, electricity and solid fuels from April 2026 will continue to provide an incentive for energy efficiency. At autumn Budget 2024, this Government also announced that the main rate of CCL on liquefied petroleum gas will continue to be frozen. This is to ensure better consistency between LPG and other portable fuels—for example kerosene, which is zero rated under fuel duty—for commercial premises not connected to the gas grid. The changes made by the clause will increase CCL rates on gas, electricity and solid fuels by RPI with effect from April next year. Non-domestic energy supply users will see an increase on their CCL bill of around 0.025p per kWh of gas or electricity supplied. The rate on solid fuels will increase by 0.2p per kg. However, participants of the climate change agreement scheme are eligible to pay reduced CCL rates in return for meeting negotiated energy-efficiency and carbon targets. The CCA scheme enables energy-intensive industries to receive discounts of up to 92% on their CCL bill. The new six-year scheme, announced on 16 October, will provide an estimated £1.9 billion of relief to 2,600 businesses in 53 industrial sectors over its lifetime. Overall, we expect a reduction in greenhouse gas emissions as a result of the clause compared with freezing the rates. In conclusion, the changes made by the clause will help to incentivise businesses to improve their energy efficiency, thereby progressing the Government’s climate objectives, which are vital for the UK’s long-term economic prosperity and energy security. I commend the clause to the Committee.

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

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  I thank the shadow Minister for his questions. I think from his comments that he knows this, but the clause is a paving measure for legislation that will be introduced. There will be further detail in draft legislation that will come in a future Finance Bill, so I cannot give him that detail today, but I take into account what he said. Draft legislation will be published so that affected industries can comment on it. I therefore reassure him that some of the issues he raised will be taken into account. Question put and agreed to. Clause 83 ordered to stand part of the Bill. Clause 84 Correction of wrong cross-reference etc Question proposed, That the clause stand part of the Bill.

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

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  The clause will enable the commissioners for HMRC to prepare for the introduction of the UK carbon border adjustment mechanism and allow information to be disclosed for the purposes of developing the CBAM. The Government are committed to reaching net zero by 2050. As we make progress to decarbonise, we must ensure that the effect of our efforts is not undermined by carbon leakage. I am sure that hon. Members know this, but for the benefit of the Committee, let me define carbon leakage: it is the movement of production and its associated emissions from one country to another to avoid higher decarbonisation efforts and costs. The best solution to carbon leakage risk would be international co-ordination on decarbonisation and carbon pricing. However, many countries do not yet have domestic carbon pricing mechanisms. Consequently, introducing the UK CBAM will reduce the risk of carbon leakage by placing a carbon price on carbon-intensive goods imported into the UK from 2027. The new tax will enable a charge to be placed on the carbon emissions found in highly traded carbon-intensive goods imported into the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. A comparable carbon price will be placed on those goods, based on what they would have incurred if they had been produced in the UK under our domestic emissions trading scheme.

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

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  I hope the clause will not be controversial, although we are always surprised by Opposition Members. The clause will make changes to ensure that various errors and omissions in three pieces of legislation are corrected. I will go through them in turn. First, subsection (1) will amend paragraph (d) of section 151I(1)—that is a confusing number—of the Taxation of Chargeable Gains Act 1992, which defines “financial inclusion” for the purposes of legislation on the provision of alternative finance in chapter 4. That definition includes persons who are authorised to provide credit. Authorisation of such persons was previously the responsibility of the Office of Fair Trading, but moved to the Financial Conduct Authority. To reflect that change in responsibility, the definition of financial institution was amended in both the Income Tax Act 2007 and the Corporation Tax Act 2009. However, the mirror legislation found in the Taxation of Chargeable Gains Act 1992 was overlooked, and subsection (1) will make similar changes to the Act to ensure that the definition of financial institution is consistent across the relevant capital gains tax, income tax and corporation tax legislation. Secondly, subsection (2) corrects the procedure for making regulations under part 14A of the Corporation Tax Act 2009. The current wording requires regulations to be made by statutory instrument, subject to annulment by either House of Parliament. That is incorrect, as financial regulations are a reserved matter for the House of Commons only. The clause corrects the error by requiring regulations to be laid before the Commons only—take back control. Lastly, subsection (3) corrects a typographical error in section 4 of the Taxation (Post-transition Period) Act 2020, concerning excise duty on the removal of goods to Northern Ireland. The correction removes a reference to section 42 of the Finance (No. 2) Act 2023, and inserts the correct reference to section 47 of that Act. In summary, the changes made by clause 84 will ensure that legislation accurately reflects the policy intent, and remove possible confusion for readers.

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

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  The clause makes changes to ensure that the Treasury has the power to make regulations to implement the cryptoasset reporting framework, which is also known as the CARF. The CARF was developed at the OECD, and the previous Government supported its development and committed to the UK’s implementing it, so I hope the Conservatives will support the clause. The CARF will require cryptoasset service providers to collect, check and report information that identifies their non-UK-resident customers and their non-UK-resident customers’ cryptoasset transactions undertaken from 2026. HMRC will then receive and share relevant data with participating jurisdictions for tax purposes from 2027. Other participating jurisdictions will share their data with HMRC where it relates to UK resident customers of non-UK cryptoasset service providers. The increased tax information that the CARF will bring to HMRC is expected to generate additional revenue of £315 million across 2026-2029. The Government intend to make the regulations in 2025 so that the CARF applies to UK crypto businesses in the UK from 1 January 2026. The changes made by the clause will amend existing legislation so that the CARF is added to the list of international arrangements for exchanging information. This will give the Treasury the power to make the CARF regulations to implement the CARF regime so that it applies to UK cryptoasset service providers from 1 January 2026. The clause is essential so that the Government can implement the CARF.

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

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  I thank the Opposition for their support. Question put and agreed to. Clause 79 accordingly ordered to stand part of the Bill. Clause 80 ordered to stand part of the Bill. Clause 81 OECD crypto-asset reporting framework Question proposed , That the clause stand part of the Bill.

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

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  It is a bit of an exaggeration to read into this change, which we have introduced because the previous Government failed to keep the levy in line with inflation, and somehow infer from that—

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

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  I thank the shadow Minister for his comments. If he will bear with me, I will speak generally about clause 82 before I address his amendment. Clause 82 will make changes to ensure that HMRC can secure the resource it needs to implement the vaping products duty. The duty will be legislated for in this Bill and will come into force on 1 October 2026. It will be accompanied by a one-off increase in all tobacco duties to maintain the financial incentive to give up tobacco. The chief medical officer is clear that those who do not smoke should not vape. Introducing a vaping products duty is part of the wider Government strategy to tackle vaping among young people—as the shadow Minister stated, there are worrying developments in the number of young people taking up vaping—and indeed among those who do not smoke, including via the Tobacco and Vapes Bill and the ban on disposable vapes. The vaping products duty is forecast to raise £525 million in revenue a year by the end of the scorecard, to fund vital public services such as the NHS, defence, education and stop smoking initiatives supporting a smoke-free UK. In 2023, 12% of the UK’s adult population used e-cigarettes, the highest rate ever recorded. One million people in England now vape despite never having been regular smokers: a sevenfold increase in just three years, which is pretty shocking. As the shadow Minister said, vaping rates are highest among 16 to 24-year-olds, with 15.8% vaping daily or occasionally. Reducing affordability is part of the Government’s wider strategy to influence behaviour, especially given the addictive nature of these products. Several countries have already introduced a tax on vaping. Approximately 50 countries have a national tax on vaping products, with most targeting liquid as the tax base. The majority target both nicotine-free liquids and liquids containing nicotine. The changes made by clause 82 will enable HMRC to prepare for the introduction of the new excise duty before it is formally provided for in primary legislation next year. It will allow for spending on IT systems and staff recruitment. On the shadow Minister’s amendment 67, I thank him for his speech, and I agree that it is crucial to get the implementation of the Bill right. His amendment would require HMRC to “have regard to the desirability of requiring a digital tax stamp to be applied to e-cigarette liquids.” The Government deem the amendment unnecessary at this time, as HMRC is already giving due consideration to vaping duty stamps. The decision to introduce vaping duty stamps was supported by respondents to the vaping products duty consultation, who pointed to their use on vaping products in other jurisdictions. The shadow Minister asked about the illicit vaping market. HMRC intends to exploit modern technology and digitalisation to ensure that the vaping duty stamps scheme targets the specific risks of the illicit vaping market. A technical public consultation on the design of the scheme ran from 30 October 2024 to 11 December 2024, and respondents submitted their views on digital duty stamps, physical duty stamps or a combined approach. We are currently analysing the responses to that consultation; no policy decision has yet been made. We will communicate in due course a policy decision to balance enforcement decisions and business operations. We will take on board the views of the shadow Minister; I thank him again for his amendment. The Government remain committed to working with industry to ensure that the scheme only creates burdens that are essential to tackle non-compliance, avoidance and evasion. Let me try to answer the shadow Minister’s questions. He asked whether there is a risk that increasing tobacco duty and introducing a vaping duty will drive up illicit trade. The threat from illicit tobacco needs to be addressed by reducing its availability, rather than allowing it to dictate our public health and tax policies. We are consulting on additional robust compliance tools for tackling the illicit trade in vapes and will collaborate with Border Force to target the illicit trade when the duty goes live. HMRC and Border Force already have a strategy in place to tackle illicit tobacco. I hope that that reassures the shadow Minister. The shadow Minister also asked about digital versus physical vaping duty stamps. Vaping duty stamps will support both enforcement and industry by identifying products that are non-duty paid and therefore illicit. They will also help HMRC to manage the revenue risk from the initial sell-through period and to limit the duty avoidance practice known as forestalling, which is clearing large quantities of excise goods from duty suspense immediately prior to a rate increase to avoid paying the new tax. In regard to the shadow Minister’s amendment, the Government will not commit to fully digital stamps, as we are analysing consultation responses. A policy decision will be taken in due course, but I reassure him that we will take his views on board.

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

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  Obviously kerosene is zero rated, but the effect of the clause is to increase the main rates of CCL on gas, electricity and solid fuels by RPI. That is in line with what we announced at the Budget, and takes forward those measures, so hopefully it will come as no surprise to hon. Members. Question put , That the clause stand part of the Bill.